First, make sure you have a decent optic, mounted properly, and that you're shooting from a proper position or rest. Then, stop playing at 25 yards and give it a real test at 100 yards. Try a few different types of ammo, and report back with your results. A legitimate 4" group at 25 yards isn't acceptable, but I feel there's something else going on here in all likelihood.
I've had a couple of the PSA kits. The first one I bought didn't compare accuracy wise with the more expensive gun I carry for work (on that has a cold hammer forged barrel). But, I didn't really expect an all-in $325 AR-15 to compare to a $1,200 one. Nevertheless, I found that the first 100 rounds were the worst for this rifle, and it smoothed out after that. I'm shooting it open sights, so I can't claim I'm shooting my best groups with it. But, it now seems comparable to most off-the-shelf standard AR-15's like you'd buy from S&W, Bushmaster, etc.
For the money I paid it does its job just fine: which is to serve as a truck/camping gun I don't mind beating around a bit.