A new report from the Treasury Inspector General for Tax Administration revealed that the federal government “erroneously” paid out $15.6 billion through the Earned Income Tax Credit (EITC) in Fiscal Year 2015. (Treasury Inspector General Report, April 27, 2016) These improper payments account for 23.8 percent of the total tax dollars distributed through the EITC, with most of the money likely going to illegal aliens. (Id.) The Office of Management and Budget has classified the EITC program a “high-risk” program, making it the only IRS program with this designation. (The Washington Free Beacon, May 23, 2016)
The EITC is a tax credit for lower income tax filers but requires a social security number in order to claim it. (See 26 U.S.C. § 32) If the EITC credit is larger than the tax filer's tax liability, the difference is paid out directly to the filer. (SeeFAIR Legislative Update, Mar. 3, 2015)
While it used to be more difficult for illegal aliens to claim the EITC tax credit because they lack social security numbers, the Obama administration’s immigration policies have contributed to the increased fraudulent payments. Specifically, a number of Obama’s executive amnesty programs, including Deferred Action for Childhood Arrivals (DACA), rewards qualifying illegal aliens with a Social Security Number. The Obama administration’s decision to freely give out social security numbers have directly led to the significant number of illegal aliens potentially eligible for EITC.
Outrageously, once eligible for EITC, tax law allows a person to amend their tax returns from the past three years to claim the credits — even if that person was ineligible during those years. The Congressional Research Service — the nonpartisan policy research arm for lawmakers — confirmed that each amnestied illegal alien is eligible for more than $24,000 in tax credits through the EITC. (See FAIR Legislative Update, Feb. 10, 2015)
In addition to erroneous EITC payments, the IG report noted other refunded tax credits that also result in significant improper payments. Notably, the Additional Child Tax Credit (ACTC) which is a refundable credit that allows individuals with three or more children to reduce their federal income tax by up to $1,000 for each child who meets certain criteria. The Inspector General found that improper payments for the ACTC program were 24.2 percent in fiscal year 2015, totaling $5.7 billion. (See TIGTA Report, April 27, 2016, The Washington Free Beacon, May 23, 2016)
Like the EITC, an overwhelming amount of the fraudulent ACTC payments go to illegal aliens. For example, an Indianapolis television station uncovered in April 2012 an instance where four illegal aliens alone, sharing a small trailer received $29,608 from the IRS by claiming tax credits for 20 nieces and nephews who live in Mexico. (See FAIR Legislative Update, Mar. 22, 2016) Investigators identified one address in Atlanta where 23,994 ITIN-related tax refunds were sent, including 8,393 refunds deposited into a single bank account. (Id.) Further, the Washington Times found the use of the tax credit by illegal aliens jumped from 796,000 in 2005 to 1.5 million in 2008 and 2.3 million in 2010. (Id.)
While Members of Congress have blasted the IRS for improper and potentially fraudulent payments, neither the House nor Senate leadership has brought legislation addressing this issue up for a vote.
More at FAIR Legislative Update, June 7, 2016
