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 Post subject: Tax Loophole Allows Illegals to Get $4.2 Billion in Refunds!
PostPosted: Thu May 24, 2012 9:48 pm 
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Investigative reporter Bob Segall of WTHR Channel 13 out of Indianapolis has been doing a series of excellent reports on illegal aliens exploiting a tax loophole to claim $4.2 billion in child tax credits. Originally, the story had 2 parts. But the story has gone national and, as of this date, has 4 parts to it. I will endeavor to post all the videos and written reports here.
***
INDIANAPOLIS -
The national response to WTHR's "Tax Loophole" investigation has been huge. Millions of people have watched the videos that show how undocumented workers are tapping into an IRS loophole – a loophole that allows illegal immigrants to claim billions of dollars in tax credits. We'll post any follow-up stories on this page.

Part one: Tax loophole costs billions - Millions of illegal immigrants are getting a bigger tax refund than you. Eyewitness News shows a massive tax loophole that provides billions of dollars in tax credits to undocumented workers and, in many cases, people who have never stepped foot in the United States. And you are paying for it!

Part two: Will lawmakers act to close tax loophole for illegal immigrants? - From Indiana to Capitol Hill, thousands of people are now weighing in on a WTHR investigation exposing a tax loophole worth billions for undocumented workers. But what, if anything, can be done about it?

Part three: Lawmakers debate tax loophole - Members of the US House of Representatives are talking about our investigation and demanding answers.

Part four: IRS workers OK "phony" documents from illegal immigrants - After WTHR exposed a tax loophole that allows illegal immigrants to collect tax credits worth billions, the Internal Revenue Service pointed the finger at Congress. But IRS whistleblowers are now coming forward to say the real blame lies within.
***

Video Part One: http://www.wthr.com/story/18204912/tax- ... estigation

Tax loophole costs billions
Posted: Apr 26, 2012 8:55 PM CDT Updated: May 10, 2012 4:48 PM CDT

By Bob Segall

Note: This is part one in a two-part series. Read part two here. Also, read our follow-up story on how US lawmakers are taking notice.


INDIANAPOLIS - Inside his central Indiana office, a longtime tax consultant sits at his desk, shaking his head in disbelief.

"There is not a doubt in my mind there's huge fraud taking place here," he said, slowly flipping through the pages of a tax return.

The tax preparer does not want you to know his name for fear of reprisal, but he does want you to know about a nationwide problem with a huge price tag.

He came to 13 Investigates to blow the whistle.

"We're talking about a multi-billion dollar fraud scheme here that's taking place and no one is talking about it," he said.

The scheme involves illegal immigrants -- illegal immigrants who are filing tax returns.

How it works

The Internal Revenue Service says everyone who is employed in the United States – even those who are working here illegally – must report income and pay taxes. Of course, undocumented workers are not supposed to have a social security number. So for them to pay taxes, the IRS created what's called an ITIN, an individual taxpayer identification number. A 9-digit ITIN number issued by the IRS provides both resident and nonresident aliens with a unique identification number that allows them to file tax returns.

While that may have seemed like a good idea, it's now backfiring in a big way.

Each spring, at tax preparation offices all across the nation, many illegal immigrants are now eagerly filing tax returns to take advantage of a tax loophole, using their ITIN numbers to get huge refunds from the IRS.

The loophole is called the Additional Child Tax Credit. It's a fully-refundable credit of up to $1000 per child, and it's meant to help working families who have children living at home.

But 13 Investigates has found many undocumented workers are claiming the tax credit for kids who live in Mexico – lots of kids in Mexico.

"We've seen sometimes 10 or 12 dependents, most times nieces and nephews, on these tax forms," the whistleblower told Eyewitness News. "The more you put on there, the more you get back."

The whistleblower has thousands of examples, and he brought some of them to 13 Investigates. While identifying information such as names and addresses on the tax returns was redacted, it was still clear that the tax filers had received large tax refunds after claiming additional child tax credits for many dependents.

"Here's a return right here: we've got a $10,3000 refund for nine nieces and nephews," he said, pointing to the words "niece" and "nephew" listed on the tax forms nine separate times.

"We're getting an $11,000 refund on this tax return. There's seven nieces and nephews," he said, pointing to another set of documents. "I can bring out stacks and stacks. It's just so easy it's ridiculous."

20 kids = $30,000

WTHR spoke to several undocumented workers who confirmed it is easy.

They all agreed to talk with WTHR investigative reporter Bob Segall and a translator as long as WTHR agreed not to reveal their identity.

One of the workers, who was interviewed at his home in southern Indiana, admitted his address was used this year to file tax returns by four other undocumented workers who don't even live there. Those four workers claimed 20 children live inside the one residence and, as a result, the IRS sent the illegal immigrants tax refunds totaling $29,608.

13 Investigates saw only one little girl who lives at that address (a small mobile home). We wondered about the 20 kids claimed as tax deductions?

"They don't live here," said the undocumented worker. "The other kids are in their country of origin, which is Mexico."

He later explained none of the 20 children have ever visited the United States – let alone lived here.

So why should undocumented workers receive tax credits for children living in a foreign country, which is a violation of IRS tax rules?

"If the opportunity is there and they can give it to me, why not take advantage of it?" the worker said.

Other undocumented workers in Indiana told 13 Investigates the same thing. Their families are collecting tax refunds for children who do not live in this country. Several of the workers told WTHR they were told it was legal for them to claim the tax credit for a child who does not live in the United States.

IRS was repeatedly warned

"The magnitude of the problem has grown exponentially," said Russell George, the United States Department of Treasury's Inspector General for Tax Administration (TIGTA).

And he says the IRS has known about the problem for years.

George has repeatedly warned the IRS that additional child tax credits are being abused by undocumented workers. In 2009, his office released an audit report that showed ITIN tax filers received about $1 billion in additional child tax credits. Last year, the inspector general released a new report showing the problem now costs American tax payers more than $4.2 billion.

"Keep in mind, we're talking $4 billion per year," he said. "It's very troubling."

What George finds even more troubling is the IRS has not taken action despite multiple warnings from the inspector general.

"Millions of people are seeking this tax credit who, we believe, are not entitled to it," said the inspector general. "We have made recommendations to [IRS] as to how they could address this, and they have not taken sufficient action in our view to solve the problem."

Other information obtained from the TIGTA audits include:

· Claims for additional child tax credits by ITIN filers have skyrocketed during the past decade, from $161 million in 2001 to $4.2 billion in tax year 2010.

· Undocumented workers filed 3.02 million tax returns in 2010. 72% of those returns (2.18 million) claimed the additional child tax credit.

· In 2010, the IRS owed undocumented workers more in claimed additional child tax credits than it collected from those workers in taxes.

Agency responds – sort of

What does the IRS have to say about all this?

The agency sent WTHR a statement, defending its policy of paying tax credits to illegal immigrants.

"The law has been clear for over a decade that eligibility for these credits does not depend on work authorization status or the type of taxpayer identification number used. Any suggestion that the IRS shouldn't be paying out these credits under current law to ITIN holders is simply incorrect. The IRS administers the law impartially and applies it as it is written," the statement said.

George disagrees with that position and believes the IRS should be doing more to prevent undocumented workers from getting billions in US tax dollars.

"The IRS is not doing something as simple as requesting sufficient documentation from people seeking this credit," he said. "Once the money goes out the door, it's nearly impossible for the IRS to get it back."

Over the past month, WTHR has tried to ask the IRS more questions about its efforts to prevent abuse involving additional child tax credits.

Despite repeated phone calls, e-mails and a visit to IRS headquarters in Washington, the agency said none of its 100,000 employees had time to meet with 13 Investigates for an interview. An IRS spokeswoman said all staff were too busy because of the tax filing deadline in mid-April.

Apparently, the IRS doesn't have time to respond to some tax preparers, either.

Last year, our whistleblower noticed dozens of undocumented workers had used phony documents and false income to claim tax credits. He reported all of it to the IRS.

"These were fraudulent, 100% fraudulent tax returns, but I got no response; absolutely none. We never heard a thing," he said. "To me, it's clear the IRS is letting this happen."

The IRS tells WTHR it can do nothing to change the current system unless it gets permission from Congress. In other words, according to the IRS, closing the loophole would require lawmakers to pass a new law specifically excluding illegal immigrants from claiming additional child tax credits.

The big questions now: Is Congress willing to do that?

What's next

Tomorrow night, 13 Investigates will show you how lawmakers are reacting to WTHR's investigation and what they plan to do about. You'll also hear why some undocumented workers say the credits are essential and should be left intact. Our investigation continues Friday night at 11:00.

Full statement to WTHR from the Internal Revenue Service

The law has been clear for over a decade that eligibility for these credits does not depend on work authorization status or the type of taxpayer identification number used. Any suggestion that the IRS shouldn't be paying out these credits under current law to ITIN holders is simply incorrect. The IRS administers the law impartially and applies it as it is written. If the law were changed, the IRS would change its programs accordingly. The IRS disagrees with TIGTA's recommendation on requiring additional documentation to verify child credit claims. As TIGTA acknowledges in this report, the IRS does not currently have the legal authority to verify and disallow the Child Tax Credit and the Additional Child Tax Credit during return processing simply because of the lack of documentation. The IRS has procedures in place specifically for the evaluation of questionable credit claims early in the processing stream and prior to issuance of a refund. The IRS continues to work to refine and improve our processes.


Last edited by Cheree on Thu May 24, 2012 10:15 pm, edited 2 times in total.

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 Post subject: Re: Tax Loophole Allows Illegals to Get $4.2 Billion in Refunds!
PostPosted: Thu May 24, 2012 9:59 pm 
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Part Two Video:
http://www.wthr.com/story/17861738/will ... immigrants

Will lawmakers act to close tax loophole for illegal immigrants?
Posted: Apr 27, 2012 10:20 PM CDT Updated: May 10, 2012 4:49 PM CDT

By Bob Segall


From Indiana to Capitol Hill, thousands of people are now weighing in on a WTHR investigation exposing a tax loophole worth billions for undocumented workers. But what, if anything, can be done about it?

Note: This is part two in a two-part series. Read part one here. Also, read our follow-up story on how US lawmakers are taking notice.

INDIANAPOLIS - Congressman Dan Burton (R – Ind) is frustrated – very frustrated – after learning the details of an Eyewitness News investigation.

"Why in the world are we doing this?" he asked. "Are you kidding me? The cost to the American tax payer is huge!"

The veteran lawmaker is responding to what 13 Investigates discovered all across Indiana: illegal immigrants getting big tax refunds from the Internal Revenue Service thanks to a loophole in federal law.

MORE: Tax loophole costs billions

The loophole allows undocumented workers to collect what's called an additional child tax credit. The credit – up to $1,000 per child – can be claimed even by families who pay nothing in taxes, in many cases resulting in a cash payment from the IRS. It is intended for working families with children who live in the same home.

But a local tax preparer came to Eyewitness News to blow the whistle on millions of people who, he believes, are taking advantage of the system. He says many illegal immigrants are claiming the tax credit for children who've never lived in this country, and he showed 13 Investigates dozens of redacted tax returns to prove his point.

"There is not a doubt in my mind there is huge fraud taking place here," said the whistleblower, who asked not to be identified for fear of reprisal. "I can bring out stacks and stacks. It's just so easy it's ridiculous."

Exposing the loophole

An undocumented worker in southern Indiana told 13 Investigates just how easy it truly is.

He said four other illegal immigrants file tax returns using his address, even though none of them actually lives there. And he said this year, those four workers filed tax returns claiming 20 children live inside his small trailer home. As a result, the IRS sent the illegal immigrants tax refunds totaling more than $29,000.

But none of the 20 children listed as dependents on the tax returns lives in Indiana – or even in the United States.

"No, they don't live here," admitted the undocumented worker, who lives with his young daughter. "The other kids are in their country of origin, which is Mexico."

The IRS granted tax credits for the 20 children anyway, even though the agency's own policy states they are not eligible. (Children are eligible for additional child tax credits only if they are US citizens or minor resident aliens who live in the US with a tax filer for more than half of a calendar year.)

According to WTHR's whistleblower, cases like this one are commonplace because the IRS does little to verify the eligibility of both the undocumented workers filing for additional child tax credits and the dependents listed on their tax returns.

13 Investigates has confirmed it's a growing problem. It's nationwide. And it's out of control.

Billions already paid

Eyewitness News obtained US Treasury Department audit reports that show illegal immigrants now get additional child tax credits totaling $4.2 billion dollars each year. The department's Inspector General for Tax Administration has repeatedly warned the IRS that undocumented workers are abusing the additional child tax credit.

"Millions of people are seeking this credit who, we believe, are not entitled to it," said inspector general Russell George. "We have made recommendations to [IRS] as to how they could address this and they have not taken sufficient action in our view to solve the problem. It's very troubling."

Why has the IRS done nothing?

Despite phone calls, emails, even a visit to IRS headquarters in Washington to get answers, no one at the IRS would meet with WTHR.

The agency instead sent 13 Investigates a short statement (see below) saying it is following the law, and current tax law does not prevent undocumented workers from getting additional child tax credits. The IRS claims it can't change that without a new law.

Rep. Burton and other lawmakers are now ready to act.

Lawmakers looking for a fix

"We've got to deal with it," he said. "I knew this was a problem, but until hearing what you found, I didn't know it was this severe."

Rep. Burton and dozens of other House Republicans have co-sponsored a bill that would essentially authorize additional child tax credits only for US citizens. House Resolution 1956 would require tax filers to provide a valid social security number to receive an additional child tax credit.

The IRS provides illegal immigrants with an ITIN (individual taxpayer identification number) so they can file tax returns, but most undocumented workers are not eligible to receive a social security number.

HR 1956 has sat idle in the House Ways and Means Committee for almost a year.

However, language from the bill is now included in a package of proposed budget savings measures that House lawmakers are expected to consider in May. While the budget package may have enough support to pass the House, it is expected to die a quick death in the Democratic-controlled Senate.

"This should not be a partisan issue because we're all concerned about saving taxpayer dollars and not wasting them on fraudulent things like this," said Rep. Burton. "But I don't think Democrats want to deal with this with right now."

Not all Democrats are opposed to limiting additional child tax credits to US citizens.

Last fall, Senator Claire McCaskill (D – Mo) sent a letter to IRS Commissioner Douglas Shulman asking him to stop the agency's payments of additional child tax credits to undocumented workers. "This is deeply problematic and must be remedied," the senator wrote.

But few other Democratic lawmakers have voiced support for eliminating the child tax credits for undocumented workers.

Republicans plan to keep pushing the issue forward.

"This rampant abuse of hardworking taxpayer dollars is just wrong," said Rep. Sam Johnson (R – Tex), who authored HR 1956. "It's time we close this tax loophole and put a stop to the child tax credit sham."

Rep. Burton agrees.

"I'm a taxpayer, and the thought of me paying for 24 people who are living in one trailer boggles my mind, especially when you tell me most of them are still living in Mexico. That's unconscionable." he said.

"Who's going to help?"

Many undocumented workers see the issue very differently.

"It's not taking advantage. I'm very thankful to this country for the help it gives me," said an illegal immigrant in central Indiana, who decided to talk with 13 Investigates as long as we agreed not to reveal his identity.

The worker has lived in the United States for 14 years. He owns a home in Indiana, pays taxes and is raising three children who are all honor roll students. This year, he received a $9,000 tax refund that includes additional child tax credits – not only for his children who live in Indiana, but also for four nieces and nephews in Mexico.

The tax credits help him care for his young family members south of the border, and he says attempts by Congress to revoke the credits could have dire consequences.

"Who's going to help them if they're not eligible ... to avoid them ending up in the drug mafia, begging in the street, being raped? What happens when they get sick?" he asked. "There's a lot of things that could happen to them if you don't help … When you come here [to the United States], to your family down there, you are their hope."

Taking additional child tax credits away from undocumented workers would also have an impact on millions of children legally living in this country. Children of illegal immigrants who are born in the US are legal US citizens and, in many cases, those children would no longer be eligible to receive the tax credits under proposals like HR 1956.

But the inspector general insists refundable tax credits were never intended for illegal immigrants – let alone people who've never stepped foot in the United States.

"It's being abused by people who are not entitled to use it, and that's problematic," George told Eyewitness News.

"It's cheating the American taxpayer," agreed Burton. "We all believe in humanity and humanitarianism, but we've got a $15 trillion national debt. We can't subsidize the whole world."

What can you do?

Congress may be voting on a budget measure in the coming weeks, and a budget reconciliation package now being considered in the House of Representatives contains language that would limit additional child tax credits to US citizens with a valid social security number. If you feel strongly about this issue – one way or another – now is a good time to let your lawmakers know. Their contact information is listed below:

US Representatives – Indiana

District 1
Visclosky, Peter-D
202-225-2461

District 2
Donnelly, Joe-D
202-225-3915

District 3
Stutzman, Marlin-R
202-225-4436

District 4
Rokita, Todd-R
202-225-5037

District 5
Burton, Dan-R
202-225-2276

District 6
Pence, Mike-R
202-225-3021

District 7
Carson, André-D
202-225-4011

District 8
Bucshon, Larry-R
202-225-4636

District 9
Young, Todd-R
202-225-5315


US Senate – Indiana

Daniel Coats (R)
493 Russell Senate Office Building
Washington, DC 20510
(202) 224-5623
www.coats.senate.gov/contact/


Richard Lugar (R)
306 Hart Senate Office Building
Washington, DC 20510
(202) 224-4814
www.lugar.senate.gov/contact/


Full statement to WTHR from the Internal Revenue Service:

The law has been clear for over a decade that eligibility for these credits does not depend on work authorization status or the type of taxpayer identification number used. Any suggestion that the IRS shouldn't be paying out these credits under current law to ITIN holders is simply incorrect. The IRS administers the law impartially and applies it as it is written. If the law were changed, the IRS would change its programs accordingly. The IRS disagrees with TIGTA's recommendation on requiring additional documentation to verify child credit claims. As TIGTA acknowledges in this report, the IRS does not currently have the legal authority to verify and disallow the Child Tax Credit and the Additional Child Tax Credit during return processing simply because of the lack of documentation. The IRS has procedures in place specifically for the evaluation of questionable credit claims early in the processing stream and prior to issuance of a refund. The IRS continues to work to refine and improve our processes.


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 Post subject: Re: Tax Loophole Allows Illegals to Get $4.2 Billion in Refunds!
PostPosted: Thu May 24, 2012 10:05 pm 
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Part Three Video: http://www.wthr.com/story/18272744/hous ... e-question

House lawmakers debate tax loophole question
Posted: May 10, 2012 4:35 PM CDT Updated: May 11, 2012 9:57 AM CDT

By Bob Segall - bio

INDIANAPOLIS -
More than three million people have watched WTHR's "Tax Loophole" investigation online within the past week, and many lawmakers are among them. Thursday in Washington, members of Congress debated the problem exposed by 13 Investigates.

Thursday was business as usual on the floor of the U.S. House of Representatives.

Democrats and Republicans spent hours arguing and criticizing one another as they debated a controversial package of spending cuts known as House Resolution 5652.

But Thursday was also different. For the first time, House members debated whether to close a tax loophole that's providing big tax refunds to illegal immigrants. It's something Congressman Sam Johnson (R – TX) has been wanting to do for years.

"Due to a loophole in the tax code, the IRS is shoveling out billions on American tax dollars to those who are here illegally," said Rep. Johnson.

Bolstered by an Eyewitness News investigation, Rep. Johnson and other Republicans made their case for closing the loophole that is now making national news.

Two weeks ago, 13 Investigates showed how millions of illegal immigrants are taking advantage of tax credits intended for working families with children. WTHR's investigation documented how many undocumented workers file tax returns using an ITIN (individual taxpayer identification number) to claim thousands of dollars in Additional Child Tax Credits.

IRS tax code currently allows illegal immigrants to claim the fully-refundable tax credits as long as the children listed as dependents live in the United States and with the tax filer for at least six months of the year. Eyewitness News showed many undocumented workers are cheating the system by instead claiming nieces and nephews who live in other countries. The IRS issues them tax credits anyway because the agency does little to verify ITIN documentation.

According to an audit report by the U.S. Treasury Department's Inspector General for Tax Administration, the problem now costs American taxpayers $4.2 billion per year. The inspector general has been warning the IRS and Congress about the abuse since 2009, but most members of Congress seemed unaware of the problem – until now.

"This is where our taxpayer money is going, to the [additional] child tax credit," said Rep. Paul Ryan (R-WI) Thursday morning during Congressional debate. "One investigation in Indiana said illegal immigrants in Indiana are getting $29,608 for 20 children they claimed for the tax credit who live in Mexico and have never visited the United States before!"

Rep. Ryan, chairman of the House Budget Committee, wants tax credits for illegal immigrants stopped, and so do many other lawmakers who saw WTHR's investigation. They debated it Thursday morning on the floor of the House after being bombarded by phone calls and e-mails from constituents who watched the Eyewitness News report online.

Some lawmakers, like Rep. Rick Mulvaney (R-SC), spent all of their allotted floor time to discuss the loophole.

"We got dozens [of e-mails] this week about a program where supposedly it was part of an investigative report by a television station in the Midwest that said that supposedly illegal immigrants were able to file paperwork every April 15 and receive $1000 back from the federal government for every child that they had, regardless of whether they could prove the child existed, regardless of whether the child actually lived in this country," Rep. Mulvaney said. "I was stunned by it to be quite frank with you and I gave it to my staff to actually research it, and it turns out, Mr. Speaker, stunningly it's absolutely true. Absolutely true. And it's not just a … television station in the Midwest or me, it's the IRS [that] admits this is true. The IRS inspector general looked into this and said we are spending $4 [billion] dollars every single year … on these types of programs. They admit that it's true and the IRS has asked us to act and we've done nothing. This is an outrage, Mr. Speaker. I'm surprised to hear anybody defend this system. This is the type of waste, fraud and abuse that undermines confidence in the way we do business in this town. This is the type of thing that gives people concern that we don't have any idea what we're doing about anything… We don't have to wait to fix this type of abuse."

Rep. Johnson took the opportunity to share his concerns, too.

"Illegal immigrants are even filing tax returns claiming children who do not live in America, according to a recent report by NBC Indianapolis WTHR," Rep. Johnson reported to his Congressional colleagues. "Mr. Speaker, there really shouldn't be any controversy over this. The American people are speaking out against this. The treasury and tax IG has spoken out against this. Democratic Senator Claire McCaskill has spoken out against this. Even the administration supports the idea of preventing illegal [immigrants] getting public benefits through funding of a verification program… Americans want, need and deserve better protection of their hard earned money and we owe it to the United States of America to take action today."

House Democrats argued against placing limits on the Additional Child Tax Credit. "I'm in opposition to an unfair proposal that would alter the child tax credit to exclude children of hard-working immigrant families," said Budget Committee Ranking Member Chris Van Hollen (D-MD).

Democrats unanimously spoke against HR 5652, which contains billions of dollars in proposed cuts to Medicaid funding, food stamps and other social programs.

"This is an unbalanced package of cuts that hurts the most vulnerable populations of our society and the working middle class," said Rep. Henry Waxman (D-CA).

Ultimately, Democrats lacked the votes needed to defeat the measure.

Along strict party lines, House lawmakers approved the budget reconciliation package, including language that would take away Additional Child Tax Credits from those who do not have a social security. That would essentially eliminate the ability of millions of undocumented workers to receive Additional Child Tax Credits.

But the measure is predicted to die a certain death in the Democrat-controlled Senate.

"That bill is not going to go anywhere in this Congress," said Eyewitness News political analyst Robin Winston.

Winston believes the budget reconciliation package now headed to the Senate is filled with too many controversial budget cuts to survive, and he thinks Congress is unlikely to pass a separate bill dealing with tax credits for illegal immigrants during an election year.

"There are huge constituencies with Latino-Hispanic voters, and some of those are in areas with contested House seats in battleground states," said Winston. "This is an issue that should be dealt with, but it would take some Democrats and some Republicans going into a room and saying ‘This isn't about immigration reform. This is about fairness to American taxpayers,' and everyone putting their ego in a drawer and deciding to work together to move this out [of Congress]," Winston said. "Until that happens, everyone draws a line in the sand and doesn't move on either side."

If you want to contact your lawmakers about this issue, you'll find their contact information below.


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 Post subject: Re: Tax Loophole Allows Illegals to Get $4.2 Billion in Refunds!
PostPosted: Thu May 24, 2012 10:12 pm 
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Part Four Video: http://www.wthr.com/story/18616411/irs- ... immigrants

IRS workers OK "phony" documents from illegal immigrants
Posted: May 24, 2012 12:33 PM CDT Updated: May 24, 2012 7:12 PM CDT

By Bob Segall

After WTHR exposed a tax loophole that allows illegal immigrants to collect tax credits worth billions, the Internal Revenue Service pointed the finger at Congress. But IRS whistleblowers are now coming forward to say the real blame lies within.

INDIANAPOLIS - Getting a letter from the IRS is something most of us don't look forward to.

But in the past few weeks, 13 Investigates has been getting letters, calls and e-mails from IRS employees who are blowing the whistle on their own agency.

They say they were compelled to contact WTHR after seeing an Eyewitness News investigation that exposed a massive tax loophole for illegal immigrants. And they want to set the record straight about why the loophole now costs American taxpayers more than $4 billion per year.

"I think most people will be very angry," said one of the IRS workers. "If they only knew what we do here – actually what we don't do – they wouldn't be happy."

Eleven current and former IRS workers contacted WTHR in the past three weeks. They all have three things in common:
•They work/worked at an IRS processing center.
•They don't want to be identified for fear of retaliation by the IRS.
•They believe the IRS is not doing enough to prevent undocumented workers from getting fraudulent tax credits and refunds.

Two of the workers agreed to meet in person near an airport on the East Coast. The others talked with WTHR by phone and e-mail.

"I just saw your report and there's something I need to tell you," explained one of the IRS insiders. "I see this stuff every day and there isn't anything I can do about it."

It's all in the numbers

To understand the whistleblowers concerns, you first need to understand the system in which they work. Most of them have experience working at an IRS facility that processes ITIN applications.

An ITIN is an individual taxpayer identification number issued to undocumented workers strictly for the purpose of paying taxes. The 9-digit number looks like a Social Security number, except it always begins with the number 9.

In recent years, millions of illegal immigrants have sought an ITIN because of an IRS loophole that allows them to use that number to claim Additional Child Tax Credits. The credits (up to $1000 per child) are intended for working families with children living at home. Illegal immigrants in the United States can legally receive Additional Child Tax Credits if they have children who live in their household for at least six months per year.

But 13 Investigates discovered some undocumented workers claim Additional Child Tax Credits for children who live in other countries. They apply for (and often obtain) ITIN numbers for those kids so they can list them as dependents on their tax returns, resulting in large tax refunds for children who've never stepped foot in the United States.

"I have tons of examples. This problem is so huge," said an Indiana tax preparer, who first brought the loophole to the attention of 13 Investigates. "It's so easy, it's ridiculous."

Why is it so easy?

The people who process ITIN requests and tax returns know the answer – and they want you to know, too.

"You know it's phony"

"I'd get stacks of ITIN applications – at least 250 – a day, and your job was to get them in and out. Just get them done and get that person a [ITIN] number," explained a former IRS worker who served as a trainer at an ITIN processing center. "You have to do X amount in an hour or you don't get your pay grade raise, you don't get that great evaluation. You have to kick them out as quickly as possible if you want to keep your job."

That worker, and most others who talked with WTHR, said pressure to process as many ITIN applications as possible leaves little time for scrutinizing documents that are supposed to accompany each ITIN application.

In addition to a the formal application, referred to as a W-7, ITIN applicants must also provide two original or certified copies of identifying documents, such as a foreign birth certificate, drivers license or voter ID card. According to IRS workers, those types of documents are easily forged, and bogus documents are what the ITIN processing center in Austin, Tex., receives every day.

"You can make most of them on your home computer," explained one of the IRS whistleblowers.

"So how do you know if the documentation is real or fake?" asked 13 Investigates.

"You don't," the whistleblower said.

"I can't read Spanish so I couldn't even read [the documents]," explained another IRS insider.

"Wait a second. You're expected to process documents and you don't even read the language the documents are [written] in?" 13 Investigates asked.

"Correct," they said simultaneously.

"We get applications from Mexico, Honduras, China, Japan, Bulgaria, all over the world. How are we supposed to read all that? But I guarantee 90% of them are phony. We see the same signatures hundreds of times. We see the same docs photocopied and attached to different applications. It's the same person, same photo, same address. I've seen the same birth certificate twelve times now in the past day. You see it all on an ITIN application," the IRS insider said.

"So what do you do with that application?" we asked.

"If the documentation is there, process it," admitted the insider.

"How? It was your job to make sure that documentation was correct," 13 Investigates said.

"No," the IRS insider said, quickly shaking his head. "There's no way for us to do that. The documents would come in. That's it. We're done with it. We accept it … no ifs, ands or buts. You can sit there and look and you know it's phony. [There's] nothing we can do about it. Absolutely nothing."

Look the other way

Another current ITIN processing agent, who called WTHR while on his lunch break outside the Austin processing center, said many of the center's workers are part-time seasonal employees who have little training in identifying fraudulent documents. He said the IRS has a "look-the-other-way attitude" about the overwhelming quantity of bogus documents submitted with ITIN applications.

"I have no doubt factories are mass producing these fake IDs. I have no doubt many of the birth certificates we get are for kids in other countries who don't exist," he said. "Most of these documents are fraudulent and there's absolutely no system here to catch it."

Current and former workers from the ITIN processing center tell Eyewitness News they have "raised red flags" to their supervisors about documentation that appears to be fraudulent. They say those complaints often go unheard. Raising concerns and asking questions about individual ITIN applications is actually discouraged, according to the IRS workers, because that takes time and slows down the approval process.

"You're there to give them this [ITIN] number. You're not there to judge," said a former ITIN processing trainer.

"What do you mean 'you're not there to judge?' If you don't judge the validity of these documents, who is?" asked 13 Investigates.

"No one. This is how they're getting these [ITIN] numbers," the trainer replied.

That helps explain what some Indiana tax preparers see on a regular basis: illegal immigrants who get big tax refunds by sending the IRS paperwork that doesn't match.

Here's an example:

Victor filed a 1040 tax return, along with a W2 wage statement from his employer to show how much he got paid in 2011. But the 1040 and W2 submitted to the IRS have different names and identification numbers. Victor's 1040 lists "Victor" as the taxpayer and shows an ITIN number. The attached W2 is for someone named Jose, and it shows a Social Security number.

It's not a mistake.

"That's what happens," explained the tax preparer whistleblower who provided the documents to WTHR after crossing out last names, addresses, the last six digits of each identification number and all other identifying information. "A lot of these undocumented workers usually get a hold of somebody's Social Security number to get a job, then they use that number with an ITIN to file tax returns."

"As a tax preparer, when you see the Social Security numbers and names don't match up, why would you still send them in together?" asked Segall.

"Because the IRS tells us that is how we're supposed to do that," explained the tax preparer. "Regardless of what that W2 says, as far as the Social Security number, the IRS guidance on this says you file the tax return using their ITIN number, attach the W2 to the return and from there, they handle it. And how they handle it is they pay out thousands and thousands of dollars on those."

He's right.

Victor listed seven nieces and nephews on his tax return -- all have ITIN numbers -- and, despite the discrepancies involving names and identification numbers, Victor got tax refunds and additional child tax credits totaling more than $9,000.

Stealing from taxpayers

Keep in mind, most undocumented workers cannot legally get a Social Security number, so if they're listing one on a tax return, it means the number is likely stolen from someone else.

That doesn't seem to bother the IRS.

Earlier this year, the IRS posted a notice on its website to tell tax preparers it will gladly accept tax returns with an "ITIN/SSN mismatch." The IRS' online e-file system was previously designed to reject computer-filed tax returns that showed an ITIN/Social Security number discrepancy. That has been changed to make it easier to file tax returns for undocumented workers. According to the agency notice, "The IRS has changed the programming to ensure that these returns will not be stopped."

"I don't understand why we're doing that," said a former ITIN processing agent. "They're basically using everyday Joe Taxpayer's Social Security numbers and cashing in with that number. This is out of control."

The U.S. Treasury Department's Inspector General for Tax Administration agrees. Last year his agency released an audit showing undocumented workers now receive more than $4.2 billion annually in Additional Child Tax Credits.

"The IRS is not doing something as simple as requesting sufficient documentation from people seeking this credit," said inspector general Russell George. "It's very troubling, and the current system has many problems."

After seeing evidence presented by WTHR, he renewed his call for changes at the IRS.

"The IRS needs to institute procedures to ensure the examples you just cited are stopped at the outset before the money goes out the door. We have made recommendations to them as to how they could address this, and they have not taken sufficient action in our view to solve the problem," George said.

Silence from IRS headquarters

What steps is the IRS to prevent illegal immigrants and US taxpayers from obtaining tax credits fraudulently?

During the past eight weeks, Eyewitness News has contacted the IRS 20 times to submit questions and to request an interview. Each of the interview requests was ignored or declined, and the agency has not answered any of 13 Investigates questions.

The agency did send WTHR a short statement, saying "The IRS has procedures in place specifically for the evaluation of questionable credit claims early in the processing stream and prior to issuance of a refund."

The agency has not explained what those procedures are, and both current and former IRS employees who talked with 13 Investigates say if there are procedures, they are not aware of them.

"We don't have the resources to follow up on much and we're not allowed to flag problems," said an IRS worker in Austin, Tex. "We have a lot of trouble tracking ITIN numbers. That's a tangled mess. We're good about writing scary letters, but actually investigating fraud is expensive and Congress doesn't want to fund the enforcement side."

When it comes to this tax loophole for illegal immigrants, the IRS blames Congress not just for a lack of funding, but also for a lack of action. The IRS insists it cannot deny Additional Child Tax Credits for illegal immigrants without a new mandate from lawmakers.

"The law has been clear for over a decade that eligibility for these credits does not depend on work authorization status or the type of taxpayer identification number used. Any suggestion that the IRS shouldn't be paying out these credits under current law to ITIN holders is simply incorrect. The IRS administers the law impartially and applies it as it is written. If the law were changed, the IRS would change its programs accordingly," the IRS explained in its statement to Eyewitness News.

Following WTHR's investigation, the U.S. House of Representatives approved a budget appropriations bill that would limit Additional Child Tax Credits for individuals with a Social Security number, essentially eliminating the tax credit for undocumented workers. The bill is expected to be killed in the Senate.


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