Three weeks ago, an Indiana accountant turned whistle blower exposed the decade-old practice among some illegal immigrant of fraudulently collecting cash refunds for child tax credits. Local network station WTHR broadcast the story that sparked an Internet frenzy creating outrage among citizens.
According to the accountant, thousands of immigrants file false returns claiming, in addition to their own children, neighbors, nieces and nephews. In some cases, even though some of the children may not be their own or even live in the United States, filers receive $1,000 per child. Said the accountant, “It’s so easy it’s ridiculous.”
Crucial to the rip-offs are Individual Tax Identification Numbers, which the Internal Revenue Service issues to workers who pay taxes regardless of their immigration status. Once the immigrants file using their ITINs, the check is in the mail.
Russell George, the Treasury Inspector General for Tax Administration, has been hounding Congress for years to close the loophole, something that would be a simple matter of re-writing the tax code and making it mandatory that filers use a valid Social Security number.
Pursuant to an IG report, 72 percent of tax returns filed by ITIN users claimed the ATCT credit compared to just 14 percent of returns filed with Social Security numbers. The bottom-line cost to American taxpayers is $4.2 billion annually.
Since its original broadcast, WTHR heard back from several frustrated former and current IRS employees who described the agency’s pressure-packed policy to process as many ITIN applications as possible even though the applications are obviously fraudulent.
One INS employee said that during a recent day, he saw the same ITIN documentation including the identical photographs and signatures “dozens of times.” According to one disgruntled worker, even though the ITIN’s supporting paperwork is clearly fake, the employees are forced to process “X amount in an hour, or you don’t get your pay grade raise or that great evaluation. You have to kick them out as quickly as possible if you want to keep your job.”
In short, this level of blatant deceit by citizens would result in fines, penalties or possible jail time.
Of the multiple problems Congress faces, correcting the ITIN scandal would be the easiest to resolve — by following Inspector General George’s recommendation to change the tax code to require valid Social Security numbers on returns.
The House, at least, has taken the first step. Rep. Sam Johnson (R-Texas) introduced a provision that would prevent illegal immigrants from collecting the additional tax child credit. Johnson’s proposal was added to a budget reconciliation bill (H.R. 5652) that the House passed.
However, the Democratic-controlled Senate is unlikely to support the House. Last week, Sen. David Vitter (R-La.) introduced S. 577 that duplicates Johnson’s language. But Majority Leader Harry Reid blocked Sen. Jeff Sessions and Vitter’s proposal to ask for unanimous consent on S. 577.
Sessions blasted Reid, the IRS and President Obama for their collective refusal to act in Americans’ best interests. Sessions, noting that the $4 billion annual cost would eliminate the remaining shortfall for the federal highway bill and cover much of the student loan bill’s costs, said: “This should not be a partisan issue: It is wrong for the government to use Americans’ tax dollars to directly subsidize illegality, especially at a time when our nation is spending so much money we don’t have.”
As Sessions noted, the ITIN flim-flam is simply flat-out wrong. The congressionally sanctioned sting is a deeply insulting affront to honest, hard-working Americans.
Joe Guzzardi retired from the Lodi Unified School District in 2008. Contact him at firstname.lastname@example.org.