DEFRAUDING THE AMERICAN TAXPAYER
December 5, 2011
The Earned Income Tax Credit
Economist Edwin S. Rubenstein examined the widespread fraud created by the EITC. You may visit www.TheSocialContract.com to get an idea of the enormous immigration fraud being perpetrated on the American taxpayer.
“President Obama’s stimulus program includes tax cuts for low income workers,” said Rubenstein. “The purpose, of course, is to put money back into taxpayer’s hand so they’ll spend it and boost the economy. But thanks to the EITC, much of the “tax relief” will go to people who have never paid a cent of tax – and may have already defrauded the government of huge sums each year.
“How is this possible? EITC is a “refundable credit,” – meaning that beneficiaries can receive more from the government than they pay in taxes. As a result, many low income workers who pay no income taxes will file a tax return for one reason: to get an EITC check.
“The incentive to cheat is huge: a worker with two children and earned income less than $38,646 could receive an EITC payment of up to $4,824 in 2008. A related tax credit – the Additional Child Tax Credit (ACTC) –pays this person another $1,126 if his or her income was less than $16,000. [Center on Budget and Policy Priorities, 2008 EITC Outreach Kit.] For most families in this income bracket, the EITC check is the largest single sum of money they will receive in the course of the year.
“Technically, EITC is available only to people with valid Social Security numbers. In practice, identity theft, counterfeit Social Security cards, and other scams, easily nullify such restrictions. EITC outreach groups – most prominently the Center for Budget and Policy Priorities – offer tips as to how immigrants can receive EITC payments for years in which they did not have a valid Social Security number. As a result, illegal aliens are estimated to receive EITC at even greater rates than their legal counterparts.
“The ACTC is available to illegals even if they do not have a valid Social Security number. All they need is an Income Taxpayer Identification Number (ITIN) – which IRS is only too happy to provide.
“The General Accounting Office (GAO) verified the vast scale of the fraud, reporting that “…the IRS estimated [it is] between 27 and 32 percent of EITC dollars claimed.” [Ernest Istook, “Congress Will Send Billions to Tax Cheaters,” Heritage Foundation, February 5, 2008.
“EITC scams are common, well-organized, and massive. In 1993 Dateline, a network television news program, filmed perpetrators paying housing project residents $400 for their names and Social Security numbers. The con men used this information to file federal income tax returns electronically and receive bank loans using the estimated EITC refund as collateral.
“Most illegal immigrants have fraudulent Social Security cards, according to Federal Security officials. Their favorite target: young children. SSNs assigned to infants are stolen from medical paperwork and used to file returns. The fraud can go undetected for years - until the child looks for a job as a teenager.
“Media exposure shamed the IRS into conducting its own study. After randomly selecting 1,000 EITC tax returns, the tax collection agency sent criminal investigators to interview the taxpayers. Based on the interrogations, IRS estimated that $4 billion of the $15 billion in EITC refunds paid in 1993 were made in error – a 27% error rate. This revelation led to new control system investments and policy changes including a slowdown in EITC refunds and a decision to make banks liable for loans made to EITC filers.
“More than a decade later depressingly little changed, as evidenced by this written exchange between Senator Tom Coburn and McCoy Williams, GAO’s Director of Financial Management and Assurance:
“As you know, the improper payments made in the Earned Income Tax Credit makes up the second largest portion of government-wide improper payments for fiscal year 2005, estimating $9.6 to $11.4 billion dollars paid improperly.
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“In fiscal year 2004 EITC had an improper payment rate of 25 percent. For fiscal year 2005, it was 28 percent and this is on the low side, because it’s just an estimate. This program does not just need help, it needs a complete overhaul, with an improper payment rate that high.”
As you read this series, please realized that the Federal Government has done nothing to deter illegal immigrants from taping into this financial treasure chest. It gets worse as an estimated 800,000 illegal aliens cross our borders every year and grow their numbers for payouts by the American taxpayer.
For more information, go to: www.TheSocialContract.com
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