Congress Can Save Billions by Ending Tax Breaks to Illegals and Their Employers

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Illegal aliens and their employers received a quarter-trillion dollars in tax deductions and credits that were targeted for law-abiding U.S. workers and businesses. Congress can – and must — stop the illicit giveaways as lawmakers tackle tax reform legislation.

In plain sight, American employers and unauthorized aliens cashed in on two lucrative tax breaks, totaling an estimated $296 billion, over the past 10 years.

Deducting wages paid to illegal aliens

Section 162(e) of the Internal Revenue Code denies a business deduction for “illegal payments.” Though it is illegal to employ unauthorized alien workers, the IRS has simply ignored that rule, even when it has determined that employers knowingly broke the law.

The latest conservative estimates indicate that U.S. employers paid — and took tax deductions on — $165 billion to illegal aliens over the last decade.

Beyond that, many illegal workers – perhaps as many as 35 percent  – labor in a shadowy cash economy. The Center for Immigration Studies figures that $25.4 billion in such wages dodged taxation. Over 10 years, that adds up to a $254 billion erosion in the tax base.

Child tax credits to illegal aliens

Section 24(a) of the Internal Revenue Code allows a $1,000 per-child tax credit for low-earning taxpayers. Payment of the Additional Child Tax Credit (ACTC) to illegal immigrants appears to violate the Personal Responsibility and Work Opportunity Act of 1996, which states that illegal aliens are “not eligible for any federal public benefit.”

Again, the IRS has flouted the law by issuing ACTC refunds to illegal residents. In 2010, a federal audit pegged the giveaway at $4.2 billion annually. Based on that estimate, limiting the credit to citizens and green card holders with verifiable Social Security numbers would increase federal tax revenues by $42 billion over 10 years.

Watchdog.org reported in 2013 that ACTC disbursements – paid by the IRS even if the filer paid no income taxes — have grown rapidly with the agency’s acceptance of Individual Taxpayer Identification Numbers as substitutes for Social Security numbers. ITIN holders are not required to prove legal residency, and new ITIN applications are running at the rate of 1 million a year.

In one egregious case, the IRS sent more than $7.2 million in ACTC refunds to a Virginia woman who filed more than 1,700 tax returns with stolen identifications used by illegal immigrants, mainly from Mexico. The tax returns frequently cited foreign dependents, which increased the refund amounts.

Illegal aliens with deferred action (DACA and DAPA) also are eligible to claim the Earned Income Tax Credit (EITC). An Inspector General’s report found that $15.6 billion in improper payments EITC were disbursed in 2015, but the IG did not break down the amount received by illegal immigrants.

Congress must rein in the IRS’s extra-legal actions that enable fraud and abuse on a massive scale.

Rep. Steve King, R-Iowa, has introduced H.R. 176, the New Illegal Deduction Elimination Act, which would amend Section 162(e) to clarify that no deduction is allowed for wages paid to unauthorized alien workers.

Similarly, Congress must restate the obvious on the child tax credits: that only U.S. citizens and legal U.S. residents are eligible for the tax break in Section 24(a).

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Content posted by current and previous members of the Federation for American Immigration Reform (FAIR) staff.

21 Comments

  1. avatar

    I don’t understand why anyone who is on welfare should get an “Earned” Income Tax “Credit”! They didn’t earn their income and should not be entitled to a credit. I’ve heard of people who get over $7K every year. Their strategy now is to hold on to this annual bonus to save up for a house down payment! It is ridiculous.

  2. avatar

    One of the bad bills Congress past was the Earned Income Tax Credit. It was meant for single moms, like the ones who lost husbands in the wars or very unusual circumstances. It started as a small help to single mothers and the original cost was 4 billion dollars with virtually no misuse or fraud. Now it is climbing toward 100 billion dollars with a 25% fraud rate. It looks like it is time to end this and also the Additional Child Tax Credit. Take a look at this and send the information to your Congress person or the President. It is time to end these two “welfare” programs and make a law that “no tax law” will be accepted that opens an open door to fraud, abuse or enormous losses to fraud or misuse.
    This includes any open credits or ridiculous tax laws which the the President declared he would end regarding the business tax loss laws, such as the 20 year tax loss carryover, which allows billionaires not to pay taxes for twenty years.
    Think about it. I bet President would agree with me and let’s go straight!
    I am sending a check to Dan and I challenge all of you to do the same. You will not get these tax changes unless you go directly to Congress and beg or/or the President.

  3. avatar

    Anything Obama and Crooked Hillary did needs to be undone, including their appointments of judges, and muslim brotherhood crooks. President Trump has a lot to do and doesn’t need to fight these crooks every step of the way.

  4. avatar

    get a life , that’s the last thing congress wants to do , is save money, with out waste, fraud and abuse and special interest , they would be crying poverty, every time they pass a bill , someone in congress is filling their pockets, how do you think pelosi made 20 million in 2 years , after she passed a bill sending a billion dollars to the co. her husband works for , witch the irs , fbi and no one else will even look into

    • avatar

      Believe it or not, the idiots in California continue to vote for these thieves: nancy pelosi and her colleagues in theft, dianne feinstein, and jerry ( the clown ) brown. I live in california and ‘am sick and tired of the giveaways by these no good liberals, AKA ‘socialists’ to bums, fereeloaders, leeches and ‘boat people”. By ‘boat people’ i’m referrng to illegal aliens from china.. These disgusting rude and ill mannered ‘***********’ are first in line for all kinds of ‘freebies’ AKA ‘giveaways’, care of the taxpzyers: SNAP, food stamps, housiing vouchers and feee healthcare all the while spitting on the American flag and also our streets with a sense of ‘entitlement’, totally disgusting and outrageous! San Francisco has some of the most disgusting and dirtiest streets around and the aforementioned have never paid a damned dime into the tax pot but are claiming all kinds of free services and the liberal idiots keep giving all this free ‘stuff’ away, paid for the taxpayers, AKA suckers of California. Time to bring fiscal competence back to California before the ‘dumbocraps’, AKA ‘liberal;’ or to put it more succinctly, ‘socialists’ bankrupt the state and drive it into the toilet and in some parts of Callifornia, thsy’ve succeeded !

    • avatar

      Both Political parties have lots of members who walk away rich, time to charge a “lobbying” tax and put it in the “kitty” as toward the national debt. Do you think? Need a third group in Washington.

  5. avatar
    Barbara E Johnson on

    The IRS is another one of Obama’s holdovers and they should go through the IRS with a fine tooth comb along with other agencies like the CIA,FBI AND The Justice department and ferret out the very people who were leaking all the confidential information. With a thorough scouring of these entities I believe you would have a much better government then what Obama left Trump with.

    • avatar

      You took the words out of my mouth! The IRS rehired some of the people who were fired over the Tea Party scandal! They have entirely too much power, and a good deal of it is blatantly unconstitutional (like no due process!) The FBI, has Obama spies embedded in “career”positions which they got illegally before he left office. The complete Judicial system including Federal lae enforcement needs to be overhauled, and the Treasury Department(Secret Service) and CIA need to be included!
      The swamp is dark and deep, but Trump can do it!

      • avatar

        The IRS 501 C’s were not originally written for business or politics. They were written for “local social programs” in 1959. Hannity turned it upside down! A political t.v. host doesn’t make a good specialist, unless that is what his program is based on.

    • avatar

      I agree…but shut the IRS down firing all who work there; Trump do his tax plan and they will not need that huge building because he will hire new people for his tax plan. Turn the other part of that building into homes for homeless veterans.

  6. avatar

    I am for anything to make these people go back to their own countries and apply legally. They are gaming the system and we are paying for their lack of understanding how our government works. We need border security and those who come here should not expect to get in. We do not have to let them in or provide for their living here while they go through the process of finding out if they can stay. Deport them..

    • avatar

      They know how our system works but they think they can get around it because Obama promised them that if they got here they could stay which is in violation of all of our immigration laws.

      • avatar

        After 8 years of that balck POS, look at the miasma we’ve inherited. Hopefuully the American people have gotten samart treally quickly. So sick and tired of the liberals, AKA socvialists still trying to run this copuntry into the fround letting all this riff raff basical;ly destroy our country.

  7. avatar

    To end this. Arrest and prosecute everyone, including IRS personnel that allowed this to happen. Sweeping it under the rug is a violation of law. Sounds like the IRS needs an outside police agency to come in and fire every Obama hired person. Arrest every one that processed and passed on refunds that were illegal and prosecute. No exceptions. And arrest all employers and illegal aliens and prosecute. Immediate deportation actions for all of them.

    • avatar

      The IRS is completely corrupt and violates the constitution every time they seize assets without due process! Immigration laws have been ignored for so long, Trump will have to be strong and make sure all these illegals are dealt with. And forget this discrimination ********, do not let any more muslims into this country and deport every illegal one now! They are a clear and present danger to our national security! The anchor baby law needs to end! If you arent a U.S. citizen, your baby cannot be a U.S. citizen, plain and simple! That alone would save millions in aid for these “families”!

      • avatar

        You may be surprised. Look what is happening in Austria, Australia, the U.S>, and many other countries. A movement to the sensible right.
        No discrimination, no racism, just acceptance with the rule of laws. Without decent laws, our country would be no better than theirs!
        This is the best site to work toward reasonable immigration and has been for many years.
        Thanks to Mr. Stein and all his fine writers.

    • avatar

      Good post, but President Obama did not make these Bad, easy to defraud tax laws. Most of them were passed by both parties agreeing.
      Now is time for a change and time to make an easy, coherent tax plan, so write. To tell you younger people, The Republican Party with Ryan and McConnell sound just as they did 100 years ago. Ha!
      No, we need analyst of every President and what they did right and wrong and at what cost.

      Then maybe a new outlet called something as”good point, bad point.”

      The constant cry that the U.S.> Corporations pay the highest tax in the world is strictly political hype. The effective tax rate in this country is equal or less than any developed country, (that means a lot of tax breaks, in between And many pay zero in taxes because of losses or loss carry forwards.
      Watchdogs can also be “political” hacks! “Walk carefully and carry a big stick.”