New legislation sponsored by Rep. Sam Johnson (R.-Tex.) would block illegal immigrants from cashing in on the refundable child tax credit and save the federal government tens of billions of dollars.
“Last year illegal immigrants bilked $4.2 billion from U.S. taxpayers due to a loophole with the refundable child tax credit,” Johnson said. “According to a new report, this rampant abuse has cost American taxpayers billions. That’s just wrong.
“It’s time to close this loophole,” Johnson continued. “With the dire need to cut government spending, I hope this simple fix gets a serious look as a way to stamp out waste, fraud and abuse.”
The Refundable Child Tax Credit Eligibility Verification Reform Act (HR 1956), would amend the Internal Revenue Service (IRS) code to require that taxpayers provide their Social Security number on their tax return in order to claim the refund.
The Congressional Joint Committee on Taxation studied Johnson’s legislation and determined that it would save at least $10 billion if the temporary tax benefit expires in 2012, and $24 billion by 2021.
According to the Treasury Department’s Inspector General for Tax Administration,, those working illegally in the U.S. are still required to pay taxes, and many do so using taxpayer identification numbers. These taxpayer numbers “are issued regardless of immigration status, because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code,” the IRS says.
The refunds claimed by illegal immigrants have grown over the years at an alarming rate: $924 million in 2005 to $4.2 billion in 2010.
The mere existence of this tax credit offers “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. Clarification is needed on this issue,” the inspector general said.
IRS Commissioner of the Wage and Investment Division Richard Byrd Jr. responded to the inspector’s report by saying the agency was following the law.
“The IRS is administering the law accordingly. Legislative changes would be required to deny many of the claims discussed in the report,” Byrd said.