By James Walsh
September 23, 2011
On July 7, 2011, the U.S. Department of Treasury’s inspector general for tax administration issued a startling report entitled “Individuals Who Are Not Authorized to Work in the United States Were Paid $4.2 Billion in Refundable Credits.”
No wonder the nation’s finances are in turmoil.
According to the Treasury report, foreign nationals not authorized to work in the United States and ineligible for a Social Security Number (SSN) are nevertheless receiving government help from the Internal Revenue Service (IRS). The IRS currently issues undocumented aliens an Individual Taxpayer Identification Number (ITIN) to facilitate their filing of tax returns.
Many illegal workers are paid in cash “under the table” and thus file no tax forms at all; but a number of undocumented workers, according to the Treasury report, are receiving public benefits contrary to federal and state laws.
For example, the Child Tax Credit (CTC) and the Additional Child Tax Credit (ACTC) allow payment of federal funds as tax benefits to undocumented aliens. Add to these the Earned Income Tax Credit (EITC), and the result is tax refunds that provide incentives for foreign nationals to enter, reside, and work in the United States without authorization and in violation of current U.S. immigration law.
The CTC, ACTC, and EITC have come under review because of the significant volume of Individual Taxpayer Identification Number (ITIN) returns filing for these credits using fraudulent data, such as names and SSNs.
The Treasury report notes that the American Recovery and Reinvestment Act of 2009 (ARRA) temporarily increased ACTC eligibility by changing the income threshold for calculating the credits in 2009 and 2010. The result was that in 2010, undocumented alien (ITIN) filers were able to claim higher tax refunds that totaled $4.2 billion. They represent an increase from $924 million in 2005.
It is clear that unauthorized aliens are filing ITIN tax returns with fraudulent data. The Treasury report found that “One common type of fraudulent refund involves taxpayers fabricating a Wage and Tax Statement (Form W-2) that shows excess withholding and results in a tax refund.”
Street-smart illegal immigrants are wise to the federal government’s incompetence.
Making matters worse, the U.S. Department of the Treasury, Accounts Management Taxpayers Assurance Program (AMTAP) has failed to take steps to notify U.S. taxpayers when it is obvious that their SSNs and names have been compromised.
The Treasury Report found “sufficient evidence” that the IRS took no steps to notify legitimate taxpayers that their SSNs, and sometimes their names, were used by undocumented aliens filing tax returns on regular or ITIN tax returns.
The Child Tax Credit (CTC) benefit also is being fraudulently used by illegal aliens.