Today, U.S. Senator Ben Sasse and U.S. Senator Ron Johnson, Chairman of the Homeland Security and Governmental Affairs Committee, sent a letter to Treasury Inspector General Russell George, the federal government’s IRS watchdog, seeking answers regarding previously undisclosed consequences of the Administration’s new policy of deferred action. The Senators issued the following statements:
“By offering illegal aliens new payments under the Earned Income Tax Credit, the IRS may encourage fraud from those claiming children living in other countries. The Administration may have blown open the doors for fraud with amnesty bonuses of more than $24,000 to those who receive deferred action,” said Sasse. “This is basic economics: if you want more of something, you subsidize it. By subsidizing illegal entry with four years’ worth of new tax credits, the IRS would promote lawlessness. This program severely undermines the White House’s lip-service to enforcing the law and would increase the burden on law-abiding taxpayers.”
Chairman Ron Johnson (R-Wis.) made these remarks, “Non-U.S. citizens who qualify for President Obama’s temporary deferred actions will now be eligible to receive permanent Social Security numbers. A Social Security number is the key that opens a whole treasure chest of benefits, including significant tax credits. Most notably, qualifying applicants for the president’s programs can now claim thousands – even tens of thousands – of dollars in payments from the Earned Income Tax Credit and, for some, the Additional Child Tax Credit. These two programs, which cost taxpayers $89.6 billion in 2013, were responsible for $21 billion in improper, potentially fraudulent payments that same year. Americans deserve to know where their taxpayer dollars are being spent and whether the Internal Revenue Service is failing to protect them from improper payments.”
A copy of the Senators’ letter is found below:
Dear Inspector General George:
This week, witnesses at a hearing of the Senate Homeland Security and Governmental Affairs Committee discussed the implications of the President’s executive amnesty. We would appreciate your views on the testimony of Eileen O’Connor, formerly with the Department of Justice Tax Division, who discussed the tax consequences of the President’s new policies.
We would like to summarize her comments briefly and would appreciate your assessment of whether what we heard was accurate.
According to Ms. O’Connor, the President’s executive actions will not only allow illegal aliens to stay in the country for three years, but would also award them with free federal money.
Right now, the law requires anyone who lives and works in the country illegally to be returned to their home country. The law also prohibits these individuals from getting many federal benefits available to U.S. citizens and legal residents.
As Ms. O’Connor explained, however, the President effectively re-wrote the law in a way that significantly changed the status of some of those here illegally. From this point forward, any illegal alien who is approved under the new rules to stay in the U.S. – a process known as “deferred action” – will now be allowed to receive a Social Security Number.
The significance of this change, Ms. O’Connor noted, is that having a Social Security Number will allow individuals to get federal benefits that were previously unavailable. In particular, it could allow millions of people to receive a tax benefit known as the Earned Income Tax Credit, or EITC. Under the law, families with low to moderate incomes can get an EITC cash payment as high as $6,143, but only if they have a Social Security Number.
For some people, the total amount could go even higher. This is because under EITC rules, anyone eligible for the program can also ask for payments to cover the three prior years as well. This means that an illegal alien with a new Social Security Number can get a payment of more than $24,000 for years they were working illegally. On top of this, Ms. O’Connor noted, families could also get thousands more in payments through the Additional Child Tax Credit program. This means a family with three or more children might collect even more than $24,000.
Ms. O’Connor concluded by pointing to the work of your office, which has found enormous fraud rates in both the EITC program and in the Additional Child Tax Credit program. Therefore, we are concerned that because the President’s new rules would let millions of people access these programs for the first time, the cost to the taxpayer could be billions of dollars.
When the President announced his new polices in November, these facts were not included. Moreover, none of the documents released by the administration provided any explanation for this, either.
In light of her testimony, we would greatly appreciate if you could provide answers to the following questions:
- Is the above summary of Ms. O’Connor’s testimony an accurate description of the effects of the President’s executive actions?
- Given the high rates of fraud in both tax credit programs, is there an incentive for tax filers to fraudulently claim more children than they have?
- To be eligible for the Additional Child Tax Credit, is a tax filer required to provide a Social Security Number for each claimed child?
- Is it possible for individuals to claim tax benefits under either program for children that do not live in the United States? If so, can you estimate the amount of fraudulent claims?
- If someone with children who has worked in the United States receives deferred action and gets a new Social Security Number, but has never filed their taxes, what is the highest amount that person might receive under both tax credit programs?
- What additional tax benefits might someone be eligible for with a Social Security Number that they would not have been eligible for with merely an Individual Tax Identification Number?
- What do you estimate will be the full cost of providing EITC benefits to illegal aliens under the President’s executive actions?
- How many people do you estimate will be eligible for EITC benefits under the President’s executive actions who were not previously eligible?
- Is the Internal Revenue Service equipped to detect and prevent fraud as it processes millions of new claims for EITC benefits?
We appreciate your assistance in better understanding this issue and believe both Congress and the American people will benefit from a full accounting of the facts.
Ben Sasse Ron Johnson
U.S. Senator Chairman