Illegal immigrants get billions in tax credits

FOX 5 I-Team investigates

Illegal immigrants get billions in tax credits

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It may surprise you that the IRS expects illegal immigrants to pay taxes on any money they earn and those immigrants are eligible for child tax credits that can lead to big refunds.

Critics say those refunds to illegal immigrants have exploded into billions of dollars a year.  Many suspect a massive amount of fraud.

Internal Revenue Service commissioner Douglas Shulman says the IRS doesn't care if you are here illegally, Uncle Sam still wants your taxes.  

"Our job is to make sure, if you work in this country and have tax obligation, that you file a tax return," Shulman told National Press Club.

That was IRS commissioner Douglas Shulman, talking to the National Press Club. He says the IRS doesn't care if you are here illegally. Uncle Sam still wants your taxes.  

Tax expert, Bill Nemeth, calls it a crazy contradiction and he knows -- he's been doing tax returns for illegal immigrants for years.

"When I tell people this they think I'm pulling their leg. I think I'm pulling their leg," said Nemeth.

Since illegal immigrants can't have a Social Security number, the government lets them apply for an Individual taxpayer identification number. It's the same tax ID used by non-citizens working in America legally.

With that taxpayer ID number, an immigrant can now file a tax return. And, just like any other taxpayer, that illegal immigrant is eligible for child tax credits, up to a $1,000 per child.
    
"It sounds crazy to me when I tell people. Yes, it's bizarre," said Nemeth.

All those illegal immigrant applications for taxpayer ID's are sent to an IRS office in Austin, Texas.  

Howard Antelis was one of the people processing those applications. He says, along with the immigrant's tax returns, he saw criminals who took advantage of those ID numbers to cheat the system.

"I'd say realistically 70 to 80 percent of what we were seeing was fraud. And blatant fraud," said Antelis.

Antelis was not the only one who saw a problem. The inspector general found the IRS refunded illegal immigrants $4.2 billion in child tax credits in 2010 alone. They suspected fraud.

"I was incredibly angry, and not just me – a number of co-workers, just angry and ashamed," aid Antelis.

Antelis felt people were stealing your money by lying about how many kids they had and forging birth certificates, passports and school records.

Howard says he couldn't get his bosses to take the suspected fraud seriously, so he blew the whistle and the inspector general investigated again.

The findings: "lax documentation" meant "tax fraud can go undetected." And the IRS management was "not concerned with addressing questionable applications."

And where were the biggest problems?

"Easily the Atlanta, Georgia area was our top source for fraudulent applications," said Antelis.

The inspector general found nearly 24,000 different tax refunds were sent to one address somewhere in Atlanta - they won't say where. The total amount of those refunds:  $46 million.

"This was an organized criminal effort. This was just not a bunch of people individually on their own figuring out the system," said Antelis.

"We shouldn't want people to be here illegally in the first place, and we shouldn't encourage it by making tax refunds back to them on child tax credits," said Georgia Sen. Johnny Isakson.

Isakson couldn't believe it when he read the report. He and fellow Georgia Sen. Saxby Chambliss have co-authored a bill they think will put an end to any fraud.

"It gives us the teeth to go after somebody who's obviously stealing from the American taxpayer," said Isakson.

The bill will require immigrants filing for child tax credits to attach their passport, visa, and job authorization as well as documents for all their eligible children.  

The IRS has already made one change, now requiring immigrants to file original documents, not copies, on all their applications.

Click the video to watch FOX 5 Senior I-Team reporter Dale Russell's story!

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