Illegal immigrants and Child Care Credit

Source: Excerpts from “The American Citizens Handbook on Immigration-,A Candid conversation with a Concerned Citizen” due out in August 2020.       


                        I (Individual) T(Tax) I(Identification) N(Number)

The ITIN program was created by the IRS in July 1996 so that foreign nationals and other individuals who are not eligible for a Social Security number (SSN) can pay the taxes they are legally required to pay.

The application process is designed to facilitate tax payment, and the fact the IRS does not share applicants’ private information with immigration enforcement agencies is key to tax compliance.   

What You See:

An article from The American Prospect, titled “ Denying the Child Credit to Undocumented Children” was released on June 28th, 2018.

 It’s focus is a little-noticed provision in the Republican tax reform  that stripped billions in tax benefits from an estimated one million mostly low-income undocumented children residing in the United States.  

It goes on and states:

“Currently, unauthorized immigrants are able to claim the credit by applying for a nine-digit Individual Taxpayer Identification Number, or ITIN, which allows them to file state and federal tax returns, even without a Social Security number. The new requirement, which will go into effect next year, will render ineligible roughly one million undocumented children, according to a Center on Budget and Policy Priorities analysis of data from the Pew Hispanic Center.

The change threatens to inflict greater poverty on a mostly low-income working population that depends heavily on such credits. In 2013 alone, some 4.4 million tax returns were filed using ITINs, claiming child tax credits worth $6 billion, according to a report on refundable tax credits by the Government Accountability Office (GAO). Almost a third of ITIN filers claiming child tax credits that year had incomes of less than $40,000. Most ITIN-filers are undocumented.”

Adding that “Eliminating all access to tax benefits for undocumented immigrants has long sat atop the wish list of many conservatives, who have vilified undocumented immigrants and accused them of large-scale tax fraud. But the Republicans have displayed a studied disinterest in the large-scale tax frauds by the rich, which will only be intensified by the Tax Act.”

That’s a pretty dark picture, but there’s some facts that seem to be neglected in this rendition of illegal immigrants being victimized.

The Complete Story:

In the 2010 processing year more than three million returns were filed with ITINs. Of these, 2.3 million paid no federal income taxes and collected an aggregate of $4 billion from the Treasury in refundable tax credit money from the ACTC. Of those who did not file for the ACTC, most used the CTC to reduce or eliminate their tax liability and thereby recover all or part of any federal income tax money withheld by employers. Of all of the 2010 ITIN filers, fewer than one-quarter paid any federal income taxes, which amounted to about $0.87 billion in total. Thus, on a net basis, ITIN filers gained $3.13 billion ($4.0 billion minus $0.87 billion) from the IRS in the 2010 processing year. an approximation of the total net outflow of IRS funds to ITIN filers for the 2005-2010 processing years comes to 7.37 billion.

 “Tax Loopholes Cost Billions 13 investigates WTHR-  Published Apr 26th , 2012- updated Dec 2nd ,2016

INDIANAPOLIS – Inside his central Indiana office, a longtime tax consultant sits at his desk, shaking his head in disbelief. “There is not a doubt in my mind there’s huge fraud taking place here,” he said, slowly flipping through the pages of a tax return. The tax preparer does not want you to know his name for fear of reprisal, but he does want you to know about a nationwide problem with a huge price tag.

“We’re talking about a multi-billion dollar fraud scheme here that’s taking place and no one is talking about it,” he said. The scheme involves illegal immigrants — illegal immigrants who are filing tax returns.

How it works

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.

While that may have seemed like a good idea, it’s now backfiring in a big way.

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.

But 13 Investigates has found many undocumented workers are claiming the tax credit for kids who live in Mexico – lots of kids in Mexico.

“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.”

The whistleblower has thousands of examples, and he brought some of them to 13 Investigates. While identifying information such as names and addresses on the tax returns was redacted, it was still clear that the tax filers had received large tax refunds after claiming additional child tax credits for many dependents.

“Here’s a return right here: we’ve got a $10,3000 refund for nine nieces and nephews,” he said, pointing to the words “niece” and “nephew” listed on the tax forms nine separate times.

“We’re getting an $11,000 refund on this tax return. There’s seven nieces and nephews,” he said, pointing to another set of documents. “I can bring out stacks and stacks. It’s just so easy it’s ridiculous.”

“The magnitude of the problem has grown exponentially,” said Russell George, the United States Department of Treasury’s Inspector General for Tax Administration (TIGTA).

And he says the IRS has known about the problem for years.

George has repeatedly warned the IRS that additional child tax credits are being abused by undocumented workers. In 2009, his office released an audit report that showed ITIN tax filers received about $1 billion in additional child tax credits. Last year, the inspector general released a new report showing the problem now costs American tax payers more than $4.2 billion.

Other information obtained from the TIGTA audits include:

  • Claims for additional child tax credits by ITIN filers have skyrocketed during the past decade, from $161 million in 2001 to $4.2 billion in tax year 2010.
  • Undocumented workers filed 3.02 million tax returns in 2010. 72% of those returns (2.18 million) claimed the additional child tax credit.
  • In 2010, the IRS owed undocumented workers more in claimed additional child tax credits than it collected from those workers in taxes.

     Remember the  the next time you read  how much illegal immigrants are paying in taxes, the other side of the equation. Remember that the we the u.s. Citizens are paying for this. Use this blog as your contact point and advise your congressperson and senator that they are on notice. Go to the Senate and congressman information and press “for more info”. That will take you to each states congress and senate contact information, including phone numbers, addresses and social media. Contact today and let them know you expect constructive immigration policies.

Thank you for participating in this conversation. God Bless America and Godspeed.