IG: Billions lost to potential child tax credit fraud
12/09/2014
(These figures are old and I would guess they are higher for recent years.)
Potential abuse of a popular tax-credit program is costing the government billions of dollars, the IRS inspector general said in 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 percent to 30 percent of total payments, the Treasury inspector general for tax administration said Tuesday.
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.
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.
The liberal-leaning think tank Center for Budget and Policy Priorities said reports of fraud in the credit program, which has been expanded by both Republicans and Democrats, are overblown.
“These are primarily unintentional errors stemming from the infraction of the credit’s complex rules and complicated family and child-rearing arrangement, rather than fraud and, while significant, these errors constitute a small share of the overall tax compliance gap,” said Bob Greenstein, the group’s president.
Still, 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, and a top Republican on Tuesday blasted the improper payments as proof of incompetence at the IRS, while also criticizing the White House immigration plan.
“The president’s recent executive order on immigration will only add to the number of people able to receive refundable earned income tax credits, given the Social Security number requirement,” said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance committee.
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.
Hatch also said the report calls into doubt the administration’s ability to administer other tax credit programs — including new subsidies that are part of Obamacare. But those credits are largely paid directly to insurance companies, so experts think the chances of that are small.
What many call a nonsensical law 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 the great 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.
https://www.politico.com/story/2014/12/child-...aud-113425
(I remember eons ago the IRS audited us and we were required to send copies of our children's birth certificates as proof they were our dependants!)
12/09/2014
(These figures are old and I would guess they are higher for recent years.)
Potential abuse of a popular tax-credit program is costing the government billions of dollars, the IRS inspector general said in 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 percent to 30 percent of total payments, the Treasury inspector general for tax administration said Tuesday.
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.
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.
The liberal-leaning think tank Center for Budget and Policy Priorities said reports of fraud in the credit program, which has been expanded by both Republicans and Democrats, are overblown.
“These are primarily unintentional errors stemming from the infraction of the credit’s complex rules and complicated family and child-rearing arrangement, rather than fraud and, while significant, these errors constitute a small share of the overall tax compliance gap,” said Bob Greenstein, the group’s president.
Still, 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, and a top Republican on Tuesday blasted the improper payments as proof of incompetence at the IRS, while also criticizing the White House immigration plan.
“The president’s recent executive order on immigration will only add to the number of people able to receive refundable earned income tax credits, given the Social Security number requirement,” said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance committee.
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.
Hatch also said the report calls into doubt the administration’s ability to administer other tax credit programs — including new subsidies that are part of Obamacare. But those credits are largely paid directly to insurance companies, so experts think the chances of that are small.
What many call a nonsensical law 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 the great 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.
https://www.politico.com/story/2014/12/child-...aud-113425
(I remember eons ago the IRS audited us and we were required to send copies of our children's birth certificates as proof they were our dependants!)
