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Illegal workers are allowed to obtain an ITIN (Individual Taxpayer Identification Number) issued by the IRS. It is intended to "help individuals that don't qualify for a ssn to pay taxes" (what a joke!!). Anyways, they are allowed to claim dependents here and in Mexico and Canada. Not only that, but they are allowed to claim the Child Tax Credit (CTC) and the Aditional Child Tax Credit (ACTC) which is up to $1,00 per qualifying child. Now, in order to qualify for this refundable credit, the dependent children have to be present in the U.S. Almost all of the tax returns filed with ITIN are filed fraudelently claiming these credits since there is no verification of the supporting documentation required to establish the existence of the children and if they are here or in Mexico. Does the IRS really expect that someone that is working using a fake ID card, SSN, driver's license, etc, is going to provide legitimate documents to support their application?? The fact is that illegal workers only file a tax return if they are going to receive a refund. If they owe money to the IRS they just don't file and nothing happens to them. Many of them file up to three years (late returns) and receive thousands of dollars. There are dishonest tax preparers and ITIN acceptance agents that would not hesitate to "help them" qualify for the credits. I've heard stories of tax preparers issuing a fake W2 to an illegal worker so he would qualify to claim the Child Tax Credit.
There are cases of people obtaining multiple ITIN under different names and filing multiple tax returns and receiving multiple refunds. Hard to believe but it's true. Most of these preparers helping ITIN filers commit fraud are latinos. The system is designed for a country where honesty is the rule and dishonesty is the exception. Sadly in other countries is the other way around.
This has been going on for years and the IRS is aware of it but nothing is done to correct this situation.
I'm not allowed to post any links at this moment, but if you want to read the report from the TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION, just google the following: Actions Are Needed to Ensure Proper Use of Individual Taxpayer Identification Numbers and to Verify or Limit Refundable Credit Claims.
Please, feel free to repost this.
Last edited by myopinion2010; 08-01-2010 at 12:55 PM..
This is very common and it's not just done with the ITIN.
Another way to get at IRS EITC and child tax credits is more informal. Have the children listed as some low income green card worker's children - he declares the children for the exemptions and tax credits and can split the big "refund" aka EITC credits with the actual parents (fathers included if they are known). This works very well and very easily with anchor babies whose illegal parents don't have ITINs to access the EITC directly. The anchors have the required social security numbers so it's super-simple.
I don't understand how that would work. You only get a refund on taxes that you've paid.
GarySiete
You know that every dependent that you claim in your income tax return reduces your taxable income. Mexicans and Canadians are allowed to claim dependents living in their country like parents, brothers, sisters, uncles, nephews, nieces, grand parents. With so many dependents (who know if they really support them, or even worst, who knows if they really exist) they end up getting a refund of any income tax that was withheld from their pay checks. Now, if some of the dependents are children, then they get the Child Tax Credit and Additional Child Tax Credit ($1,000 per child). Now what is really wrong is the fact that a great number of ITIN filers lie in their tax return. They claim the Child Tax Credit for children that are in Mexico, but they state that they are here. Now the cases of multiple returns under different names works like this: Juan Lopez uses John Doe's name and ssn to work. Now, under the rules to apply for a ITIN you need to a document with your photograph and your birth certificate. These documents don't need to be certified by the issuing authority. So you can figure now that they can file a fake document. Juan Lopez files his tax return along with application for ITIN and in a few weeks gets ITIN #1 from refund #1. Then Juan Lopez gets greedy and decides to apply for another ITIN this time he is going to file another tax return under a different name, lets say Juan Perez claiming that he used John Doe's name and ssn to work. He gets another set of fake documents (id and birth certificate), files another tax return and in a few weeks gets ITIN #2 and refund #2. Nobody verify the validity of these documents.
Last edited by myopinion2010; 08-01-2010 at 08:13 PM..
Thanks for the lesson, I knew you could reduce your tax liability to zero but didn't realize tax laws were written so you could come ahead on the deal -and make money. That's insane.
No you don't. See - the illegals know more about it than you. They know all about the EITC welfare program that gives you more than you ever paid in.
ITIN applicants are NOT eligible for Earned Income Credit payments.
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EIC payments
