Good News/Bad News on IRS Program that Pays Illegals to Stay in the U.S.

By David North on October 4, 2016

There's both some good news and some bad news on one of the Internal Revenue Service programs that, in effect, pays many illegal aliens to stay in this country. We at CIS have written about these peculiar and persisting tax transfers to illegals from time to time (see here and here).

One of the principal elements of the current personal income tax system that pays the illegals to stay is the Additional Child Tax Credit (ACTC) program. Peter A. Shulkin estimated that illegal aliens received $4.2 billion in 2010 from this program.

ACTC gives tax filers up to an additional $1,000 for each dependent child; the $1,000 can be used to reduce the tax owed, or in low income families it can be a cash payment even though no income taxes are collected from the family. The big bonus for the illegal aliens filing income tax returns is that the ACTC benefit can be secured even though the child concerned cannot obtain a Social Security number. What the illegals filing must use is a different number, issued by IRS, not Social Security. It is called an Individual Tax Identification Number (ITIN). One can also use SSNs in ACTC filings.

There has been much fraud in the past regarding the issuance of ITINs, including the issuance of numbers for children outside of the United States and for non-existent children.

The other, larger, older, and better-known program for subsidizing low-paid work through the income tax system is Earned Income Tax Credit (EITC). The rules for this program are that the benefits go only to those with Social Security numbers, and those numbers are supposed to be issued only to legal residents.

At the superficial level, the good news is that ACTC, which rewards the presence of illegal alien children (and sometimes the invention of them) and which reached its peak in 2009, has been steadily declining in size, while EITC, which at least tries to avoid sending benefits to illegals, has been increasing in size. ACTC used to be about half the size of EITC, now it is less than one third of EITC, as these refund totals from IRS show (numbers in millions). This data is for all beneficiaries, citizens as well as aliens.

Program 2009 2010 2011 2012 2013 2014 2015
EITC $48,841 $59,778 $60,950 $62,472 $65,482 $68,920 $69,118
ACTC $24,002 $22,535 $23,677 $23,088 $22,703 $22,595 $21,786



EITC's steady climb in size is what we often see with welfare and welfare-like programs; this is not the case with the illegal-friendly ACTC.

Another dollop of good news, which may relate to the trend noted above, is that IRS has stiffened to some extent the rules on the issuance of ITINs. Further, starting with some income tax returns filed next spring, some of the ITINs issued before 2013 will start expiring, as their five-year life ends. Such numbers must be applied for again. The new expiration requirement is designed to weed out some of the fraudulently secured ITINs issued in the past.

We also have mixed news, some good, and some bad, that was pried out of IRS via a Freedom of Information Act request by Ian Smith of the Immigration Law Reform Institute. This data relates to the number of ITINs issued, not the dollars that they secure.

Over the last three years, the number of applications has fallen noticeably, and the number of grants has fallen by a lesser amount. That's all to the good, but the percentage of applications rejected by IRS has also dropped, and that's worrisome. These are the number provided by IRS:

Year ITIN Applications Grants Rejections Pct. Rejected
2013 1,206,204 622,814 583,390 48.4%
2014 958,669 636,041 322,628 33.7%
2015 891,050 608,373 282,677 31.7%



The downward trend in rejection percentages may relate to a better mix of applications, to lowered standards on the part of IRS, or to some combination of those two factors.

Let's look more closely at two of these numbers: the 608,373 grants in 2015 and the 31.7 percent rejection rate that year.

The 608,373 marks the creation of ID's for that number of new illegal aliens annually; let's make some assumptions:

  • Every newly arrived illegal alien secures a new ITIN on arrival;

  • Every newly arrived illegal stays for 50 years before dying or leaving; and

  • There is no return migration to the home country until 50 years have passed.

If all those assumptions are true, and there is a minimal death rate during those years (say about 10 percent for the whole period), then we would have 50 years x 547,753 for a population of 27,350,000 illegals, all in excess of what was left of the current population of some 11 million. This allows for no illegal aliens either not applying for, or not getting, the ITINs, an unlikely possibility; working in the other direction is the equally unlikely assumption that all will stay for 50 years.

With these boxcar numbers in mind, it is safe to assume that 608,373 newly arrived illegal aliens is a bloated number, and that in many cases the ITIN's were issued, to coin a phrase, to fake illegal aliens created for ACTC purposes. That, in turn, suggests that the 31.7 percent rejection rate is between too low and much too low.

So while the new numbers of ITIN applications and grants are running in the right direction, the whole volume is such to indicate continuing, massive problems with the issuance of these refund-creating IDs.

ITIN's and Stolen Social Security Numbers. The fraudulent securing of either an ITIN or a Social Security number is a crime, but there is a difference: The theft of an SSN usually has an additional serious consequence that the acquisition of a phony ITIN rarely has. This is the case because bad SSNs are not usually invented out of thin air, they are stolen from Americans and their misuse can cause all sorts of havoc for the innocent citizen or green card holder who is attached to that number. This is a topic that has been covered by my CIS colleagues Ronald W. Mortensen and Dan Cadman.