4.27.12 -- WTHR.com – Indianapolis Channel 13
IRS Tax Loophole Costs Taxpayers Billions
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!
Link to three-minute video -- http://www.wthr.com/video?
ACTION STEP: Congress may be voting on a budget measure in the coming weeks, and a budget reconciliation package now being considered in the House of Representatives contains language that would limit additional child tax credits to US citizens with a valid social security number. If you feel strongly about this issue –one way or another – now is a good time to let your Congressmen know.
…U. S. Rep. Dan Burton and dozens of other House Republicans have co-sponsored a bill that would essentially authorize additional child tax credits only for US citizens.
House Resolution 1956 would require tax filers to provide a valid social security number to receive an additional child tax credit…
Part One in a two-part series: http://www.wthr.com/story/
Part Two in a two-part series: http://www.wthr.com/story/
17861738/will-lawmakers-act- to-close-tax-loophole-for- illegal-immigrants
Excerpts from these Indianapolis Channel 13 articles:
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…
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
…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.
…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…
· 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.
…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 loophole allows undocumented workers to collect what's called an additional child tax credit. The credit – up to $1,000 per child – can be claimed even by families who pay nothing in taxes, in many cases resulting in a cash payment from the IRS. It is intended for working families with children who live in the same home.
…U. S. Rep. Dan Burton and dozens of other House Republicans have co-sponsored a bill that would essentially authorize additional child tax credits only for US citizens. House Resolution 1956 would require tax filers to provide a valid social security number to receive an additional child tax credit…
HR 1956 has sat idle in the House Ways and Means Committee for almost a year.
However, language from the bill is now included in a package of proposed budget savings measures that House lawmakers are expected to consider in May. While the budget package may have enough support to pass the House, it is expected to die a quick death in the Democratic-controlled Senate.
"This should not be a partisan issue because we're all concerned about saving taxpayer dollars and not wasting them on fraudulent things like this," said Rep. Burton. "But I don't think Democrats want to deal with this with right now."
…Republicans plan to keep pushing the issue forward.
"This rampant abuse of hardworking taxpayer dollars is just wrong," said Rep. Sam Johnson (R – Tex), who authored HR 1956. "It's time we close this tax loophole and put a stop to the child tax credit sham."
…Many undocumented workers see the issue very differently.
"It's not taking advantage. I'm very thankful to this country for the help it gives me," said an illegal immigrant in central Indiana, who decided to talk with 13 Investigates as long as we agreed not to reveal his identity.
The worker has lived in the United States for 14 years. He owns a home in Indiana, pays taxes and is raising three children who are all honor roll students. This year, he received a $9,000 tax refund that includes additional child tax credits – not only for his children who live in Indiana, but also for four nieces and nephews in Mexico.
…Taking additional child tax credits away from undocumented workers would also have an impact on millions of children legally living in this country. Children of illegal immigrants who are born in the US are legal US citizens and, in many cases, those children would no longer be eligible to receive the tax credits under proposals like HR 1956.
But the inspector general insists refundable tax credits were never intended for illegal immigrants – let alone people who've never stepped foot in the United States.
…"It's cheating the American taxpayer," agreed Burton. "We all believe in humanity and humanitarianism, but we've got a $15 trillion national debt. We can't subsidize the whole world."
What can you do?
Congress may be voting on a budget measure in the coming weeks, and a budget reconciliation package now being considered in the House of Representatives contains language that would limit additional child tax credits to US citizens with a valid social security number. If you feel strongly about this issue –one way or another – now is a good time to let your lawmakers know.