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Another IRS Scandal?

by Dave Emanuel, published

IRSAccording to Barack Obama, the melange of scandals that have recently come to light are "phony". An examination of the facts indicates otherwise. While there may not be a direct link to members of the current administration, the current crop of "issues" falls well within the following dictionary definitions of "scandal"-

1-  An action or event regarded as morally or legally wrong and causing general public outrage: "a bribery scandal".

2- The outrage or anger caused by such an action or event.

Yet another scandal originating within the IRS is a known flaw in its operations that has sent $4.2 billion taxpayer dollars to illegal immigrants in a single year. It's difficult to determine whether incompetence or indifference-- or a combination thereof-- has allowed this open wound to continue bleeding taxpayer funds, but for at least two years, no one of authority at the IRS has taken any action to suture the wound that is commonly known as the "ACTC loophole". (ACTC is an acronym for Additional Child Tax Credit.)

As might be expected, the ACTC scandal isn't the only one that is funneling taxpayer dollars to illegal immigrants. On March 31, 2009, Michael R. Phillips, Deputy Inspector General for Audit in the office of The Treasury Inspector General for Tax Administration, issued a 47-page report entitled, " Actions Are Needed to Ensure Proper Use of Individual Taxpayer Identification Numbers and to Verify or Limit Refundable Credit Claims". (Individual Taxpayer Identification Numbers (ITINs) are issued to, "help individuals comply with the United States (U.S.) tax laws and provide a means to efficiently process and account for tax returns.")

A person needs an ITIN if he or she is receiving income in this country, but is not eligible to have a Social Security number. As with a Social Security number, a person is supposed to have only one ITIN. However, the report found, " Individuals are assigned multiple ITINs, which results in the issuance of erroneous refunds. A recent IRS study identified that 4 percent of individuals applying for ITINs already had an ITIN assigned to them and that 30 percent of these individuals were assigned another one. The study further estimated that approximately $60 million per year in erroneous refunds were issued for ITIN cases. Some of these resulted from the same individual filing multiple tax returns under the different identification numbers."

And that's just the tip of the iceberg. In a July 7, 2011 report,  The Inspector General stated, " Many individuals who are not authorized to work in the United States, and thus not eligible to obtain a Social Security Number (SSN) for employment, earn income in the United States. The Internal Revenue Service (IRS) provides such individuals with an Individual Taxpayer Identification Number (ITIN) to facilitate their filing of tax returns.  Although the law prohibits aliens residing without authorization in the United States from receiving most Federal public benefits, an increasing number of these individuals are filing tax returns claiming the Additional Child Tax Credit (ACTC), a refundable tax credit intended for working families.  The payment of Federal funds through this tax benefit appears to provide 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." The report also stated, (in capital letters)  "INDIVIDUALS WHO ARE NOT AUTHORIZED TO WORK IN THE UNITED STATES WERE PAID $4.2 BILLION IN REFUNDABLE CREDITS".

Considering the ages of these reports, it is clear that the IRS is either incapable of properly administering ITIN-based tax returns or has no interest in doing so. Fortunately, at least one member of Congress has other ideas. Representative Jack Kingston, of Georgia has introduced, "The Child Tax Credit Integrity Preservation Act", legislation that will close the ACTC loophole. According to Kingston, "This credit was created to help working families offset the costs of raising children, not to help people offset the costs of living in this country illegally. It’s time to close this loophole and shut off this incentive for illegal immigration."

Kingston found that many of the illegal claims for ACTC refunds aren't a result of misunderstanding or mistakes, but of intentional fraud. He cited a report by Indianapolis television station WTHR's Bob Segall that stated, "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." The worker also stated that none of the 20 children have ever even visited the United States.

If the IRS's handling of ITINs and ACTC refunds doesn't fit the definition of a scandal, nothing does.

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