Tax Loophole for Illegal Aliens

My Story Limerick:
Have you heard about the IRS tax loophole,
After you do, you'll want heads to roll,
Aliens can receive $1000 per child,
This is where it gets really wild,
Most of the kids are still in Mexico!

Quote of the Day:
We will lower the tax burden on middle-class Americans by asking the very wealthy to pay their fair share. Middle-class taxpayers will have a choice between a children's tax credit or a significant reduction in the income tax rate.
Bill Clinton and Al Gore, "Putting People First", 1992

I was furious when I learned this story! This is an outrage for someone that pays thousands of dollars a year in taxes. Wait! Hold on! I have not told the story yet. Trust me, this will be hard to believe.

The Story:
An IRS whistle-blower told an Indiana's WTHR-TV station this,

"There is not a doubt in my mind there's huge fraud taking place here ... We're talking about a multi-billion dollar fraud scheme here that's taking place and no one is talking about it."

Reporter, Bob Segall walks us through how the fraud 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.

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 $1,000 per child, and it's meant to help working families who have children living at home.

And this is where the scheme kicks in: many illegal immigrant use the tax credit to claim children living in Mexico as dependents.

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

According to an eyewitness, the whistle-blower was able to provide physical proof of the scheme. He produced a  tax return that showed a refund of $11,000 to an "illegal alien" who claimed seven nieces and nephews.

"I can bring out stacks and stacks. It's just so easy it's ridiculous,"

Russell George, the United States Department of Treasury's Inspector General for Tax Administration said, "The magnitude of the problem has grown exponentially," George's office release a report that estimates this problem to cost taxpayers $4.2 billion annually. George said, "Keep in mind, we're talking $4 billion per year ... It's very troubling."

The IRS has known about this scheme for years and has done nothing to stop it despite the warnings from the inspector general's office.

The Inspector General continued with this, "Millions of people are seeking this tax credit who, we believe, are not entitled to it ... 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."

Below is the official statement from the IRS to the WTHR news:

"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 View:
Anyone who works hard and pays taxes to the Federal government should be upset over this fraud, but who should be most upset? I think it the answer is legal immigrants. This is a 'spit in the face' to all taxpayers, but especially so for the ones that came to our great country legally.

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