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05-06-2012, 12:49 PM
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Business
Report: Tax Loophole Pays Out Billions in Tax Credits to Illegal Aliens
Billions of dollars in tax credits are being paid out to illegal immigrants because of a certain ?undocumented worker? tax loophole, Indiana?s WTHR-TV reports.
And, of course, it?s all happening at the expense of the taxpayer.
?There is not a doubt in my mind there?s huge fraud taking place here,? a whistleblower told Eyewitness News on condition of anonymity, ?We?re talking about a multi-billion dollar fraud scheme here that?s taking place and no one is talking about it.?
So how does the alleged fraud work? It?s a little convoluted but reporter Bob Segall walks you through the process:
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 $1000 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 whistleblower told Eyewitness News. ?The more you put on there, the more you get back.?
Watch the wthr.com report:
According to Eyewitness, the whistleblower was able to provide proof of the scheme. For instance, he produced a return that shows a $10,3000 refund paid out to an ?undocumented worker? who claimed nine nieces and nephews. Another return showed an $11,000 refund made to another ?undocumented worker? who claimed seven nieces and nephews.
?I can bring out stacks and stacks. It?s just so easy it?s ridiculous,? the anonymous source said.
?The magnitude of the problem has grown exponentially,? Russell George, the United States Department of Treasury?s Inspector General for Tax Administration (TIGTA) said.
A report released by George?s office shows the problem costs taxpayers more than $4.2 billion each year.
?Keep in mind, we?re talking $4 billion per year,? George said. ?It?s very troubling.?
Apparently, the IRS has known about the scheme for years and it has done nothing about it despite repeated warnings from the inspector general?s office.
?Millions of people are seeking this tax credit who, we believe, are not entitled to it,? said the inspector general. ?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.?
