While federal law denies illegal workers the ability to obtain earned income tax credits for child care, the IRS refunded $4.2 billion dollars to these illegal workers last year, according to an audit of tax refunds by the Treasury Inspector General for Tax Administration.
The newest audit is one of many the inspector general has generated over the last decade and is only the latest in finding that efforts to collect taxes for illegal workers has resulted in fraud and abuse.
The amount of refunds sent to illegal workers has exploded growing from $924 million in 2005 to $4.2 billion last year.
The illegal workers are collecting tax credits that they are not entitled to receive. In some cases, the same illegal workers are using stolen and fraudulent identities to collect those refunds. IRS leadership appears to be unwilling to stop the illegal refunds or the identity theft.
The audits contradict claims by elected officials who have lobbied for amnesty that the illegal workers are law-abiding taxpayers.
Some file taxes on stolen Social Security numbers or improperly obtained Individual Taxpayer Identification Numbers (ITIN). The ITIN is an IRS issued number that allows those who cannot get a Social Security number the ability to pay taxes. Previous audits found that some taxpayers file returns with both a Social Security number and an ITIN. This puts the tax burden for the illegal worker’s wages on the U.S. citizen who owns the stolen number and allows the illegal worker to collect illegal refunds.
In addition, the most recent audit confirmed that the IRS does little to notify the legal owner of the stolen Social Security number that they have been a victim of identity theft.
“It is imperative that the IRS informs U.S. taxpayers that their Social Security Numbers are being used fraudulently,” said ‘J. Russell George, Treasury Inspector General for Tax Administration.
“The IRS management claims that the law is unclear and that it lacks the authority to deny the refunds to the illegal workers. “Federal law denies such individuals the Earned Income Tax Credit and federal public benefits. IRS management’s view is that the law does not provide sufficient legal authority for the IRS to disallow the ACTC to unauthorized workers,” the inspector’s announcement said.