Illegal Immigrants Could Receive $7 Billion In Tax Credits

[Teddy B 17,252]

It's not bad enough that the US taxpayer has to pay for their education, but let's give them a nice big tax credit too!

Illegal immigrants could receive more than $7 billion this year in federal tax credits, according to one estimate, thanks to a loophole in the law that allows people not authorized to work to reap the government payments with no questions asked.

Sen. Jeff Sessions' office calculated that, based on recent trends, illegal immigrants could receive roughly $7.4 billion through a provision known as the Additional Child Tax Credit. That's more than quadruple what the payout was four years ago, but the payments have been steadily increasing over the past decade.

Though illegal immigrants are prohibited from receiving similar tax credits, a quirk in the law allows them to qualify for the child tax credit. And it's a "refundable" credit, meaning recipients can reap the money -- with average checks totaling about $1,800 -- even if they've paid no taxes.

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[X Factor 1,112]

Now you know whose votes are bought and paid for

[JohnR! 5,495]

It's not bad enough that the US taxpayer has to pay for their education, but let's give them a nice big tax credit too!

They only get the break if they file taxes... It should discredit the notion many have that illegal immigrants pay no taxes...

http://www.irs.gov/newsroom/article/0,,id=106182,00.html

IRS Tax Tip 2011-29, February 10, 2011

The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. Here are 10 important facts from the IRS about this credit and how it may benefit your family.

1. Amount - With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.

   
   

2. Qualification - A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.

   
   

3. Age Test - To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2010.

   
   

4. Relationship Test - To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

   
   

5. Support Test - In order to claim a child for this credit, the child must not have provided more than half of their own support.

   
   

6. Dependent Test - You must claim the child as a dependent on your federal tax return.

   
   

7. Citizenship Test - To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.

   
   

8. Residence Test - The child must have lived with you for more than half of 2010. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.

   
   

9. Limitations - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.

   
   

10. Additional Child Tax Credit - If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

    
    

Links:

• Form 8812, Additional Child Tax Credit

• Publication 972, Child Tax Credit
• Form 1040A, U. S. Individual Income Tax Return
• Form 1040A Instructions
• Form 1040, U.S. Individual Income Tax Return

• Form 1040

  Instructions

Edited August 22, 2012 by Gegel

[Teddy B 17,252]

They only get the break if they file taxes... It should discredit the notion many have that illegal immigrants pay no taxes...

Illegal immigrants are supposed to file taxes. As long as they have a child in school, they all qualify for this tax credit whether they actually pay taxes or not. They would be foolish not to file taxes and get this free money.

Also from the story:

Illegal immigrants can qualify because even people not authorized to work in the U.S. are supposed to file returns with the IRS. If they don't have a Social Security number, they are provided what's known as an Individual Taxpayer Identification Number in order to file returns.

And those filers are not excluded from claiming the Additional Child Tax Credit, which is offered to some families with children under 17 years old.

A report last year by the Treasury Inspector General for Tax Administration found the claims added up to $4.2 billion in 2010. Sessions' office calculated the $7.4 billion figure based on the IG report numbers and White House budget numbers.

[JohnR! 5,495]

Illegal immigrants are supposed to file taxes. As long as they have a child in school, they all qualify for this tax credit whether they actually pay taxes or not. They would be foolish not to file taxes and get this free money.

Also from the story:

It is really not free money... You can only get it if you file taxes, ergo it is your money...

Limitations - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.

[Teddy B 17,252]

It is really not free money... You can only get it if you file taxes, ergo it is your money...

Limitations - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.

You could at least read the article before attempting to argue against it.

Though illegal immigrants are prohibited from receiving similar tax credits, a quirk in the law allows them to qualify for the child tax credit. And it's a "refundable" credit, meaning recipients can reap the money -- with average checks totaling about $1,800 -- even if they've paid no taxes.

[rocks 494]

You could at least read the article before attempting to argue against it.

Do you have any other sources for this story? I have looked (not very hard I must admit) and haven't seen anything yet.

[JohnR! 5,495]

You could at least read the article before attempting to argue against it.

I read the article and I read the information on the IRS website. I can't seem to find the quirk to which the copy refers.

What is the quirk, precisely?

<div><br></div><div>All I am saying is that Sessions had a habit of speaking without thinking and the copy presents no corroborating evidence to support his statement.</div><div><br></div>

Edited August 22, 2012 by Gegel

[Teddy B 17,252]

I read the article and I read the information on the IRS website. I can't seem to find the quirk to which the copy refers.

What is the quirk, precisely?

<div><br></div><div>All I am saying is that Sessions had a habit of speaking without thinking and the copy presents no corroborating evidence to support his statement.</div><div><br></div>

Tax loophole costs billions

Posted: Apr 26, 2012 9:55 PM EDT

Updated: Jul 05, 2012 10:03 AM EDT

By Bob Segall - bio

Millions of illegal immigrants are getting a bigger tax refund than you. Eyewitness News shows a massive tax loophole that provides billions of dollars in tax credits to undocumented workers and, in many cases, people who have never stepped foot in the United States. And you are paying for it!

Note: See all follow-up stories here.

INDIANAPOLIS - Inside his central Indiana office, a longtime tax consultant sits at his desk, shaking his head in disbelief.

"There is not a doubt in my mind there's huge fraud taking place here," he said, slowly flipping through the pages of a tax return.

The tax preparer does not want you to know his name for fear of reprisal, but he does want you to know about a nationwide problem with a huge price tag.

He came to 13 Investigates to blow the whistle.

"We're talking about a multi-billion dollar fraud scheme here that's taking place and no one is talking about it," he said.

The scheme involves illegal immigrants -- illegal immigrants who are filing tax returns.

How it works

The Internal Revenue Service says everyone who is employed in the United States – even those who are working here illegally – must report income and pay taxes. Of course, undocumented workers are not supposed to have a social security number. So for them to pay taxes, the IRS created what's called an ITIN, an individual taxpayer identification number. A 9-digit ITIN number issued by the IRS provides both resident and nonresident aliens with a unique identification number that allows them to file tax returns.

While that may have seemed like a good idea, it's now backfiring in a big way.

Each spring, at tax preparation offices all across the nation, many illegal immigrants are now eagerly filing tax returns to take advantage of a tax loophole, using their ITIN numbers to get huge refunds from the IRS.

The loophole is called the Additional Child Tax Credit. It's a fully-refundable credit of up to $1000 per child, and it's meant to help working families who have children living at home.

But 13 Investigates has found many undocumented workers are claiming the tax credit for kids who live in Mexico – lots of kids in Mexico.

"We've seen sometimes 10 or 12 dependents, most times nieces and nephews, on these tax forms," the whistleblower told Eyewitness News. "The more you put on there, the more you get back."

The whistleblower has thousands of examples, and he brought some of them to 13 Investigates. While identifying information such as names and addresses on the tax returns was redacted, it was still clear that the tax filers had received large tax refunds after claiming additional child tax credits for many dependents.

"Here's a return right here: we've got a $10,3000 refund for nine nieces and nephews," he said, pointing to the words "niece" and "nephew" listed on the tax forms nine separate times.

"We're getting an $11,000 refund on this tax return. There's seven nieces and nephews," he said, pointing to another set of documents. "I can bring out stacks and stacks. It's just so easy it's ridiculous."

20 kids = $30,000

WTHR spoke to several undocumented workers who confirmed it is easy.

They all agreed to talk with WTHR investigative reporter Bob Segall and a translator as long as WTHR agreed not to reveal their identity.

One of the workers, who was interviewed at his home in southern Indiana, admitted his address was used this year to file tax returns by four other undocumented workers who don't even live there. Those four workers claimed 20 children live inside the one residence and, as a result, the IRS sent the illegal immigrants tax refunds totaling $29,608.

13 Investigates saw only one little girl who lives at that address (a small mobile home). We wondered about the 20 kids claimed as tax deductions?

"They don't live here," said the undocumented worker. "The other kids are in their country of origin, which is Mexico."

He later explained none of the 20 children have ever visited the United States – let alone lived here.

So why should undocumented workers receive tax credits for children living in a foreign country, which is a violation of IRS tax rules?

"If the opportunity is there and they can give it to me, why not take advantage of it?" the worker said.

Other undocumented workers in Indiana told 13 Investigates the same thing. Their families are collecting tax refunds for children who do not live in this country. Several of the workers told WTHR they were told it was legal for them to claim the tax credit for a child who does not live in the United States.

IRS was repeatedly warned

"The magnitude of the problem has grown exponentially," said Russell George, the United States Department of Treasury's Inspector General for Tax Administration (TIGTA).

And he says the IRS has known about the problem for years.

George has repeatedly warned the IRS that additional child tax credits are being abused by undocumented workers. In 2009, his office released an audit report that showed ITIN tax filers received about $1 billion in additional child tax credits. Last year, the inspector general released a new report showing the problem now costs American tax payers more than $4.2 billion.

"Keep in mind, we're talking $4 billion per year," he said. "It's very troubling."

What George finds even more troubling is the IRS has not taken action despite multiple warnings from the inspector general.

"Millions of people are seeking this tax credit who, we believe, are not entitled to it," said the inspector general. "We have made recommendations to [iRS] as to how they could address this, and they have not taken sufficient action in our view to solve the problem."

Other information obtained from the TIGTA audits include:

· Claims for additional child tax credits by ITIN filers have skyrocketed during the past decade, from $161 million in 2001 to $4.2 billion in tax year 2010.

· Undocumented workers filed 3.02 million tax returns in 2010. 72% of those returns (2.18 million) claimed the additional child tax credit.

· In 2010, the IRS owed undocumented workers more in claimed additional child tax credits than it collected from those workers in taxes.

Agency responds – sort of

What does the IRS have to say about all this?

The agency sent WTHR a statement, defending its policy of paying tax credits to illegal immigrants.

"The law has been clear for over a decade that eligibility for these credits does not depend on work authorization status or the type of taxpayer identification number used. Any suggestion that the IRS shouldn't be paying out these credits under current law to ITIN holders is simply incorrect. The IRS administers the law impartially and applies it as it is written," the statement said.

George disagrees with that position and believes the IRS should be doing more to prevent undocumented workers from getting billions in US tax dollars.

"The IRS is not doing something as simple as requesting sufficient documentation from people seeking this credit," he said. "Once the money goes out the door, it's nearly impossible for the IRS to get it back."

Over the past month, WTHR has tried to ask the IRS more questions about its efforts to prevent abuse involving additional child tax credits.

Despite repeated phone calls, e-mails and a visit to IRS headquarters in Washington, the agency said none of its 100,000 employees had time to meet with 13 Investigates for an interview. An IRS spokeswoman said all staff were too busy because of the tax filing deadline in mid-April.

Apparently, the IRS doesn't have time to respond to some tax preparers, either.

Last year, our whistleblower noticed dozens of undocumented workers had used phony documents and false income to claim tax credits. He reported all of it to the IRS.

"These were fraudulent, 100% fraudulent tax returns, but I got no response; absolutely none. We never heard a thing," he said. "To me, it's clear the IRS is letting this happen."

The IRS tells WTHR it can do nothing to change the current system unless it gets permission from Congress. In other words, according to the IRS, closing the loophole would require lawmakers to pass a new law specifically excluding illegal immigrants from claiming additional child tax credits.

The big questions now: Is Congress willing to do that?

Full statement to WTHR from the Internal Revenue Service

The law has been clear for over a decade that eligibility for these credits does not depend on work authorization status or the type of taxpayer identification number used. Any suggestion that the IRS shouldn't be paying out these credits under current law to ITIN holders is simply incorrect. The IRS administers the law impartially and applies it as it is written. If the law were changed, the IRS would change its programs accordingly. The IRS disagrees with TIGTA's recommendation on requiring additional documentation to verify child credit claims. As TIGTA acknowledges in this report, the IRS does not currently have the legal authority to verify and disallow the Child Tax Credit and the Additional Child Tax Credit during return processing simply because of the lack of documentation. The IRS has procedures in place specifically for the evaluation of questionable credit claims early in the processing stream and prior to issuance of a refund. The IRS continues to work to refine and improve our processes.

My link

[JohnR! 5,495]

I see that the original copy used the misnomer 'quirk' instead of 'tax fraud' . There is no loophole in the law, so much as there is abuse and fraud.

I wonder how many others are using the same tax break to claim dependents they do not have.

[Teddy B 17,252]

I see that the original copy used the misnomer 'quirk' instead of 'tax fraud' . There is no loophole in the law, so much as there is abuse and fraud.

I wonder how many others are using the same tax break to claim dependents they do not have.

I agree that the word "loophole" is incorrect in this case. At any rate, $7 Billion is a lot of dough and it's something that needs to be taken care of.

[JohnR! 5,495]

I agree that the word "loophole" is incorrect in this case. At any rate, $7 Billion is a lot of dough and it's something that needs to be taken care of.

I don't understand how the IRS works sometimes. I just received a check from the IRS, for tax overpayment in my 2010 taxes, for the amount of $ 1.43! I had the check framed.

They sent me a letter advising me of the overpayment. I then called the 800 number and asked them to zap the check and call it even, to no avail. It must have cost us at least $5 to have the check mailed to me, considering all the overhead involved..

Go friggin figure...

[Teddy B 17,252]

I don't understand how the IRS works sometimes. I just received a check from the IRS, for tax overpayment in my 2010 taxes, for the amount of $ 1.43! I had the check framed.

They sent me a letter advising me of the overpayment. I then called the 800 number and asked them to zap the check and call it even, to no avail. It must have cost us at least $5 to have the check mailed to me, considering all the overhead involved..

Go friggin figure...

It's gov't, that pretty much sums it up. There is enormous waste at all levels that would sink any private company, but we keep on digging in our pockets to pay for it.

[Darnell 8,478]

TeddyB - back to post #1 - there was a news report on TV during tax season this year, covering this exact same issue, and was talked about here at VJ in some length. Old News, I'm afraid.

IMO, it starts with identity theft (get a SSN that isn't yours) and ends with the SSA's inability to vette a SSN when the IRS is processing a tax return. In between, is the 'assigning of children' for a headcount, on the Tax Return.

Edited August 23, 2012 by Darnell

[PalestineMyHeart 1,897]

Of course anyone can file a tax return without having paid any taxes.

However, the article refers to "$7 billion" in potential tax credits. This begs the question: how many illegals have actually filed tax returns and received "free money" ? Is there any actual data on this ?