POSTED: Wednesday, May 16, 2012 - 4:41pm
UPDATED: Friday, June 29, 2012 - 7:11am
We’ve been telling you about a tax scam being used by some undocumented workers to claim child tax credits from Uncle Sam for children that aren’t theirs and may not even live in the U.S.
KETK spoke with the US treasury Department today and they said there has been quite a bit of pushback on this story.
It seems the Internal Revenue Service is getting a little defensive.
To summarize, KETK has learned that there is a tax scam going on that is costing the government billions.
And the Inspector General’s office of the Treasury Department wants it ended.
Since 1996, workers without a social security number can get an Individual Taxpayer Identification Number.
It allows them to legally file their income taxes.
But illegal workers have also figured out how to claim the Additional Child Tax Credit, which gives them a refund of $1000 per child.
Some have filed for multiple children who they do not support, and do not live with them as the law requires. Some even live in Mexico.
It even goes beyond that.
The Treasury Department says…
“…documentation associated with returns filed by taxpayers with ITINs sometimes reveals that either the individuals filing the returns have fabricated an SSN or improperly used someone else’s SSN to obtain employment.”
And if that happens, you will never know…
“The IRS generally does not inform the rightful holders of those SSNs that their numbers have been compromised.”
“The use of ITIN’s has increased from 1.5 million in 2005 to just over 3 million in 2010. And 73% of the returns using ITINS paid no income tax, and received refunds. Generally those refunds were due to the additional child tax credit.”
Kyle Anderson led the investigation into the child tax credit.
“The IRS does do audits of these, and we have found when they do audits a very high error rate. But again, the audits are done after the fact, after the credit has been refunded,” he says.
And what did the IRS say in response?
“The law denies those taxpayers who do not have social security numbers,” Anderson says, “the earned income tax credit and most federal benefits. That’s the law. IRS management’s view is that the law does not provide sufficient legal authority for them to disallow the additional child tax credit to unauthorized workers because the credit isn’t specifically defined as a federal public benefit.”
And after our call, on Tuesday, we got, not an interview, but this statement.
Eligibility for the Child Tax Credit and Additional Child Tax Credit does not depend on work authorization status or the type of taxpayer identification number used. Any suggestion that the IRS shouldn’t be paying these credits under current law to qualified individuals who hold ITINs is simply incorrect… If the law were changed, the IRS would change its programs accordingly.
The IRS is very focused on preventing erroneous refund claims, and has procedures in place to evaluate questionable tax credit...”
Related to this story, we have found that identity theft is actually aided by the Social Security Administration.
And it is something that is actually required by law.
More on that to come.