April 15 used to feel like a predictable transaction. These days, with the Treasury Inspector General for Tax Administration confirming that the IRS disbursed nearly $213 million in Earned Income Tax Credits to approximately 67,000 noncitizens holding non-work Social Security numbers across tax years 2023 and 2024, it feels more like funding a casino that pays out to the wrong players. Of the $219 million claimed, $213 million went out the door. Only six million were withheld.
Thirty years of managing private wealth and serving as an expert witness on fiduciary duty in federal and state courts have taught me that a system repeatedly catching the same violation across two decades is not incompetent; it is protected. TIGTA first flagged the nonwork-SSN EITC problem in 2001. Fresh recommendations followed in 2017. A 2012 audit identified over $4.2 billion in improper EITC payments overall. Each time, the agency acknowledged the gap and produced no durable fix. Twenty-five years of formal findings and zero institutional consequences.
The mechanism is not complicated. Nonwork SSNs are issued to foreign nationals for purposes like Medicaid or food stamp access, but carry no work authorization. EITC explicitly requires it. Yet when these numbers appear on returns claiming the credit, the IRS processes them anyway. The Social Security Administration holds citizenship codes that identify unauthorized workers, but does not share them with the IRS in real time. The Department of Homeland Security updates immigration status records when non-work number holders gain authorization, but does not routinely pass those updates along either. Privacy laws, specifically Internal Revenue Code Section 6103, create constraints on inter-agency sharing. Analysts have identified statutory pathways around them. The IRS has never seriously pursued them. As of March 2025, approximately 2.4 million nonwork SSNs were active. The IRS flagged more than 1 million returns for identity fraud in 2023 and 2024, but reviewed fewer than 5,100.
The IRS's own Taxpayer Services Division chief, Kenneth Corbin, acknowledged the gap in his formal response to the inspector general's report. He wrote that timely, updated, and reliable eligibility information would enable immediate eligibility determinations and avoid costly post-filing corrections. The agency conceded the problem in writing. Then it built no solution. That acknowledgment, delivered to a federal watchdog and filed away for the next audit cycle, is the most revealing sentence in the entire report.
The fraud-detection workforce is shrinking in parallel. The IRS's Automated Questionable Credit program dropped from 174 to 148 examiners between October 2022 and June 2025, a 15 percent reduction. In fiscal year 2025, the IRS itself estimated that 33 percent of all EITC disbursements — $21.1 billion out of $64.7 billion — were improper payments. In the private sector, any firm managing a $64.7 billion annual disbursement program without real-time eligibility verification would face regulatory scrutiny and potential liability. Federal agencies operate under a different standard because Congress has never made non-compliance consequential enough to force the fix.
The 1996 Welfare Reform Act drew the line explicitly: unauthorized individuals cannot receive the EITC. Congress established that boundary 30 years ago. The IRS has known since at least 2001 that it was not enforcing it. The gap between the law on the books and the checks being cut is not a regulatory gray area. It is a failure of administrative will sustained across multiple administrations and neither party has treated it as urgent.
Two recent policy moves have established the correct legal architecture. The Trump administration's November 2025 Treasury regulations classified refundable EITC portions as federal public benefits under the 1996 welfare reform law, restricting undocumented immigrants starting in tax year 2026. The One Big Beautiful Bill, signed July 4, 2025, requires valid Social Security numbers for major credits and will require EITC claimants to obtain an official certification before filing starting in 2028. The framework is sound. Enforcement and modernization are what remain.
The IRS already holds statutory authority to fix this. Internal Revenue Code Section 6213(g) gives the agency math error power, the ability to automatically correct returns carrying eligibility errors before refunds are processed. TIGTA has recommended explicitly invoking this authority for nonwork SSN claims. The IRS has declined, citing system limitations that decades of IT neglect have made self-fulfilling. The individual master file still runs on an architecture designed in the 1960s. Elon Musk told Fox News in March 2025 that these are failing systems enabling massive fraud. He was correct. Properly deployed AI tools could scan every EITC return in real time, cross-reference SSA and DHS data, and flag ineligible claims before the check is cut.
The national debt closes in on $39 trillion. Net interest payments now consume more than 13 percent of federal outlays and are climbing. Every improperly paid EITC dollar is borrowed money transferred to an ineligible recipient while taxpayers absorb the cost. The statutory and regulatory framework to stop this exists. Mandate real-time SSA-IRS-DHS data sharing. Require work-authorization verification at the point of claim. Deploy Section 6213(g) authority before the next audit cycle produces the same findings with a different date on the cover page.
Jay Rogers is a financial professional with more than 30 years of experience in private equity, private credit, hedge funds, and wealth management. He has a BS from Northeastern University and has completed postgraduate studies at UCLA, UPENN, and Harvard. He writes about issues in finance, constitutional law, national security, human nature, and public policy.