Local TV report out of Indiana highlights potential for billions of dollars of tax fraud by illegal immigrants

posted at 12:01 pm on May 4, 2012 by Morgen Richmond

An investigative report from Indiana television station WTHR highlights what they call a “loophole” in the tax code which may be costing tax payers billions by enabling illegal immigrants to claim tax credits for children not even living in the U.S. I’ve embedded the video package below, but for those of you at work there is a good write-up on their site as well. Did I say “potential”?

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.

The report goes on to highlight several of these returns, actual redacted tax returns, generating refunds in excess of $10,000. So it’s easy to imagine how these numbers could really add up on a national basis.

Even more outrageous than the report itself however is a statement WTHR received from the IRS after the story aired. See no evil, hear no evil?

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. Any suggestion that the IRS shouldn’t be paying out these credits under current law to ITIN holders is simply incorrect. 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. The IRS disagrees with TIGTA’s recommendation on requiring additional documentation to verify child credit claims. As TIGTA acknowledges in this report, the IRS does not currently have the legal authority to verify and disallow the Child Tax Credit and the Additional Child Tax Credit during return processing simply because of the lack of documentation.

Here’s the real problem and I’m not sure calling this a tax “loophole” is really the best way to describe it. As the law is written, it’s perfectly legal for non-legally resident aliens to file tax returns. It’s required actually. The law also makes no distinction between legal and illegal residents when it comes to claiming most tax credits and deductions. So under current law an illegal immigrant can claim the Child Tax Credit on their return, as pointed out by the IRS in their response.

So this scheme is actually legal? (Cue outrage). Well, not exactly. The IRS web site has a good summary of the eligibility criteria for the Child Tax Credit, but in order to qualify for this credit the child being claimed must be a U.S. citizen or green card holder, and must have also been a resident of the tax payers’ household for more than half the year (among other requirements). So an illegal immigrant claiming a tax credit for one or more eligible children born and living with them in the U.S. is perfectly legal. Claiming that a couple dozen nieces and nephews live with you in one house in Indiana when they actually live in Mexico? Not so much.

So there is plenty of fodder for outrage here, obviously, not the least of which is the seeming indifference to this problem on the part of the IRS. I gather from their response that there is no mechanism in place to verify the immigration or residency status of the children being claimed. Outside the course of a regular audit I assume. How many people residing in the U.S. illegally would ever even show up for an IRS audit? And if I were really cynical I would posture that knowing this, the IRS would not even bother to direct their limited resources towards verifying many of these returns.

I think it’s also important to note that there is no reason to assume that this type of fraud is limited to those residing here illegally. Given how it easy it seems to be to get away with this, I suspect the scope of this problem is much, much greater than this. While I don’t expect the GOP to place much emphasis on this between now and November, this should be one of the major arguments for tax reform. Rather than having a tax code riddled with loopholes such as this which enable those willing to break the law to take advantage of their fellow tax payers, why not have a flatter, simpler code which eliminates most if not all of these types of credits and deductions. And if the goal is really to provide income support to low-income families (and a refundable tax credit is just welfare in disguise), then it should be called what it is and should be enacted as part of legislation which includes a mechanism to prevent this sort of abuse from taking place.

(Cleaned up a couple of wording and grammatical problems after publishing)


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good to know that according to you, hard-working mexicans don’t deserve the money because they don’t know how to use it well. what a rotten soul you have…

sesquipedalian on May 4, 2012 at 12:54 PM

The fact of the matter is it doesn’t matter. They are illegal, end of story. Look at it this way, a hard working criminal spends the money here or sends it to his family in another country and does no other work, files a tax return and gets a refund. So that would be okay with you.

Deanna on May 4, 2012 at 1:39 PM

I did not mean to say “….”

Schadenfreude on May 4, 2012 at 1:40 PM

Deanna on May 4, 2012 at 1:39 PM

Plus, the illegals take the jobs and the money from the legal poor people, whom the left claim to ‘be for’, hypocrites.

Schadenfreude on May 4, 2012 at 1:43 PM

you probably jumped ahead of many people because you’re educated and married to an American citizen or have relatives in the country, otherwise you’d have to wait decades until you get a green card. who are you trying to fool?

sesquipedalian on May 4, 2012 at 1:29 PM

I am not trying to fool anyone nor do I have relatives here. I came here for school.

Are you claiming that “Mexicans” are NOT educated?

your ignorant pals here who seem to believe that ‘getting in line’ is a feasible way for mexicans to come to this country?

Do you believe that Mexicans — I don’t know why you singled out a particular nationality. I didn’t. — have a “right” to come to the United States?

If so, do you think that you have a “right” to move to Mexico? If you laughingly think so, you’ve got another thing coming. Mexico’s immigration laws are draconian.

Resist We Much on May 4, 2012 at 1:47 PM

Plus, the illegals take the jobs and the money from the legal poor people, whom the left claim to ‘be for’, hypocrites.

Schadenfreude on May 4, 2012 at 1:43 PM

This whole mess started when the IRS began to issue Individual Taxpayer ID Numbers in place of Social Security numbers. The idea was to force foreign investors to pay taxes but it has pretty much been an open door for illegls to get refunds.

Deanna on May 4, 2012 at 1:49 PM

Given the looting and cheating, charlatanry and exploitation of the producers, there is no longer a duty to contribute, as you well know :)

Schadenfreude on May 4, 2012 at 1:35 PM

Yep, and I should be applauded by the Left…They love when people go on strikes, after all….

Resist We Much on May 4, 2012 at 1:55 PM

Do you believe that Mexicans — I don’t know why you singled out a particular nationality. I didn’t. — have a “right” to come to the United States?

Resist We Much on May 4, 2012 at 1:47 PM

you didn’t have a right to come, but you’re still here. and yes, mexicans who come here tend to be low-skilled. i single them out because that’s whom conservatives rail against, but if you think that nenets immigration is the problem, let me know.

you came for school that you somehow paid for but most mexicans cannot afford, found a job with your new diploma, got sponsored for green card? congrats. still irrelevant to the situation of those for whom the illegal crossing of the border or overstaying their tourist visa is the only workable way to get here.

sesquipedalian on May 4, 2012 at 1:56 PM

I’m going to have a chat with my tax preparer.

shick on May 4, 2012 at 1:25 PM

I recommend H&R Block. They have always done well by us. We have a relatively simple return and we don’t even itemize, athough we may have to next year. But they have always made sure that we had all the tax credits and whatnot filed for that we could legitimately claim. Which is why I know you have to have documentation for tax credits and I am shocked to find out you don’t need that for Additional Child tax credits.

Cripes, we have lots of nieces and nephews. None in Mexico, but still, how would they know? I dunno about you, but I could use $10,000 free dollars a year.

Lily on May 4, 2012 at 1:58 PM

you didn’t have a right to come,…

sesquipedalian on May 4, 2012 at 1:56 PM

Everyone, who applies, has a right to go through the process, and if accepted, come legally…proving once again that you are beyond foolish.

Schadenfreude on May 4, 2012 at 2:01 PM

Yep, and I should be applauded by the Left…They love when people go on strikes, after all….

Resist We Much on May 4, 2012 at 1:55 PM

Love the way you think!

Schadenfreude on May 4, 2012 at 2:02 PM

still irrelevant to the situation of those for whom the illegal crossing of the border or overstaying their tourist visa is the only workable illegal way to get here.

sesquipedalian on May 4, 2012 at 1:56 PM

You must think. This is the truth.

Schadenfreude on May 4, 2012 at 2:03 PM

you didn’t have a right to come, but you’re still here.

But, I NEVER HAD A “RIGHT” TO COME TO THE UNITED STATES. I NEVER HAD A “RIGHT” TO DEMAND THAT I BE ALLOWED INTO THE COUNTRY. I NEVER HAD A “RIGHT” TO DEMAND AMERICAN CITIZENSHIP. I HAVE NEVER HAD A “RIGHT” TO DEMAND ANYTHING OF THE AMERICAN TAXPAYER. I AM NOT “OWED” ANYTHING BY THE FEDERAL, STATE OR LOCAL GOVERNMENT OTHER THAN MY CONSTITUTIONAL RIGHTS.

and yes, mexicans who come here tend to be low-skilled. i single them out because that’s whom conservatives rail against, but if you think that nenets immigration is the problem, let me know.

Well, I didn’t say anything about specific groups. I believe that illegal immigration is wrong regardless of country of origin, race, creed, gender, sexual orientation, etc. In the UK, there is an explosion in the entitlement crisis that has been cause, in large part, by European immigrants from the former Eastern Bloc. They are Caucasians. Most are uneducated and low-skilled. If they sneak into the country and manage not to get caught for 6 weeks, they are entitled to the same benefits as those that fought and defended Britain in WWII.

you came for school that you somehow paid for but most mexicans cannot afford, found a job with your new diploma, got sponsored for green card? congrats. still irrelevant to the situation of those for whom the illegal crossing of the border or overstaying their tourist visa is the only workable way to get here.

No, I’m still very relevant. Want to know why? Because I destroy your moral relevancy argument. There are many people like me that come here legally and become citizens. You want to reward illegal behaviour. You are exactly the kind of person the late, great Senator Daniel Patrick Moynihan was addressing when he wrote of defining deviancy down.

Would you mind if a few strangers had moved into your home while you were at work today? Probably, but you could care less that people move into your country without going through the proper channels.

Resist We Much on May 4, 2012 at 2:10 PM

Let me see if I get this straight….

Illegal aliens are not only being allowed to remain in Indiana, but are being handed money by the state government?

It is one thing when there are illegal aliens out there who manage to fly below the radar, work under the table, and generally avoid doing things that would result in the government and police knowing of their existence. This is why we have SB-1070 here in Arizona, to identify and deport such illegals.

It is quite another when the state government knowingly allows illegals to live and work within that state. This scam would not even be possible if the state were doing its job of identifying and deporting illegal aliens.

leereyno on May 4, 2012 at 2:12 PM

Love the way you think!

Schadenfreude on May 4, 2012 at 2:02 PM

~~wink, wink~~

Resist We Much on May 4, 2012 at 2:12 PM

There are many people like me that come here legally and become citizens. You want to reward illegal behaviour. You are exactly the kind of person the late, great Senator Daniel Patrick Moynihan was addressing when he wrote of defining deviancy down.

Would you mind if a few strangers had moved into your home while you were at work today? Probably, but you could care less that people move into your country without going through the proper channels.

Resist We Much on May 4, 2012 at 2:10 PM

i don’t want to reward illegal behavior, i want to make it easier for people to come here, and not just the privileged ones like you.

if you say that strangers moving into my home is analogous to immigrants coming here illegally to live and work and raise a family here like everyone else, you’re an idiot.

also, calm down.

sesquipedalian on May 4, 2012 at 2:33 PM

you probably jumped ahead of many people because you’re educated and married to an American citizen or have relatives in the country, otherwise you’d have to wait decades until you get a green card. who are you trying to fool? your ignorant pals here who seem to believe that ‘getting in line’ is a feasible way for mexicans to come to this country?

sesquipedalian on May 4, 2012 at 1:29 PM

You sure do like assuming, don’t you? Typical leftist. Why bother asking questions when your mental powers are so awesome?

And I don’t care if a Mexican citizen thinks we have a poor way of allowing foreigners to immigrate. It’s OUR country you idiot.

Squiggy on May 4, 2012 at 2:34 PM

Mind boggling? No, not really.

Evidently, being here illegally has its benefits. Like President Obama’s Uncle, who gets arrested for drunk here in Massachusetts, only to be allowed to stay here in the US AND is given his illegally obtained driver’s license back so he can go back to work in the liquor store and drink and drive again:
http://www.bostonherald.com/news/regional/view.bg?articleid=1061121791&position=emailed

And let’s not forget about his aunt … She’s suffered so much abuse taking tax payer dollars while living here illegally for over 20 years, she wrote a book!
http://www.youtube.com/watch?v=I_0zJ6858AM

And yes, she is STILL living in Boston public housing.

BRunner on May 4, 2012 at 2:37 PM

Here’s a wacky idea: Get rid of the credit altogether. You want 10 kids, have at it. But don’t make the taxpayers pay for them.

angryed on May 4, 2012 at 2:45 PM

i don’t want to reward illegal behavior, i want to make it easier for people to come here, and not just the privileged ones like you.

You are going to have to choose between open borders and a welfare state. You can’t have both…as California is proving to the world.

And, yes, I am privileged, but there are a lot of people that have become and are becoming Americans that did/do not come from a background like mine. You have to hold people to account and stop making excuses. It is a crime to enter this country illegally. Period. Story. End of.

if you say that strangers moving into my home is analogous to immigrants coming here illegally to live and work and raise a family here like everyone else, you’re an idiot.

Why? Don’t you think we should have a right to demand to know who is in this country, just as we would those inside of our homes? Do we want terrorists coming across borders, in through ports, or overstaying their visas? Didn’t we see the tragic effects of that on 9/11?

also, calm down.

sesquipedalian on May 4, 2012 at 2:33 PM

I’m quite calm. I understand what you do not: I did NOT have a right to become an American. It was a privilege and, no, I do not feel discriminated against in that I am forbidden from ever being President…being an American is enough.

Resist We Much on May 4, 2012 at 2:45 PM

you probably jumped ahead of many people because you’re educated and married to an American citizen or have relatives in the country, otherwise you’d have to wait decades until you get a green card. who are you trying to fool? your ignorant pals here who seem to believe that ‘getting in line’ is a feasible way for mexicans to come to this country?

sesquipedalian on May 4, 2012 at 1:29 PM

There are over 1 million LEGAL IMMIGRANTS to the US every year. There is a line. And yes it’s long, but it also moves pretty quickly. You on the other hand as usual have no clue what you’re talking about.

angryed on May 4, 2012 at 2:46 PM

if you say that strangers moving into my home is analogous to immigrants coming here illegally to live and work and raise a family here like everyone else, you’re an idiot.

also, calm down.

sesquipedalian on May 4, 2012 at 2:33 PM

So the Indians had no right to try to keep the white man out of their lands. I get it. It was their land, not “their home”.

Thanks man. Now I can quote “sesquipedalian” whenever someone gripes about how “native Americans” were treated.

You really shouldn’t drink so early in the day.

Squiggy on May 4, 2012 at 2:49 PM

if you say that strangers moving into my home is analogous to immigrants coming here illegally to live and work and raise a family here like everyone else, you’re an idiot.

sesquipedalian on May 4, 2012 at 2:33 PM

Actually, it’s a really good analogy. To make it an even better representation of the situation described in this news report, you would be expected to pay each one $200 per week.

Giving money to fraudsters like these illegals depletes our resources. All this money is borrowed, so it’s being paid back to China with interest. In addition, more worthy individuals, such as injured veterans, can’t get needed funds. The amount of money is finite. The amount of jobs are finite. These illegals (or if illegal alien is offensive to you, how about criminal alien?)are taking money and jobs from those who are here legally.

talkingpoints on May 4, 2012 at 2:57 PM

O/T Is anyone else getting a pop up ad from Dynamic? It takes over the HA thread and I can only close it, along with the HA site. It happened just now on this thread and yesterday also. I ran all of my Anti-Virus programs, but nothing found.

When the ad pops up, the HA thread is gone. The back arrow doesn’t work either. Strange as I’ve never had this happen on HA before.

Thanks

bluefox on May 4, 2012 at 12:28 PM

yes, extemely annoying. And while we are off topic, is HA now owned by or part of the Washington Post? The icon on my favorites bar now has the WP logo.

Ann on May 4, 2012 at 3:10 PM

In diplomatic matters, international affairs, there is a principle of reciprocity, a long long tradition, often enshrined in treaties (laws) between nations.

Here’s my question:

Why is it that we are not following Mexico’s immigration laws?

Reciprocal treatment and reciprocal recognition of law?

Mexico’s immigration policy is draconian compared to ours. There are serious punishments for illegals in Mexico. Many just disappear after being apprehended illegally crossing their border. Even if you are in Mexico legally, if not a citizen can you buy and sell property personally? Can you actually own a home without permits and paying of exorbitant fees? Are you given the same “rights” as a Mexican citizen just for stepping on Mexican soil?

Also, why are Mexicans abandoning their own country? True some send money back home, but why not stick around, mobilize if necessary, change the laws, enfranchise citizens, hold their leaders and government accountable, allow for development of their own nation with the sweat of their own brows?

I find it rather repugnant to abandon one’s nation, a free representative democracy, to head to another country to mooch of the system, game the system, and then demand redress because one is being treated “unfairly.”

if they truly want to come here, have compelling reasons or necessities…then why not apply for immigration? If in mortal danger why not seek asylum?

Millions apply every year to immigrate here, legally, and almost all get here, from all over.

Why should one ethnicity, from one region, be able to push aside those who have applied legally, to come here illegally, cross our borders without permission?

Isn’t one of the recognized obligations of being a nation-state to have definable borders, and be able to protect those borders? If this is to be abandoned, why have nations at all? All those 200 members of the United Nations and those non-members of the United Nations just throw open their borders so anyone can come and go at anytime and be able to enjoy the fruits found with no obligation to actually have skin in the game.

Do other nations allow people to just walk in and take over whole slices of territory and then demand more? Free? Without obligation?

If so…show me one nation that allows that, relinquishes total control over its territory and rules of law to allow that, encourage that.

And if there is one, is it self-sustainable or is it demanding aid and assistance from all across the globe?

Why are we the only nation that has demands put on it by foreigners and citizens alike to abandon our nationhood so that others can just walk in and settle down and make demands from the very first day?

coldwarrior on May 4, 2012 at 3:12 PM

Ann on May 4, 2012 at 3:10 PM

Lucky you.

I have Michelle Obama and the girls asking me to help them help Barrack get re-elected.

coldwarrior on May 4, 2012 at 3:14 PM

are you disgusted by corporate loopholes as well?

sesquipedalian on May 4, 2012 at 12:45 PM

I’m disgusted by anything ILLEGAL.

Ann on May 4, 2012 at 3:15 PM

Lucky you.

I have Michelle Obama and the girls asking me to help them help Barrack get re-elected.

coldwarrior on May 4, 2012 at 3:14 PM

You need to choose the websites you visit more carefully

Ann on May 4, 2012 at 3:16 PM

Ann on May 4, 2012 at 3:16 PM

Just was following a Sun Tzu suggestion:

“If you know the enemy and know yourself, you need not fear.”

Just trying to acquire useful intel on the opposition.

[Shoulda visited a decent porn site instead.] :-)

coldwarrior on May 4, 2012 at 3:20 PM

[Shoulda visited a decent porn site instead.] :-)

coldwarrior on May 4, 2012 at 3:20 PM

Ha! yes, instead of the political porn site….

Ann on May 4, 2012 at 3:23 PM

You really shouldn’t drink so early in the day.
Squiggy on May 4, 2012 at 2:49 PM

You really shouldn’t blame on chemical impairment what can be more obviously explained with basic idiocy.

;-)

LegendHasIt on May 4, 2012 at 3:34 PM

“Is anyone else getting a pop up ad from Dynamic? ”

Since I installed the Ghostery plugin for firefox, I don’t get any of that crap, and the pages load much faster, too.

crosspatch on May 4, 2012 at 3:43 PM

I am sure this ‘risky tax scheme’ is alive and well in California… Reason 1,000,001 why were are dead broke…

Khun Joe on May 4, 2012 at 3:45 PM

The IRS requires a SS number for every child claimed as a dependent. Where are the fraudsters getting the SS numbers? The IRS says it can’t deny child tax credits simply because of the lack of documentation. Can it deny them on the basis of bogus SS numbers??

SukieTawdry on May 4, 2012 at 3:54 PM

Illegal immigrants file taxes?

sram on May 4, 2012 at 12:09 PM

They do when they can claim $10,000 in tax credits.

SukieTawdry on May 4, 2012 at 3:57 PM

Anybody ever hear of an audit? They have no problem auditing Tea Party groups. Why should this be different? They hold that power. This just shows the hypocracy of the IRS and how bad things will come if ObamaCare survives the Court.

djaymick on May 4, 2012 at 4:01 PM

I’m really not up for giving the IRS any more authority than it already has.

Why do we have child tax credits, anyway? Exemptions resulting in a refund of withheld taxes are one thing, but producing money from thin air is entirely different.

GalosGann on May 4, 2012 at 4:12 PM

Is the IRS still not sharing information with ICE?

Or would doing so violate their “impartiality?”

Other agencies?

If I file a huge income and list it all as proceeds from major theft or fraud…will the IRS report it to anyone?

Hey, I don’t want the IRS to do a Capone on me…ill gotten gains, sure, but at least I paid my taxes.

Can’t get any answers since that bearded guy with TaxMasters stopped answering my calls.

coldwarrior on May 4, 2012 at 12:39 PM

The IRS is interested only in collecting revenue. It doesn’t matter if the income reported is from illegal activities or earned by people who are here illegally. The IRS does not share information with other agencies. If, for example, your income is derived from the illegal drug trade or prostitution, you need not worry that the IRS will rat you out. It, by law, can not. Law enforcement can not use your tax records to prosecute you unless the crime you have committed is not reporting your income or paying your taxes which, of course, is how they got Capone.

SukieTawdry on May 4, 2012 at 4:24 PM

bluefox on May 4, 2012 at 12:28 PM

yes, extemely annoying. And while we are off topic, is HA now owned by or part of the Washington Post? The icon on my favorites bar now has the WP logo.

Ann on May 4, 2012 at 3:10 PM

Have been offline most of the day. I doubt HA has anything to do with the WP. My Favorites bar doesn’t show that tho. I delete anything from there that I don’t want, since I’ve noticed some links appear automatically.

bluefox on May 4, 2012 at 8:32 PM

Let me count the ways we are sucked dry. MC fraud, IRS fraud, green energy fraud, hmmm all of these are run by the govt who now wants to run our health care. We are all Julia. At least, we no longer call them illegal because that’s racist.

Kissmygrits on May 5, 2012 at 9:50 AM

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