Individuals who are not authorized to work in the United States (i.e. immigrants in the country illegally) last year collected $4.2 billion in tax refunds from the Internal Revenue Service, according to a new audit from the Treasury Inspector General for Tax Administration (TIGTA).
A little something called the Additional Child Tax Credit is to blame. The audit explains (emphasis mine):
Many individuals who are not authorized to work in the United States, and thus not eligible to obtain a Social Security Number (SSN) for employment, earn income in the United States. The Internal Revenue Service (IRS) provides such individuals with an Individual Taxpayer Identification Number (ITIN) to facilitate their filing of tax returns. Although the law prohibits aliens residing without authorization in the United States from receiving most Federal public benefits, an increasing number of these individuals are filing tax returns claiming the Additional Child Tax Credit (ACTC), a refundable tax credit intended for working families. 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.
When the author of the audit states “an increasing number” of illegal immigrants are claiming the ACTC, he’s not kidding. Claims for the credit have increased five-fold, from $924 million in 2005 to $4.2 billion last year.
The IRS says it doesn’t have the authority to disallow the claims. Apparently, the law doesn’t explicitly forbid unauthorized workers from claiming the tax credit, so the IRS just has to dole it out. And recent changes to tax law have made the refund even easier to obtain. Federal Eye’s Lisa Rein:
Changes to tax law are partly to blame for the explosion in refunds for additional child tax credits in recent years, auditors found. Before 2001, filers needed to have three or more children to qualify — and to owe more Social Security taxes than earned income credits.
But those requirements have been eliminated and the allowable refund for each child doubled. The American Recovery and Reinvestment Act of 2009 also made the refund easier to get, auditors found.
The Treasury IG recommended the IRS work with the Treasury Department to clarify the law. TIGTA also recommended the IRS check the immigration status of filers with taxpayer identification numbers. IRS agreed to do the first, but stopped short of the second.
So, while it might be true illegal immigrants pay taxes, it’s also true they receive tax breaks that, by the admission of TIGTA, serve as added incentive to remain in the country illegally.