Thread: Fraudulent tax refunds yield a bonanza for illegal immigrants

By Edwin S. Rubenstein
Tuesday, April 16, 2013
The Washington Times


Illustration by Mark Weber

As federal services from air-traffic control to White House tours are ratcheted down thanks to the budget sequestration, millions of illegal aliens are now eagerly await billions in illegitimate Treasury payments, courtesy of the Internal Revenue Service (IRS).

Two programs, the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) provide cash payments to low-income parents who pay no income tax and fail to have a valid Social Security number.

The IRS makes it easy. The tax collection agency routinely issues an Individual Taxpayer Identification Number (ITIN) to individuals who file income-tax returns but are not eligible to work in the United States. A few go to foreign investors who pay federal income taxes on their U.S. holdings. They are not the problem.

Most ITINs are issued to illegal immigrants living in the country. Many do not work. Many more do not even have children. They file federal income-tax returns often with the help of tax-filing services solely to receive a child tax-credit refund.

The IRS knowingly allows illegal aliens who claim children to get Earned Income Tax Credit cash payments of up to $5,891 per household. This is one reason why these cash payments are expected to exceed $52 billion in fiscal year 2012 alone. The General Accountability Office (GAO) estimates that roughly a quarter of all Earned Income Tax Credit payments are issued improperly.

Compounding the problem is the Additional Child Tax Credit, which was added to the older Child Tax Credit program that became law in 1997. The Child Tax Credit reduces the tax low-income families pay by $1,000 for each child under 17. If the tax filer claims five children for a credit of $5,000 but owes only $2,000 in taxes, under the Additional Child Tax Credit the IRS sends the filer a check for the difference, or $3,000.

The federal tax agency makes no effort to verify the existence of children or the eligibility of the tax-credit recipients to work in the United States. Indeed, IRS managers reportedly encourage their staff to ignore questionable applications and blatant fraud for the sake of fast-tracking Individual Taxpayer Identification Number approvals.

A 2011 Treasury Department study found the IRS paid illegal immigrants $4.2 billion in Additional Child Tax Credit refunds in 2010, representing nearly one-fifth of all ACTC refunds paid that year.

These cash payments are one more incentive for illegal immigrants to enter, reside and work in the United States. That is the last thing we need in an economy in which 10 million U.S. citizens and more than 1 million legal immigrants are looking for work.

The scandal prompted at least one congressman to act. Last year, Rep. Sam Johnson, Texas Republican, introduced the ITIN Reform Act. The legislation would require people claiming Additional Child Tax Credit refunds on tax returns filed without a Social Security number to verify their citizenship status in person at an IRS office. Currently, the IRS sends these refunds automatically, with no questions asked.

Thus far, the IRS has refused to implement reforms that could stop massive ACTC fraud by illegal immigrants. Senate Majority Leader Harry Reid, Nevada Democrat, blocked an effort to bring the Child Tax Credit Integrity Preservation Act (S. 577) to the floor, ensuring that illegal immigrants can continue to get billions in cash payments for children who may not even exist.

Eliminating these illegitimate payments could save at least $4.2 billion to fund other government activities.

This is a tiny fraction of total federal spending, but if properly used, it could make a big difference. Shifting this amount from Additional Child Tax Credit fraud to aggressively pursuing higher value IRS targets such as high-income and corporate tax cheats could put a real dent in the “tax gap” the difference between what the government collects each year and what it is owed. Right now, that gap is close to $400 billion, no small thing when the government is projected to incur an $850 billion deficit this year.

At the very least, we could reopen the White House to public tours and keep more air-traffic controllers on the job with the money. We know that unless Congress pulls the plug on the Additional Child Tax Credit, the IRS will continue sending taxpayer funds to millions of lawbreakers who have no legal right to be in the United States.

Edwin S. Rubenstein is president of ESR Research and was formerly chief economist for the Grace Commission on Waste in Government.

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Also.

Why Gang Members Want Your Identity

by Kate Rogers
Published April 04, 2013
FOXBusiness

• 
  REUTERS

Gang members often bring to mind guns, violence and drugs—but taxes? Not so much.

Law enforcement officials say gang members are increasingly focusing on financial crimes because they are more safe and lucrative than selling drugs. The criminals are stealing people’s identities and then filing fraudulent tax returns to get sizeable returns from Uncle Sam. To gain access to consumers’ personal information, gangs are infiltrating the medical world to phish for consumer information.

Detective Craig Catlin of the North Miami Beach Police Department Gang Unit goes so far as to call it an “epidemic” among the city’s street gangs. “Every gang member is doing this,” Catlin says. “It’s a business to them—they’re doing burglaries and then having other members commit the fraud.”


The crime itself may seem tame for hardened street gangs, but Adam Levin, chairman of IdentityTheft911, says it’s simple, safe and cost-effective.

“It’s like being a vampire in a blood bank if you know what you’re doing,” Levin says.

The Tax Appeal

Catlin recounts a scene from a recent apartment raid where officers found six gang members sitting on laptops doing tax returns.

“Why sling dope on the corner of an apartment building, when you can rent a room at a hotel nearby and have a tax return party? You can make up to $40,000 or $50,000 in one night,” he says.

Director Tom Carney of the North Miami Police Department says his unit sees victims of identity theft and tax fraud every day. “Each year this gets bigger and more pervasive,” he says.

As soon as they receive an income tax return, fraudsters tend to put the money onto gift cards for retailers like Wal-Mart (WMT) and spend the cash as quickly as they can, Carney says. The department’s financial crimes and gang units have recovered millions of dollars over the past several years along with handwritten journals with countless pages of victims’ personal information.

“They’re intelligent people,” Carney says. “They recruit intelligent people—send emails, phish, make phone calls and hack computers. The biggest threat to this country is now cyber crime.”

North Miami Police Department Detective John Philome knows all this too well. The 29-year-old’s tax return was filed by an identity thief in 2012 and he says it took a year to get his return back. What’s more, the IRS still isn’t sure how his identity was stolen, or who filed the return in his name.

“I was shocked, being a crime prevention officer, I thought I took all of the necessary precautions to not have that happen to me. It’s a horrible thing to have to come back from.”

The Internal Revenue Service declined to speak over the phone, and a spokesperson would only say the IRS is “aggressively targeting identity theft on all fronts.”

Gangster Girlfriends in on the Game

In the past, gang members would often have their girlfriends purchase guns because they tended not to have criminal records, but now their role has shifted. Girlfriends are being tasked with getting hired at different companies to steal consumer data, according to Levin. He adds that positions in the health-care industry are prime targets.

“If you get a job as an administrator or data person, you have access to all of this information. And with medical it’s a double hit—it's not only about the money, but also the health insurance. That is a valuable commodity in the marketplace—it’s big dollars.”

Levin says the girlfriends show up to work, steal a sizable amount of data and then never return. The larger the medical practice, the longer it will take for the company to realize.

“It’s not so much people hacking into files anymore--it's an inside job,” he says. “Also, a lot of these medical facilities have their technology shipped offshore or stored with a third-party vendor. This means you have easier access to medical files in an emergency, but the downside is that more people have access to your files, and they may not have your best intentions at heart.”

Catlin adds that he has seen cases of this sort ranging from $30,000 to $30 million, depending on the depth of the fraud. Florida in particular had been a hotbed for this type of crime, but in recent years the District Attorney’s office has moved more quickly to prosecute tax fraud and more cases have reached the federal level.

How to Protect Yourself

Personal thefts also occur via break-ins at homes and cars, Carney says. Be sure not to leave your laptop in plain sight in your vehicle, along with your wallet or personal belongings.

“Use a shredder in your home,” he says. “They will break into your house and find that personal information.”

Tax fraud is harder to protect yourself from, says Catlin. “The only thing you can try to do is complete the refund in January, before anyone else can file in your name,” he says.

And if you’re an employer with a lot of consumer data, conduct proper background checks on any hires.
“Do in-depth background checks, because they will steal you blind,” Carney says.

Read more: http://www.foxbusiness.com/personal-...#ixzz2Ru854zjP

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