Unauthorized US workers claim $4.2b in tax credits
WASHINGTON - Tax filers who were not authorized to work in the United States collected $4.2 billion in tax credits in 2010, a Treasury Department watchdog reported yesterday.
Although federal law prohibits people residing illegally from receiving most public benefits, an increasing number filed tax returns claiming the additional child tax credit, according to J. Russell George, the Treasury inspector general for tax administration.
“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,’’ the report said.
The recipients did not qualify for Social Security numbers and filed returns with taxpayer identification numbers supplied by the Internal Revenue Service.
The child tax credit was established in 1997, a year after Congress explicitly restricted eligibility for other benefits to those with Social Security numbers.
The law authorizing the child tax credit did not specifically limit recipients to holders of Social Security numbers.
The IRS has taken the position that it does not have the authority to deny the benefit to people who file with a taxpayer identification number.
“Clarity is needed on this issue,’’ George said in a statement accompanying the report. “The Internal Revenue Service should work with the Department of Treasury to clarify whether this credit, which is based on earned income, should be paid to those who are not authorized to work in the United States.’’
George recommended that the IRS require additional documentation from unauthorized workers proving that their children meet eligibility requirements for the credit, including residency.
In a reply to George’s report, the IRS said it agreed to discuss the issue of filers’ eligibility for the credit with Treasury.
The IRS did not agree to require additional documentation from unauthorized workers, saying it does not have authority to do so.
In a statement on the report, IRS spokeswoman Michelle Eldridge said that “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.
“The IRS administers the law impartially and applies it as it is written. If the law were changed, the IRS would change its programs accordingly.’’
Even income earned illegally is subject to taxation.
Identification numbers are provided so that workers can comply with tax laws even if they do not have the work authorization necessary for a Social Security number.