Saturday, April 16, 2016

IRS Admits Encouraging Illegals to Steal

In honor of tax weekend I'll be running a few posts regarding the subject over the next few days. Today I'm highlighting an interesting issue that gets many people riled up.  Taxes and immigrants.

There is a long standing belief by many that illegal immigrants don't pay taxes.  That's not true for things such as sales tax, excise taxes, fees resembling taxes, and property taxes(usually via rent).  It is true that many do not pay income taxes. Why? Most, but not all, usually lack a social security number or taxpayer identification number(TIN). So there is really no way for them to file a tax return since it is required by the IRS. But there are some illegal immigrants(and criminals) that use stolen or deceased SSN's. This allows them to file tax returns and potentially claim refunds.

In fact the IRS has even encouraged this process by almost promoting this scheme.  It was discovered by Senator Dan Coats (R-Ind) during a Senate Finance Committe hearing with IRS commissioner John Koskinen.

Here is a direct quote from the hearing.

"What we learned is that ... the IRS continues to process tax returns with false W-2 information and issue refunds as if they were routine tax returns, and say that's not really our job," Coats said. "We also learned the IRS ignores notifications from the Social Security Administration that a name does not match a Social Security number, and you use your own system to determine whether a number is valid."

It's disturbing the IRS ignores the notifications from the Social Security Administration regarding fraudulent use.  Especially since that agency has so many issues of its own. Clearly there is a lack of something at the top. Why no one at the White House is on top of this is beyond me. Here is the follow up from that quote when asked to elaborate.

"What happens in these situations is someone is using a Social Security number to get a job, but they're filing their tax return with their [taxpayer identification number]." What that means, he said, is that "they are undocumented aliens … . They're paying taxes. It's in everybody's interest to have them pay the taxes they owe."

Of course we want people to pay what they owe. Except that a percentage of these people are getting tax refunds. A lot of this is a result of an executive order from President Obama. This basically allowed individuals to file for the Earned Income Tax Credit if they never filed a return before, relaxed income thresholds, and increased refund amounts. There is even a Senate Committee follow up on this exact issue which you can see here in question 2. Since the EITC is refundable you can forge documents to get an illegal tax refund for prior years when no return was filed. Reportedly the number of illegal refunds paid is over $4 billion.

Now I don't want people to run around yelling "Illegal Immigrants Pay NO Taxes!" That's absolutely not true overall.  Remember the majority of people mean well and try to do the right thing everyday. They do contribute to taxes through the channels I mentioned above. Whether they pay their "fair share" on the whole at the national level I'll leave that debate to the large think tanks. Although their analysis usually comes with bias from one side or the other.  
 

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