Individuals Not Authorized to Work in the US Were Paid $4.2 Billion in Refundable Credits
Highlights
Final Report issued on July 7, 2011
Highlights of Reference Number: 2011-41-061 to the Internal Revenue Service Commissioner for the Wage and Investment Division and the Chief of Criminal Investigation.
IMPACT ON TAXPAYERS
Many individuals who are not authorized to work in the United States, and thus not eligible to obtain a Social Security Number (SSN) for employment, earn income in the United States. The Internal Revenue Service (IRS) provides such individuals with an Individual Taxpayer Identification Number (ITIN) to facilitate their filing of tax returns. Although the law prohibits aliens residing without authorization in the United States from receiving most Federal public benefits, an increasing number of these individuals are filing tax returns claiming the Additional Child Tax Credit (ACTC), a refundable tax credit intended for working families. The payment of Federal funds through this tax benefit appears to provide an additional incentive for aliens to enter, reside, and work in the United States without authorization, which contradicts Federal law and policy to remove such incentives.
WHY TIGTA DID THE AUDIT
This audit was initiated to determine whether potentially fraudulent tax returns filed with ITINs were being properly and consistently worked. Because of the significant volume of these returns claiming the ACTC, we focused on those returns.
WHAT TIGTA FOUND
Claims for the ACTC by ITIN filers have increased from $924 million in Processing Year 2005 (the calendar year in which the tax return was processed) to $4.2 billion in Processing Year 2010. Clarification to the law is needed to address whether or not refundable tax credits such as the ACTC may be paid to those who are not authorized to work in the United States. *********************2(f)*********************************************************************************************** Also, employees in the Accounts Management Taxpayer Assurance Program are not taking steps to notify taxpayers when it is obvious their SSNs and names have been compromised.
TIGTA also found that a feature on tax preparation software programs which automatically takes the taxpayer identification number and enters it as the identifying number for the taxpayer’s Wage and Tax Statements ******************2(f)*************************************************************************************.
