Report: Unauthorized workers get billions from tax credit

The IRS gives identification numbers to individuals without Social Security numbers to ensure it can still collect taxes on their income. Legislation passed in the Clinton adminsitration barred those taxpayers from claiming the EITC and many federal benefits.

But the ACTC was implemented after that measure passed Congress, and the IRS does not believe it has the standing to ban unauthorized workers from claiming it.

{mosads}The Treasury Department audit also found that the increase in ACTC claims came after the 2009 stimulus package made more taxpayers temporarily eligible for the credit. A 2001 bill also allowed more families to claim the credit.

In addition to calling for increased consultation with Treasury, the inspector general recommended that the IRS require taxpayers not authorized to work in the United States to provide more documentation when claiming the credit.

But the IRS maintains that it does not have the power to take that step.

“As indicated in the report, the IRS does not have the legal authority to deny credits during processing when documentation is not provided,” the agency’s Richard Byrd wrote in response to the audit.

“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,” Michelle Eldridge, an agency spokeswoman, added in a Thursday statement. “Any suggestion that the IRS shouldn’t be paying out these credits under current law to ITIN holders is simply incorrect.”

The IRS did agree, however, to consult with Treasury officials on whether unauthorized workers are eligible for the credit.