Undocumented Aliens Defrauding IRS With Bogus Child Care Tax Credits

WTHR's Bob Segal turns in an excellent report this evening about a growing fraud problem associated with undocumented aliens filing tax returns using taxpayer identification numbers issued by the government so they can report income they earn from their unauthorized work they are performing in the United States. A tax preparer tips Segal off about the problem of these undocumented workers claiming the additional child tax credit of $1,000 per child, sometimes as many as 10 to 12, and for children that are not even living in the United States. The tax preparer tells Segal that he is seeing tax returns being filed that are yielding tax refunds of $10,000 to $12,000.

Segal spoke to the Inspector General for the IRS, Russell George, who essentially confirmed the tax preparer's allegations. The problem was created when banks a number of years ago convinced the IRS to issue taxpayer identification numbers so that undocumented aliens who don't possess social security numbers, at least legally, could open up bank accounts and deposit and report income they earned, even if the work was not authorized. The IRS thought it was a great idea because the government would start collecting taxes that were previously going unreported. Tax preparers lured these people into their offices with promises of helping get the bigger tax refunds for them. Claiming the additional child tax care credit was the easiest way of  bolstering their refunds. According to Russell, people filing tax returns using TINs are now claiming over $4 billion a year in additional child care tax credits. Despite the IRS' knowledge of the fraud taking place, it is simply ignoring the problem.

While Segal's report focuses entirely on the child care tax credit, WRTV's Rafael Sanchez uncovered a scheme run by a west side tax preparer who was targeting the Hispanic community with offers of higher tax refunds. That tax preparer was making bogus American Opportunity Tax Credits for college-related expenses for the individual tax returns it was preparing for taxpayers. Sanchez reported long lines of people waiting outside the door to get their tax returns prepared. Their refunds were deposited into an account of the tax preparer, which was keeping large contingency fees based on the size of the refund they obtained for the taxpayer. Sanchez learned that abuse of the education tax credit was widespread throughout the country and was costing the U.S. Treasury billions of dollars annually.