Friday, September 02, 2011

U.S. Treasury Inspector General Audit Indicates Illegal Immigrants Collected $4.2 Billion In Refundable Tax Credits In 2010

Think illegal immigrants aren't getting freebies? Think again? On September 2nd, 2011, the Washington Post, using the politically-correct term "undocumented workers" in the headline, reports on an audit by the Treasury Inspector General for Tax Administration which concludes that the Internal Revenue Service allowed undocumented workers to collect $4.2 billion in refundable tax credits last year. Not only is this quadruple the $924 million from 2005, but the IRS says it lacks the authority to disallow the claims.

The details are contained in the Inspector General's report, which was actually published back on July 7th, 2011. But only now has the issue received public scrutiny, with Fox News the only other national media outlet to pick up the story. The highlights:

-- Illegal immigrants who don't get a Social Security number are allowed to file a tax return using an Individual Taxpayer Identification Number (ITIN). The IRS says it has no legal authority to demand that those applying for an ITIN prove their legal status upon application.

-- The abuse centers around the Additional Child Tax Credit (ACTC). The ACTC is the refundable portion of the Child Tax Credit (CTC). The CTC can reduce an individual’s taxes owed by as much as $1,000 for each qualifying child. Unfortunately, the ACTC was liberalized. Before 2001, filers needed to have three or more children to qualify. But those requirements were subsequently eliminated and the allowable refund for each child doubled.

-- Data showed that 72 percent of returns filed with ITINs instead of SSNs claimed the child tax credit. It is well-known that many illegal immigrants seek to breed as much as they can while in the U.S. to produce multiple anchor babies.

Recommendations: The Inspector General published six different recommendations in the audit report; each recommendation includes management's response embedded in the report (after the jump).

-- Recommendation 1:  The Commissioner, Wage and Investment Division, should work with the Department of the Treasury’s Office of Tax Policy to seek clarification on whether or not refundable tax credits (or the refundable portion of tax credits) such as the ACTC may be paid to those who are not authorized to work in the United States.

-- Recommendation 2:  The Commissioner, Wage and Investment Division, should require individuals filing with ITINs and claiming the ACTC to provide specific verifiable documentation to support that their dependents meet the qualifications for the credit, including residency.

-- Recommendation 3:  The Commissioner, Wage and Investment Division, should ensure CTC and ACTC claims on ITIN returns with questionable wages and withholding are verified in the AMTAP (Accounts Management Taxpayer Assurance Program) function or referred to the Examination function for verification.

-- Recommendation 4:  The Commissioner, Wage and Investment Division, should ensure that,  when possible, questionable CTC and ACTC claims on ITIN returns identified by or referred to the Examination function are worked.

-- Recommendation 5:  The Commissioner, Wage and Investment Division, should implement procedures that are proactive in timely alerting taxpayers when the IRS has become aware that a taxpayer’s identity has potentially been stolen.  At a minimum, those taxpayers whose names and SSNs have both been compromised should be notified.

-- Recommendation 6:  The Commissioner, Wage and Investment Division, should take steps to ensure tax preparation software  packages do not auto-populate an ITIN onto Forms W-2 instead of asking for the taxpayer identification number as shown on the Forms W-2.  The IRS should not accept ITIN returns prepared with software that is not compliant with this requirement.

Also publishing reaction is ALIPAC. Their input includes the customary canard by the notorious apologist for illegal immigrants, the National Immigration Law Center, that illegal immigrants contribute billions of dollars to the Social Security and Medicare trust funds, and even the IRS has documented the billions such workers contribute in overall taxes. In response, Ira Mehlman, media director for the Federation for American Immigration Reform (FAIR), said "Treasury thinks IRS does have the authority to fix the problem, but IRS management doesn't want to exercise it. Setting aside fact that we're getting ripped off to the tune of $4.2 billion, there's a seeming lack of concern by agencies that are here to protect us."

Others expressing concern about this $4.2 billion ripoff include Gateway Pundit, The Blaze, and Free Republic.

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