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US Treasury (I.R.S) Refunds to Illegals

US Treasury (I.R.S) Refunds to Illegals

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Published by Barbara Espinosa
Documentation the IRS refunds or gives tax credits to persons not authorized to work in the United States
Documentation the IRS refunds or gives tax credits to persons not authorized to work in the United States

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Published by: Barbara Espinosa on Aug 15, 2012
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08/15/2012

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TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION 
RECOVERY ACT 
Individuals Who Are Not Authorized to Work in the United States Were Paid $4.2 Billion in Refundable Credit
July 7, 2011Reference Number: 2011-41-061
This report has cleared the Treasury Inspector General for Tax Administration disclosure review processand information determined to be restricted from public release has been redacted from this document.
Redaction Legend:2(f) = Risk Circumvention of Agency Regulations or Statutes 
1
=
Tax Return/Return Information
.
Phone Number | 202-622-6500 Email Address TIGTACommunications@tigta.treas.gov  Web Site | http://www.tigta.gov 
 
 
HIGHLIGHTS 
INDIVIDUALS WHO ARE NOT
needed to address whether or not refundable tax
AUTHORIZED TO WORK IN THE UNITED
credits such as the ACTC may be paid to those
STATES WERE PAID $4.2 BILLION IN
who are not authorized to work in the United
REFUNDABLE CREDITS
 
States.
*********2(f)********************************
 
***********2(f)**************************************
 
Highlights
 
*****************2(f)*********************************
 
*******2(f)********************************************
 
*****2(f)*****************
. Also, employees in the
Final Report issued on July 7, 2011
 
Accounts Management Taxpayer AssuranceProgram are not taking steps to notify taxpayersHighlights of Reference Number: 2011-41-061when it is obvious their SSNs and names haveto the Internal Revenue Service Commissionerbeen compromised.for the Wage and Investment Division and theTIGTA also found that a feature on taxChief of Criminal Investigation.preparation software programs which
IMPACT ON TAXPAYERS
automatically takes the taxpayer identificationnumber and enters it as the identifying numberMany individuals who are not authorized to workfor the taxpayer’s Wage and Tax Statements
***2(f)**
 in the United States, and thus not eligible todeter the IRS from matching the wage andobtain a Social Security Number (SSN) for
**
*****2(f)*****************************
.employment, earn income in the United States.The Internal Revenue Service (IRS) provides
WHAT TIGTA RECOMMENDED
such individuals with an Individual TaxpayerTIGTA recommended that the IRS work with theIdentification Number (ITIN) to facilitate theirDepartment of the Treasury to seek clarificationfiling of tax returns. Although the law prohibitson whether refundable tax credits may be paidaliens residing without authorization in theto individuals who are not authorized to work inUnited States from receiving most Federal publicthe United States. TIGTA also recommendedbenefits, an increasing number of thesethe IRS require individuals filing with ITINs andindividuals are filing tax returns claiming theclaiming the ACTC to provide specific verifiableAdditional Child Tax Credit (ACTC), adocumentation to support that their dependentsrefundable tax credit intended for workingmeet the qualifications for the credit, includingfamilies. The payment of Federal funds throughresidency, and that questionable Child Taxthis tax benefit appears to provide an additionalCredit (CTC) and ACTC claims on ITIN returnsincentive for aliens to enter, reside, and work in
**********2(f)***********************************
. Thethe United States without authorization, whichIRS should also notify taxpayers when theircontradicts Federal law and policy to removeSSNs are compromised and ensure thatsuch incentives.software packages do not auto-populate an ITIN
WHY TIGTA DID THE AUDIT
onto Wage and Tax Statements.This audit was initiated to determine whetherIRS management agreed to discuss with thepotentially fraudulent tax returns filed with ITINsDepartment of the Treasury the issue of ITINwere being properly and consistently worked.filers’ ACTC eligibility. The IRS did not agree toBecause of the significant volume of theserequire additional documentation to support CTCreturns claiming the ACTC, we focused on thoseand ACTC claims on ITIN returns
***2(f)**********
 returns.
**
**********************2(f)******************************
*
***************************2(f)********************
The
WHAT TIGTA FOUND
IRS is exploring options to alert taxpayerswhose SSNs have been compromised andClaims for the ACTC by ITIN filers haveplans to address software
that auto-populates
 increased from $924 million in Processingan ITIN onto Wage
and Tax Statements and
Year 2005 (the calendar year in which the taxtake sanctions for
noncompliance.
.return was processed) to $4.2 billion inProcessing Year 2010. Clarification to the law is
 
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
 
TREASURY INSPECTOR GENERALFOR TAX ADMINISTRATION
July 7, 2011
MEMORANDUM FOR
 
COMMISSIONER, WAGE AND INVESTMENT DIVISIONCHIEF, CRIMINAL INVESTIGATION 
FROM:
 
(for)
Michael R. PhillipsDeputy Inspector General for Audit
SUBJECT:
 
Final Audit Report – Individuals Who Are Not Authorized to Work in the United States Were Paid $4.2 Billion in Refundable Credits(Audit # 200940031)This report presents the results of our review to determine whether potentially fraudulent taxreturns filed with Individual Taxpayer Identification Numbers (ITIN) were properly andconsistently worked. Because of the significant volume of these returns claiming the AdditionalChild Tax Credit, we focused on returns filed by individuals with ITINs claiming the Child TaxCredit and Additional Child Tax Credit. The cases we reviewed were at the Fraud DetectionCenters. This audit is included in our Fiscal Year 2011 Annual Audit Plan and addresses themajor management challenges of Tax Compliance Initiatives and Erroneous and ImproperPayments and Credits. It also presents selected information related to the Internal RevenueService’s (IRS) implementation of Section 1003 of the American Recovery and ReinvestmentAct of 2009 (Recovery Act).
1
 Management’s complete response to the draft report is included in Appendix V.Copies of this report are also being sent to the IRS managers affected by the reportrecommendations. Please contact me at (202) 622-6510 if you have questions orMichael E. McKenney, Assistant Inspector General for Audit (Returns Processing and AccountServices), at (202) 622-5916.
 
1
Pub. L. No. 111-5, 123 Stat. 115 (2009).

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