Use of tax ID number a tipoff to non-working status
WASHINGTON – The IRS allowed foreign workers – many of them in the U.S. illegally – to improperly claim nearly $7 billion in child tax credits from 2004 to 2007, a government investigator said Thursday.
Most of the credits went to workers who didn’t make enough money to pay any federal income taxes, J. Russell George, the Treasury Inspector General for Tax Administration, said in a report. In those cases, the workers received payments from the Internal Revenue Service after filing income tax returns.
The IRS allowed the tax credits even though the workers did not provide Social Security numbers on their tax returns, the report said. Instead, the workers used government-issued tax identification numbers, which are available to immigrants for certain tax-filing purposes – regardless of their legal status – but are not valid for employment in the U.S.
The issue highlights a weakness in current law, according to the report. Federal law does not require a Social Security number to receive the $1,000 child tax credit. But a Social Security number is required to work and earn wages in the U.S., the report said.
“As it now stands, the payment of federal funds through this tax benefit appears to provide an additional incentive for aliens to enter, reside and work in the U.S. without authorization, which contradicts federal law and policy to remove such incentives,” the report said.
The IRS said it supports efforts to require Social Security numbers to receive the child tax credit. In the meantime, the IRS has stepped up efforts to ensure that immigrants do not improperly obtain Individual Taxpayer Identification Numbers, the agency said in a written response to the report.
For 2004, 626,000 foreign workers improperly claimed $778 million in child tax credits even though they didn’t make enough money to pay any federal income taxes. By 2007, the number of low-wage foreign workers improperly claiming the credit increased to 1.2 million, and the value of those credits jumped to nearly $1.8 billion.
An additional 774,000 foreign workers with higher incomes improperly claimed the tax credit to lower their tax bills by $622 million in 2007, the report said.