Here's how it works.
Illegal immigrants cannot qualify for legitimate Social Security numbers, which would entitle them to work legally in the U.S. and file income tax returns, but the Internal Revenue Service allows them to apply for nine-digit individual taxpayer identification numbers, or ITINs, which also are used to file federal income tax returns.
In addition, a provision in the tax code permits illegals to claim "additional child tax credits," which grant families $1,000 per "dependent" child. Roughly three-quarters of tax returns filed by illegals include these ACTCs. With the ITIN, illegals are able to get tax credits and refunds for nephews, nieces and other family members who never have touched U.S. soil.
For example, an illegal immigrant who makes $13,000 a year not only pays no taxes but also can receive a refund of $5,000 by simply filling in five ACTCs. One illegal used a fake address and said four illegal aliens lived there with 20 relatives as dependents, for a grand total tax refund of $29,000!
According to the Center for Immigration Studies, in the 2010 tax year alone, more than 3 million returns were filed with ITINs. About 2.3 million of them paid no federal income taxes and also collected a cumulative $4 billion from the Treasury in tax refunds for claiming ACTCs.
FactCheck.org confirmed: "The (Treasury Department's inspector general's) report stated that more than 2.3 million persons who did not have Social Security numbers valid for working in the U.S. got an average of roughly $1,800 each in 2010 in child tax credit refunds. That included 9,000 illegal immigrants who each got a total of $10,000 or more by retroactively claiming credits for tax years prior to 2010."
A tax consultant snitched to WTHR News: "We've seen 10 (or) 12 dependents, most times nieces and nephews, on these tax returns. The more you put on there the more you get back. ... Here's a return right here: 'We've got a $10,300 refund (for) nine nieces and nephews.'"
And if you think this is a relatively new IRS scam, consider the report for the Center for Immigration Studies prepared by Peter A. Schulkin, who holds a Ph.D. in economics from Harvard University and has taught at several universities. It was a follow-up to a November 2010 memorandum titled "Child Tax Credits for Illegal Immigrants."