The Democratic chairman and the top Republican on the Senate Finance Committee are pressing the Obama administration for information on tax credits paid to people who may not be eligible to work in the U.S.
In a letter sent to Treasury Secretary Timothy F. Geithner and Internal Revenue Service Commissioner Douglas Shulman dated today, Democrat Max Baucus of Montana and Republican Orrin Hatch of Utah cited an inspector general’s report released Sept. 1 showing that the IRS awarded $4.2 billion in additional child tax credits to people with taxpayer identification numbers rather than Social Security numbers.
The letter asks Treasury and the IRS to provide a legal analysis of the agencies’ ability to deny tax credits to people with those identification numbers. If they lack that authority, Congress could provide it and generate revenue to reduce the federal budget deficit.
Several aspects of the report “raise serious concerns about which we are requesting further information and that require the immediate attention of the Department of Treasury and IRS,” the letter said.
In addition to Hatch, the letter was signed by the committee’s 10 other Republicans on the committee.
Child Tax Credits
The additional child tax credit was established in 1997, a year after Congress prohibited taxpayers without Social Security numbers from receiving other tax credits.
The law authorizing the child tax credit didn’t include language explicitly limiting recipients to filers with Social Security numbers. The IRS has said that it doesn’t have the authority to deny the credit to people who use a taxpayer identification number to file.
Spokesmen for the IRS and Treasury Department didn’t immediately respond to requests for comment today.
In a statement when the inspector general’s report was released, IRS spokeswoman Michelle Eldridge said the law is clear that “eligibility for these credits does not depend on work authorization status or the type of taxpayer identification number used.”
“If the law were changed, the IRS would change its programs accordingly,” Eldridge said.
The child tax credit is refundable, meaning that the portion of the credit that exceeds a tax liability is paid to the taxpayer.
Taxpayer identification numbers are provided by the IRS so that workers who don’t have work authorization needed for a Social Security number can still comply with tax law. Even money earned illegally in the U.S. is subject to taxation.