IRS Should Say Immediately: Only Genuine SSNs Produce Refunds

Time is running out for the incoming Trump administration to save billions this winter by reforming the income tax system to avoid making needless cash payments to illegal aliens.

Most — but not all — of these mindless payments of federal funds to illegals are made in the income tax filing season, which has already started. Illegals (and other low-income people) often file their 1040 or 1040NR (NR for non-resident) forms early in the hopes of securing refunds and other payments as soon as possible.

The IRS, under current law, will start sending out refund checks on February 15.

The agency, particularly under the Obama administration, has resolutely refused to take steps that would prevent making needless payments to illegal immigrants. These decisions have routinely not involved Congress, and sometimes have not risen to the assistant commissioner level, so a simple order by the newly appointed Secretary of the Treasury, or by the new IRS commissioner (who has not yet been named) could literally save billions in these payments.

The (very reasonable) premise has two parts: One, if you have lied to the U.S. government about your identity, notably including the Social Security number (SSN) or numbers you are using, the U.S. government should not send you money.

Two, if you are claiming the Additional Child Tax Credit (ACTC) of $1,000 per child, the child should have a genuine SSN issued for that child. (This is a program that does not currently require an SSN for its refunds, while another, somewhat similar IRS program, the Earned Income Tax Credit, does demand a SSN.) There are clearly many ACTC credits issued to children who either do not exist, are in a foreign country, are here but are over-aged, or are here but are illegal aliens — no payments should be made in any of these categories. Billions of dollars are involved every year.

Currently, an ACTC claim can be made for a dependent who has a different Treasury number, an Individual Tax Identification Number or ITIN, that is specifically reserved for people who cannot claim legal status. If someone has an ITIN it means that they are not supposed to work in the United States.

As to the use of only genuine SSNs, issued to the tax filers, it is not clear whether there is a well-enforced requirement for that at the present. As we noted in an earlier posting, we sought information on whether this scenario would result in a tax refund or not: Supposing the worker files a 1040 with his or her real name, real address, and genuine ITIN, and files it with a W-2 from his or her employer carrying a phony SSN or one issued to someone else — we have been told that there are many such filings. Would that lead to a refund?

A couple of IRS sources said no, but an income tax consultant (and CIS informant) said that it would certainly have generated a refund in the past and at least one press account agreed with that statement.

What we do know is that there is no routine IRS use of the E-Verify system, which provides an assurance that a SSN was legally issued to a given person. Clearly every use of an SSN in an IRS form should be checked against E-Verify or a similar system.

The new administration should announce immediately — perhaps in one of Donald Trump's tweets — that if you aren't using a legitimate SSN in your income tax filings, there will be no refund for you.

That tweet, if sent soon, could save billions by setting the rules for IRS on income tax filings already filed, and by discouraging illegals who were planning to file for the refunds from doing so. Formal IRS announcements to the same effect can follow thereafter.

This would be an interim, immediate step. As Robert Rector of the Heritage Foundation has written, there are many other problems with the EITC and ACTC programs — notably false reporting of income to secure larger benefits — that need to be addressed, but the got-to-have-a-genuine-SSN, issued-to-the-taxpayer ruling would be a good place to start.

Who knows, perhaps the new administration can fund the building of much of that wall by taking this advice, getting the needed cash in hand as early as next month.

And though some of my readers will not like this suggestion, IRS needs some more millions for more staff, to save these billions.