Billions lost to potential child tax credit fraud-IG – Politico

Posted: Tuesday, December 09, 2014


12/9/14 11:58 AM EST

Updated 12/9/14 3:39 PM EST

Potential abuse of a popular tax credit program is costing the government billions of dollars, the IRS inspector general said on Tuesday, findings that may ramp up the debate over undocumented workers getting government benefits.

The IRS paid out at least $5.9 billion in improper payments of the additional child tax credit in fiscal year 2013, or about 25 to 30 percent of total payments, according to the Treasury Inspector General for Tax Administration.

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The IG previously reported that unauthorized workers were a major source of the improper payments, though that wasn’t spelled out in its most recent report.

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The inspector general took the IRS to task for not taking the potential fraud seriously, like it does with another popular credit program prone to abuse, the earned income tax credit.

“It is imperative that the IRS take action to identify and address all of its programs that are at high risk for improper payments,” said J. Russell George, the inspector general.

The agency through a spokesman said the IRS “continues to aggressively explore new ways to detect and stop potentially fraudulent claims while maximizing the use of limited compliance resources.”

It also noted that its budget has been cut by $850 million since 2010, with 13,000 fewer staff.

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The report comes as Republicans mull their next move in battling the White House action letting as many as 5 million undocumented workers gain legal status.

Because of a quirk in the law, many of these workers are already claiming the child tax credit.

The $1,000-per-child tax credit is among the government’s biggest tax breaks for working families — but it is refundable, meaning that individuals can get cash if they don’t owe taxes, making it subject to abuse.

Republicans want those claiming the refundable part of the credit to have a Social Security number.

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Democrats say that is taking food out of the mouths of innocent children and they note that many of the child beneficiaries are actually legal because they were born in the United States.

The liberal-leaning think tank Center for Budget and Policy Priorities says the credit, which has been expanded by both Republicans and Democrats, is a largely successful program that plays a key role in alleviating poverty.

What many call a nonsensical law lets creates the situation.

The IRS requires workers to file tax returns regardless of their immigration status. Authorized immigrants use their Social Security numbers to do so. But those ineligible to receive them can instead get a nine-digit individual taxpayer identification number to use for tax reporting purposes. Experts say undocumented workers comprise well over a majority of people using such numbers. About 3 million tax forms filed in 2010 had these ITINs.

The IRS has said the law doesn’t give it the legal authority to deny the credit to unauthorized workers.


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