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Tags: illegal | immigration | tax | loophole

Report: Illegals Get $4B a Year in Cash Refunds From IRS

Thursday, 23 August 2012 09:15 AM EDT

More than $4 billion a year in cash refunds are flowing to illegal immigrants who are claiming multiple children living in Mexico on tax returns and are able to exploit a loophole in the IRS tax code with impunity, an Indianapolis NBC News affiliate WTHR 13 reported.

A three-month bombshell investigation by reporter Bob Segall revealed the scam by way of a long-time Indiana tax preparer who provided scores of redacted tax returns and by interviewing illegal immigrants taking part in the scheme.

"There is not a doubt in my mind there's huge fraud taking place here," the tax man, who kept his identity hidden, said in the report. "We're talking about a multi-billion dollar fraud scheme here that's taking place and no one is talking about it.”

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Word of the loophole has spread among illegal immigrants and tax preparation offices have been swamped by millions of illegal immigrants trying to take advantage of the Additional Child Tax Credit, which is meant to ease the income tax burden on working families with kids at home, according to the Washington Examiner.

Families can claim up to $1,000 per child. In Segall’s report, he found scores of illegal immigrants who claimed the tax credits for children living in Mexico. Some even listed nieces and nephews.

Claims for additional child tax credits by illegal immigrant filers have risen from $161 million in 2001 to $4.2 billion in tax year 2010, Segall found, and of the three million tax returns filed by illegal immigrants in 2010, 72 percent claimed the additional child tax credit.

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

The tax preparer showed one return which received a $10,300 refund for nine nieces and nephews, even listing “niece” and “nephew” on the document.

Segall spoke to several of the illegal immigrants who made the fraudulent claims and they confirmed that it was easy to do and that they were simply taking advantage of an opportunity.

"The magnitude of the problem has grown exponentially," Russell George, the U.S. Treasury Department's Inspector General for Tax Administration, told Segall in an interview.

"Millions of people are seeking this tax credit who, we believe, are not entitled to it," George told Segall. "We have made recommendations to [IRS] as to how they could address this, and they have [still] not taken sufficient action in our view to solve the problem."

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The IRS said in a statement to the TV station, "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.”

George told Segall, "The IRS is not doing something as simple as requesting sufficient documentation from people seeking this credit. Once the money goes out the door, it's nearly impossible for the IRS to get it back."

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Thursday, 23 August 2012 09:15 AM
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