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Illegal Aliens Got $4.2 Billion from IRS in Tax Credits

Posted by FactReal on September 2, 2011

IRS GIVING INCENTIVES TO ILLEGAL ALIENS
This is why illegal aliens file income tax reports…to get free money in the form of tax credits from the IRS. A recent audit of the IRS procedures found that an individual claiming the Additional Child Tax Credit (ACTC) receives a refund even if no income tax was withheld or paid. No wonder so many people around the world want to enter the United States any which way they can.
The Washington Post summarizes the findings of the audit:
  The Internal Revenue Service allowed undocumented workers to collect $4.2 billion in refundable tax credits last year, a new audit says, almost quadruple the sum five years ago.

Although undocumented workers are not eligible for federal benefits, the report released Thursday by the Treasury Inspector General for Tax Administration concludes that federal law is ambiguous on whether these workers qualify for a tax break based on earned income called the additional child tax credit.

Taxpayers can claim this credit to reduce what they owe in taxes, often getting refunds from the government. The vagueness of federal law may have contributed to the $4.2 billion in credits, the report said.

The IRS said it lacks the authority to disallow the claims.

Wage earners who do not have Social Security numbers and are not authorized to work in the United States can use what the IRS calls individual taxpayer identification numbers. Often these result in fraudulent claims on tax returns, auditors found. […]

Changes to tax law are partly to blame for the explosion in refunds for additional child tax credits in recent years, auditors found. Before 2001, filers needed to have three or more children to qualify — and to owe more Social Security taxes than earned income credits.

But those requirements have been eliminated and the allowable refund for each child doubled. The American Recovery and Reinvestment Act of 2009 also made the refund easier to get, auditors found.

 
HIGHLIGHTS OF THE AUDIT REPORT
Read the audit report here or here.

  • Many individuals who are not authorized to work in the United States, and thus not eligible to obtain a Social Security Number (SSN) for employment, earn income in the United States. The Internal Revenue Service (IRS) provides such individuals with an Individual Taxpayer Identification Number (ITIN) to facilitate their filing of tax returns. Although the law prohibits aliens residing without authorization in the United States from receiving most Federal public benefits, an increasing number of these individuals are filing tax returns claiming the Additional Child Tax Credit (ACTC), a refundable tax credit intended for working families.
  • An ITIN does not authorize an individual to work in the United States or provide eligibility for Social Security benefits or the Earned Income Tax Credit (EITC); however, the IRS currently processes claims for the Additional Child Tax Credit (ACTC), a refundable tax credit, filed by taxpayers with ITINs.
  • Refundable credits can result in refunds even if no income tax is withheld or paid; that is, the credits can exceed the liability for the tax…The ACTC is always the refundable portion of the CTC [Child Tax Credit], which means an individual claiming the ACTC receives a refund even if no income tax was withheld or paid. As with all refundable credits, the risk of fraud for these types of claims is significant.
  • The American Recovery and Reinvestment Act of 2009 (Recovery Act) temporarily increased eligibility by changing the income threshold for calculating the ACTC for Tax Years 2009 and 2010. Prior to the Recovery Act, the ACTC would have been limited to 15 percent of earned income more than $12,550. The Recovery Act changed this threshold to 15 percent of earned income more than $3,000. As such, more taxpayers could claim the ACTC or claim a greater amount. In Processing Year 2010, 2.3 million ITIN filers claimed ACTCs totaling $4.2 billion. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extends the increased eligibility through Tax Year 2012. Figure 1 shows the dollar amount in ACTCs paid to ITIN filers over the last 6 years.
  • Claims for the ACTC by ITIN filers have increased from $924 million in Processing Year 2005 (the calendar year in which the tax return was processed) to $4.2 billion in Processing Year 2010.
  • Another reason for the increase is that a significant number of individuals are filing multiple claims to obtain the ACTC for prior year tax returns (e.g., filing Tax Years 2007, 2008, and 2009 returns at the same time)…[N]early 9,000 taxpayers claimed a total of $10,000 or more in ACTCs by filing multiple tax periods.
  • [In] 2010, some individuals had submitted duplicate tax returns for multiple years to multiple IRS processing centers and received ACTC refunds.

The audit concludes, “The payment of Federal funds through this tax benefit appears to provide an additional incentive for aliens to enter, reside, and work in the United States without authorization, which contradicts Federal law and policy to remove such incentives.”

2 Responses to “Illegal Aliens Got $4.2 Billion from IRS in Tax Credits”

  1. […] Thing You Want is to Raise Taxes in a Recession (Video) ● Low capital gains taxes benefit you ● Illegal aliens got $4.2 billion from IRS using tax loopholes even if no income tax was withheld or paid. ● 97% of Americans Pay less than 12% Tax Rate ● The […]

  2. […] Illegal aliens file tax returns to get free money from the IRS As we previously reported, illegal aliens file income tax returns to get “refunds” from the IRS thanks to tax credits like the Additional Child Tax Credit (ACTC). At the federal level, their tax […]

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