State Sen. Jim Tomes (R-Wadesville) recently filed a bill aimed at eliminating a tax loophole in Indiana that allows illegal immigrants and others to wrongfully collect unearned tax refunds.
Tomes said an investigative series by Indianapolis NBC news affiliate WTHR brought the loophole to his attention this summer.
Currently, some illegal immigrants nationwide are knowingly and wrongfully taking advantage of the Additional Child Tax Credit on federal returns, claiming up to a $1,000 credit per child for children who do not live in the U.S. Tomes said some of these same individuals, undocumented workers and local prisoners may also be filing similar fraudulent claims in Indiana, wrongfully taking advantage of the state’s “dependent deduction.”
STATEHOUSE (Nov. 26, 2012) —
Workers only need an Individual Taxpayer Identification Number (ITIN) — a tax processing number assigned by the Internal Revenue Service to individuals who are not eligible for Social Security numbers (SSN) — to file for this Indiana deduction.
“Unfortunately, these individuals are blatantly gaming our tax system, and we need to prevent them from doing so,” Tomes said. “We can’t allow legitimate Indiana taxpayers to carry this burden any longer. Their precious tax dollars deserve the highest degree of accountability. I’m confident many Hoosiers agree.”
Tomes said his legislation would require an individual claiming the dependent deduction in Indiana to provide the SSN of the dependent. Taxpayers would only be able to provide an ITIN to claim the deduction if they are exempt from obtaining a SSN under federal law — an exception made for non-working foreign students and some religious groups — and also provide any additional proof Indiana Department of Revenue (IDOR) officials request.
Additionally, the legislation would require state agencies to share information relevant to identity fraud with the IDOR upon request and at no charge. Agencies like the Department of Correction and the Department of Health would provide annual reports.
“Database sharing like this will allow IDOR officials to conduct a more comprehensive review of the Social Security numbers that are being used fraudulently,” Tomes said. “We have a great start on a very specific plan of action to prevent this problem in the future. This has been a complex measure to formulate, as we’ve had to consider all federal laws that apply and avoid negatively impacting our legitimate taxpayers. I look forward to hearing any suggestions fellow lawmakers might have in the upcoming legislative session.”
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