Important findings from the report include:
- The $4.2 billion that illegals claimed under the child tax credit last year is four times higher than the amount in 2005.
- Some 2.3 million filers in 2010 claimed the refundable child tax credit using an individual taxpayer identification number, or ITIN.
- Seventy-two percent of tax returns filed using ITINs sought the child tax credit. That compares with 14 percent of non-ITIN tax filers claiming the same tax credit.
- Treasury auditors note that the ITIN frequently serves as a vehicle for tax fraud.
Refundable tax credits pose an even more severe risk to Americans and the republic than mere tax credits. Refundable credits actually give money from the treasury to credit claimants whose tax liability, due to relatively low income, doesn't amount to enough to have paid more in taxes than they claim in deductions and credits. That is, these people make money off the government come tax time. In the case of the child credit, the IG says the amount claimed per return averaged $1,800.
The findings of this IG's report should not surprise anyone. Naturally, when government tax programs allow people to collect more money from the treasury than they pay in taxes, this incentivizes people to exploit such payoff schemes. Further, refundable tax credits incentivize criminal "creativity" – fraud and abuse.
The insult added to injury comes when illegal aliens run roughshod over the U.S. tax system to make ill-gotten gains. Illegals are really the only ones who need an ITIN to conduct their federal tax dealings because they lack a Social Security number. Yet, the Internal Revenue Service doesn't bother to verify a filer's immigration status (something routinely done for more than 70 means-tested benefit programs).
Illegal immigrants aren't discovering ITINs and refundable tax credits for the first time. After all, the report says, "In a prior report, [the Inspector General] noted that billions of dollars in [child tax credits] and [additional child tax credits] are being provided to ITIN filers without verification of eligibility."
In addition, economic analyst Ed Rubenstein documented the fraud and abuse by illegal aliens for the Earned Income Tax Credit. The EITC is also refundable, paying many claimants a net gain. EITC too is subjected to exploitation by illegals, Rubenstein reported.
The obvious first step is for the IRS to begin immediately to use the SAVE system to verify eligibility for taxpayer benefits available through the tax code. The child tax credit is generally a positive thing, benefiting American families and helping to promote sound family formation. But it should be limited to those legitimately residing in the United States.