IRS Knowingly Paid Illegal Aliens $4.2 Billion in Tax Credits in 2010

[kcjenkins]

In a lengthy piece posted at CNS News, it has been found that the IRS consciously decided to ‘legalize illegal aliens’ for tax purposes 17 years ago. This means that foreigners are getting the same tax benefits as U.S. citizens.

The most debatable aspect of this move regards refundable child tax credits. CNS News reports :

The question of whether to legalize illegal aliens and put them on a pathway to citizenship may be the most controversial legislative issue facing the U.S. Congress this year.

But, according to the Treasury Inspector General for Tax Administration (TIGTA), seventeen years have already passed since the Internal Revenue Service made its own “policy decision” to “’legalize’ illegal aliens.”

That policy, made those many years ago, not only determined that the IRS would treat illegal aliens the same as legal immigrants and U.S. citizens, but also that the IRS would not hand over to federal immigration authorities information about employers who appeared to be hiring large numbers of illegal aliens and about illegal aliens who filed false documents with the IRS.

As a result of the IRS’s policy, by 2010, according to TIGTA, the service was paying out $4.2 billion in refundable “Additional Child Tax Credits” [ACTC] to illegal aliens. In 2011, according to TIGTA, the IRS would pay more than $46 million in tax refunds to what theoretically were 23,994 illegal aliens who all used the same address in Atlanta.

The upshot of this change of “policy” by the IRS means that the federal government is subsidizing illegal immigration using taxpayer money:

“We believe legislation is needed to clarify whether or not refundable tax credits such as the ACTC may be paid to filers without an SSN,” said the 2009 [inspector General] audit report. “Such a legislative change could result in cost savings to the federal government of $1.8 billion annually ($8.9 billion over 5 years). As it now stands, the payment of federal funds through this tax benefit appears to provide additional incentive for aliens to enter, reside, and work in the U.S. without authorization, which contradicts federal law and policy to remove such incentives.”

On July 7, 2011, TIGTA published yet another audit report revealing that President Obama’s economic stimulus law had made the ACTC more generous and that the IRS had paid out $4.2 billion to illegal aliens through this refundable credit in 2010. The title of this audit report: “Individuals Who Are Not Authorized to Work in the United States Were Paid $4.2 Billion in Refundable Credits.”

In July 2012, TIGTA published a report on an audit it had initiated because two IRS employees had alleged “that IRS management was requiring employees to assign Individual Taxpayer Identification Numbers (ITIN) even when the applications were fraudulent.”

The qualifications for the ACTC are listed here . The second component is very interesting indeed.

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

Maybe if the IRS spent less time auditing tea party and conservative groups, they could catch more unlawful use of of the U.S. tax code by foreigners?

[Catherine]

A couple of friends of mine are NICU nurses in Boston. They tell me there is an entire *industry* built around EBT (food stamp card) and child tax credit fraud -- and the state could not care less about it; nor do the feds care. For example, a pregnant woman from the Dominican Republic, say, comes here ~7 months. Stays 'til her baby is born in Boston, making the kid a US citizen (under a perversion of the 14th Amendment, which perversion needs to be overturned). She signs up for welfare, food stamps, all kinds of aid. The facilitator group (working in the DR and within the state) help her sign up for an "address" (a warehouse, an already-used address like the Atlanta one, one of those "street address" mail delivery/acceptance services, whatever) -- which is required. She goes back to the DR after she gets her EBT card. Money gets added every month, and she plus family live like rich folks in the DR off US & Mass taxpayer money. There are similar schemes to then file US taxes and get EITC and the like.

It's obscene. It's illegal. The government does NOT care. And every nickel that goes to someone illegally is a *dime* not available to help actual US citizens who need assistance -- or to keep in their pockets for their own use.

[Gail in Virginia]

Unfortunately, whoever was responsible for unilaterally changing tax law by setting that policy for the IRS will never be held accountable. I wonder what things would be like in this country if the laws already on the books were enforced as written. I don't believe it is possible to completely eliminate fraud, but we should not be encouraging it through policy and regulations.

[Edward]

And I'll bet all of this fraud is made easier via the IRS free file system started years ago -- to avoid all this, IRS must eliminate the FREE FILE program and suggest these free filiers file future returns via the city programs that offer free tax return preparation. Otherwise it will just get worse. Too, such elimination would divert preparer's away from using the free filing to prepare returns for taxpayers and leave no trail and thus not reporting the income received from such preparations.

[joanmcq]

A couple of friends of mine are NICU nurses in Boston. They tell me there is an entire *industry* built around EBT (food stamp card) and child tax credit fraud -- and the state could not care less about it; nor do the feds care. For example, a pregnant woman from the Dominican Republic, say, comes here ~7 months. Stays 'til her baby is born in Boston, making the kid a US citizen (under a perversion of the 14th Amendment, which perversion needs to be overturned). She signs up for welfare, food stamps, all kinds of aid. The facilitator group (working in the DR and within the state) help her sign up for an "address" (a warehouse, an already-used address like the Atlanta one, one of those "street address" mail delivery/acceptance services, whatever) -- which is required. She goes back to the DR after she gets her EBT card. Money gets added every month, and she plus family live like rich folks in the DR off US & Mass taxpayer money. There are similar schemes to then file US taxes and get EITC and the like.

It's obscene. It's illegal. The government does NOT care. And every nickel that goes to someone illegally is a *dime* not available to help actual US citizens who need assistance -- or to keep in their pockets for their own use.

So stores in the Dominican Republic take food stamp debit cards? These aren't regular debit cards; they are processed completely differently. Go to your grocery store and look at the keypad; Debit, Credit, EBT.

[Guest Taxed]

A couple of friends of mine are NICU nurses in Boston. They tell me there is an entire *industry* built around EBT (food stamp card) and child tax credit fraud -- and the state could not care less about it; nor do the feds care. For example, a pregnant woman from the Dominican Republic, say, comes here ~7 months. Stays 'til her baby is born in Boston, making the kid a US citizen (under a perversion of the 14th Amendment, which perversion needs to be overturned). She signs up for welfare, food stamps, all kinds of aid. The facilitator group (working in the DR and within the state) help her sign up for an "address" (a warehouse, an already-used address like the Atlanta one, one of those "street address" mail delivery/acceptance services, whatever) -- which is required. She goes back to the DR after she gets her EBT card. Money gets added every month, and she plus family live like rich folks in the DR off US & Mass taxpayer money. There are similar schemes to then file US taxes and get EITC and the like.

It's obscene. It's illegal. The government does NOT care. And every nickel that goes to someone illegally is a *dime* not available to help actual US citizens who need assistance -- or to keep in their pockets for their own use.

As you may already know EBT fraud and misuse is being addressed in our state. Will it be 100% perfect, no.

But you have to put a lot of blame on the facilitator's and enablers of this fraud. It is not the poor DR woman unfortunately. that is a minor problem compared to the vast majority of AMERICAN owned mom and pop stores that will allow misuse of EBT card for their own benefit. We all know how they benefit by allowing non qualified items to be purchased by the EBT card. Buying back baby formula purchased with EBT card at 25 to 50% of the retail price, and it goes on.

Before we point the finger and blame the DR woman, let's look in the mirror first!

[SaraEA]

CNS News has clearly decided the IRS is wrong and is bending the facts to conform to its conclusion. I'm sure I'm not the only one on this board who remembers the controversy the year the CTC became refundable. Unlike the EITC, adoption credits, education credits, etc., there was NO requirement in the Code that the children have Social Security numbers. All of us looked it up, and looked it up again in disbelief, when the situation arose. Clarification from the IRS Chief Counsel or somewhere high up in the agency confirmed that the law, as written by Congress, did not require SS numbers. The IRS didn't just make "its own 'policy decision' to ’legalize’ illegal aliens.” It was merely following the law . To do otherwise would be breaking the law.

There have been so many scandals plaguing the agency of late that I think the media are sniffing in corners to be the first to break the next big reason to hate the IRS. Too bad reporters don't know how to read the IRC or understand that Congress makes the laws that the IRS is charged with upholding. I have read many a court decision where the judges admonished Congress to make clear their intent because neither the taxpayers nor the IRS in the case being decided could be faulted for their interpretations of the nebulous meaning of the law as passed.

The issue about overlooking possible fraud in approving ITIN applications is a bit different. Management clearly issued wrong directives. Still, I don't know what else the agency could have done in the face of budget cuts that reduced staffing and training at the same time the workload increased. (Remember that outside approval agents used to be able to review the paperwork before it got to the IRS but that practice ended so all the work ended up in the IRS's lap.) They probably should have followed the rules more carefully and just let the backlog of applications grow. When elected officials learned about the delays from constituents and complained, IRS managers could have made a good case for increased staffing.

I guess what I'm saying boils down to the fact that the uneducated public (including the media) thinks the IRS is responsible for the incomprehensible tax code and makes up the rules as it pleases. Those of us in the business know that tax law originates in Congress, and except in those instances where the law mandates that the Secretary of the Treasury flesh out the details, the IRS and Treasury are beholden to the law as written. The IRS could no more deny someone claiming the additional CTC without the child having a valid SS# than it could refuse to issue you a refund because it doesn't like your middle initial.

[kcjenkins]

But Sara, don't you think the right and proper action should have been for the IRS to at least ask Congress for a 'correction' to make it a requirement? That is routinely done for much smaller, less costly 'ommissions' in tax bills, yet I could find no data showing that this HUGE ommission was ever requested to be corrected.

[Cathy]

Wasn't this the excuse IRS used for not supplying the Refund Cycle Chart this past filing season. I had read somewhere and even told my clients that IRS had said they mistakenly refunded billions of dollars in CTCs when taxpayers used ITIN numbers for those dependents, thus certain returns would be scrutinized to make sure it didn't happen again. Therefore, iRS would not be issuing the Refund Cycle Chart as refunds may be delayed due to the returns being scrutinized.

As I recall, the 4.2 billion in refunds were issued in an election year....ooooops! I'm sure there is more to the situation than we will ever know!

[JohnH]

KC: I'm surpirsed that no one has taken you to task for using that ugly, indefensible, and racially/politically charged epithet - "illegal aliens". You should have called them "undocumented workers" or some other innocuous term so as not to offend anyone's tender sensibilities.

[Jack from Ohio]

KC: I'm surpirsed that no one has taken you to task for using that ugly, indefensible, and racially/politically charged epithet - "illegal aliens". You should have called them "undocumented workers" or some other innocuous term so as not to offend anyone's tender sensibilities.

The correct term is "unregistered Democrats."

[ILLMAS]

Who cares!!! More has been spend on the funding a war, my state's senators are crying because they deserve a raise , a local retired city comptroller believes he should be entitled to a full pension after only working three years as a comptroller, the IRS profiling organizations and U.S government is spying on us and friendly countries according to the former NSA contractor. In public finance I learned that are two sides of the coin, people receiving government benefits also have to pay taxes that is put back into the system, sales tax, property taxes, local and city taxes, documented and undocumented. They probably receive more in benefits but they pay taxes too.

[mrichman333]

It just make me so SICK!!!!

[SaraEA]

Cathy, as I recall the refund cycle chart was eliminated because the IRS had implemented numerous new filters to detect fraudulent returns before refunds were issued. Many of these filters were to sniff out identity theft. Those who changed marital status, addresses, or added dependents would surely get delayed by these filters. Since there are an awful lot of taxpayers in those situations, the agency decided not to get anyone's hopes up and did away with the chart. Remember at the start of this season they announced that refunds would take 2-3 weeks? Those who didn't have any changes in critical data got their money much sooner, but then it was a pleasant surprise. As ID theft for tax purposes continues to grow like a wildfire, expect yet more filters and more delays. I see it as financial protection of taxpayer money, not political motive.

A comment I neglected to make last night in my anger over the stupidity of the CNS news article concerns their criticism, "That policy, made those many years ago, not only determined that the IRS would treat illegal aliens the same as legal immigrants and U.S. citizens, but also that the IRS would not hand over to federal immigration authorities information about employers who appeared to be hiring large numbers of illegal aliens and about illegal aliens who filed false documents with the IRS." Teach your blood-thirsty reporters to read the Code!!! Many years ago, the IRS was prohibited from sharing ANY tax information on ANY taxpayer, businesses included, with ANYONE. You could list your occupation as smuggler for a Mexican cartel, and the IRS wasn't (and still isn't) allowed to tell a soul. The Patriot Act enacted after 9/11 made a single exception, that the IRS could share tax data of suspected terrorists with Homeland Security. Since then, they have been allowed to share names and SS#s with state prison officials (nothing else) to head off fraudulent returns that had become a prison pasttime. (Congress had to permit them to do this, but only did so after the agency endured heaps of public criticism for issuing refunds to the prison population. Congress let the IRS take the blame when Congrress was the one who prohibited them from doing otherwise.)

I have sat through many seminars given by IRS officials. They have mentioned how when they build cases against taxpayers, they cannot invite any other gov't agencies into the discussion because tax info cannot be disclosed. On the other hand, they are often invited by other agencies to help build their cases because the IRS is so good at "following the money." Paper trails can be daunting to unwind, and the IRS is really good at it. That's why so many indictments of publict officials, crime figures, etc. note that charges were brought by X ageny and the IRS.

I am not denying that the IRS has made a lot of mistakes, all well-documented by the media in recent weeks. But we as tax professionals, who know a heck of a lot more about how the agency works and the IRC it must uphold than reporters looking for a headline, have to resist joining the herd. We know better. Blame the IRS for expensive junkets, but not for doing things it legally has to do (or for not doing things it legally cannot do).

[Lee B]

I know everyone feels good after they beat up on a governmental agency, but as usual the blame really needs

to placed on our elected officials and the interest groups they answer to.

[Guest Taxed]

Perfect storm when you have confusing laws and a complicated bureaucracy to administer those laws.

[Catherine]

I know everyone feels good after they beat up on a governmental agency, but as usual the blame really needs

to placed on our elected officials and the interest groups they answer to.

And the people who keep re-electing them. Problem is, folks all say, "They're all crooks!" with the un-said appendum of "except my guy." Why their guy? Because of something nice that got done (flag for a neighbor's family, help with some snafu), or some pork that they benefited from. Or sometimes, with lower-information voters, they just pick the incumbent or the familiar name. The result: the same self-serving scoundrels go back and back and back.

Perfect example here: completely regardless of positions, -- we just gave a promotion to that absolute idiot Ed Markey, sending him from House to Senate. He first went to the House in 1967; two years before the first moon landing, for gosh sakes. I was still in elementary school and despairing of learning "double Dutch" in jump rope. He supposedly lives in a modest house in the town of Malden -- but public records show that his "home" there had a water bill of $11 for a *year*! That's not even a drip in the sink. Instead, he lives in a multi-million dollar mansion in Chevy Chase MD and only shows up in Mass to raise money. What on earth can he *possibly* know about the concerns of his district or state? (Unless you mean the concerns of his district in MD.) But the good little drones went wild for him and sent him back again.

[taxxcpa]

A lot of people just read the newspaper and vote the way the editorial page recommends. Locally the newspaper tends to support the incumbent regardless of whether they are liberal or conservative. I think they want to support whoever they think will win regardless of whether they really believe he is the best candidate.

[JohnH]

I always read & study the recommendations on the editorial pages of my local liberal rag when election time rolls around. I generally lay it out right beside my ballott when filling it out. I want to be sure I know their preferences so I'll be sure to know whom to vote against, just in case I get mixed up on a particular office.

[Guest Taxed]

And the people who keep re-electing them. Problem is, folks all say, "They're all crooks!" with the un-said appendum of "except my guy." Why their guy? Because of something nice that got done (flag for a neighbor's family, help with some snafu), or some pork that they benefited from. Or sometimes, with lower-information voters, they just pick the incumbent or the familiar name. The result: the same self-serving scoundrels go back and back and back.

Perfect example here: completely regardless of positions, -- we just gave a promotion to that absolute idiot Ed Markey, sending him from House to Senate. He first went to the House in 1967; two years before the first moon landing, for gosh sakes. I was still in elementary school and despairing of learning "double Dutch" in jump rope. He supposedly lives in a modest house in the town of Malden -- but public records show that his "home" there had a water bill of $11 for a *year*! That's not even a drip in the sink. Instead, he lives in a multi-million dollar mansion in Chevy Chase MD and only shows up in Mass to raise money. What on earth can he *possibly* know about the concerns of his district or state? (Unless you mean the concerns of his district in MD.) But the good little drones went wild for him and sent him back again.

As a MA voter I can tell you that Mr. Gomez would have lost if Mickey Mouse (D) was running against him. MA voters did not want to give Republicans another victory after kicking out Scott Brown! His disctrict could care less that he lives full time in MD as long as he pushes the Democrat positions.

And this stuff happens in all 50 states. Look at Liz Cheney moving to WY last year to run for the senate seat after living practically all her life outside WY? Carpetbagger maybe!

[Jack from Ohio]

As a MA voter I can tell you that Mr. Gomez would have lost if Mickey Mouse (D) was running against him. MA voters did not want to give Republicans another victory after kicking out Scott Brown! His disctrict could care less that he lives full time in MD as long as he pushes the Democrat positions.

And this stuff happens in all 50 states. Look at Liz Cheney moving to WY last year to run for the senate seat after living practically all her life outside WY? Carpetbagger maybe!

Whether you believe it or not, Taxed, the FACTS show that for the past 40 years, incumbents that ran in an opposed race were reelected 90% of the time. This fits EXACTLY what Catherine is correctly observing and saying.

Can't change the facts. Congress polls a 9% approval yet are reelected 90% of the time. American voter apathetic ignorance at work.

[JohnH]

And this stuff happens in all 50 states. Look at Liz Cheney moving to WY last year to run for the senate seat after living practically all her life outside WY? Carpetbagger maybe!

Liz probably noticed how well it worked for Hilary Clinton and decided to give it a try. Apparently she's hoping WY voters are just as naive & gullible as NY voters.

[Guest Taxed]

There is a big difference in the public profile of Ms. Cheney and Mrs. Hillary Rodham-Clinton a former first lady of a state and the country. Hoping to see her as the first female President of my country very soon!

[Lion EA]

Hey, Hillary never lived in NY before she ran...

[ILLMAS]

Wasn't Hillary Clinton image tarnished with the Benghazi deal?