The Treasury Inspector General for Tax Administration (TIGTA) reported on July 7, 2011 that individuals who are not authorized to work in the USA were paid $4.2 Billion in refundable tax credits from the IRS. The IRS issues taxpayer identification numbers (TINs) to individuals who are not eligible for a SSN to allow them to file income tax returns. Thus when politicians say that illegible aliens are filing income tax returns, perhaps they are motivated to do so because of these tax refunds. The illegal workers are claiming the Additional Child Tax Credit, a refundable tax credit intended for working families. The IRS view is that the law does not provide sufficient legal authority for the IRS to disallow this credit to unauthorized workers.
TIGTA recommended that the IRS work with the Dept. of Treasury to seek clarification on whether refundable tax credits may be paid to individuals who are not authorized to work in the USA. TIGTA also stated that the IRS should require unauthorized workers claiming this credit to provide verifiable documentation to support the claim that their dependents meet the qualifications for the credit, including residency. The study revealed that some illegal workers fabricated SSNs or used someone else’s SSN to obtain employment. Current IRS policy does not require the IRS to inform the rightful owners of those misused SSNs that their numbers have been compromised, and TIGTA recommended that such notification be made IRS policy.
The IRS response was that it cannot require additional documentation during the processing of returns, but can only do so if those returns are selected for audit examination. That statement is not correct. The IRS requires those claiming the First Time Homebuyers Tax Credit to include the settlement sheet with the filing of their tax return. The IRS further responded that “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,” said IRS spokeswoman Michelle Eldridge in an emailed statement. “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. Despite our disagreement over the correct application of the tax law, the IRS appreciates the targeted program recommendations made by TIGTA, and it will continue to analyze potential improvements to our programs.”
I am not sure why the IRS is the focus of such a report. Remember that the IRS is part of the US Treasury Dept. and merely interprets the laws created by Congress. Congress should be the one who needs to answer why it allows tax dollars collected from US taxpayers to be given to illegal workers in the USA.