Paul L. Caron

Friday, September 2, 2011

TIGTA: Unauthorized U.S. Workers Claimed $4.2 Billion in Tax Credits Last Year

TIGTA The Treasury Inspector General for Tax Administration yesterday released Individuals Who Are Not Authorized to Work in the United States Were Paid $4.2 Billion in Refundable Credits (2011-41-061):

Individuals who are not authorized to work in the United States received billions of dollars from the IRS last year in a refundable tax credit based on earned income called the Additional Child Tax Credit (ACTC). The study ... found that claims for this credit by these individuals have escalated sharply from $924 million in 2005 to $4.2 billion in 2010.

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@jgreene: It's a welfare check dressed up as a tax cut.

Posted by: Eppur Si | Sep 3, 2011 8:35:19 AM

"Refundable" is an euphemism for paying money out to those who actually paid nothing in (or paying more out than those paid in) based on a "credit" calculated as if they had paid in.

Basically, it "pays back" (like a fefund) to those who paid no tax to start with.

Posted by: R Richard Schweitzer | Sep 2, 2011 7:04:42 PM

Why is our government paying Tax Credits to individuals who are breaking United States immigration laws?

Getting rid of the IRS, eliminating corporated income taxes and replacing personal income taxes with a flat or fair tax seems sensible.

Posted by: jgreene | Sep 2, 2011 1:31:06 PM

$4.2 Billion buys a lot of votes.

Posted by: Willy | Sep 2, 2011 9:49:23 AM

$4.2B??? Just last year?

Is the government completely incompetent or are they overlooking this fraud for political purposes?

A bit of both most likely.

Posted by: Dr. Deano | Sep 2, 2011 9:13:55 AM

Are there any similar current figures for the EITC (Earned Income Tax Credit)?

Last I heard, several years ago at least, there was another 20 billion in fraud there also, but it included citizens as well as Potentially Insufficiently Documented Future Reliable Democratic Voters of La Raza.

There've even been newspaper stories in the past about how gangs had set up storefronts in the hood, where they did tax returns for individuals for a 50% cut of the fraudulent refund.

Posted by: geokstr | Sep 2, 2011 8:33:50 AM

$4.2 billion in refundable credits doesn't mean $4.2 billion was refunded.

It seems unclear in the article when they talk about the status of refundable credits to illegals on this point:

Is it unclear whether illegals are ineligible for refundable credits or are illegals ineligible for the refunded portion of the credit?

Posted by: C | Sep 2, 2011 8:22:38 AM

I'm not one to defend illegal immigration but I'm not sure how paying out these credits to unauthorized workers is a big deal. The report itself states "Any suggestion that the IRS shouldn’t be paying out these credits under current law to ITIN holders is simply incorrect." No, the real issues is these workers are using fraudulently obtained SSNs to find work. Seems a simple matter to implement some kind of SSN verification process for these workers.

Posted by: Pete Terranova | Sep 2, 2011 3:44:07 AM