Ayotte: Watchdog Report Finds Billions Wasted on Tax Refund Fraud

Press Release

U.S. Senator Kelly Ayotte (R-NH) today renewed her call for Congress and the administration to act to address tax refund fraud that costs Americans billions of dollars each year. A new report released by the Treasury Inspector General for Tax Administration (TIGTA) found that the IRS paid billions of dollars in improper payments of the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) in fiscal year 2013.

"It's unacceptable that the federal government continues to waste billions of taxpayer dollars on improper and fraudulent tax refunds, and this report further underscores the need to reform tax credit requirements in order to prevent such abuse," said Ayotte. "I introduced common sense legislation last year that would have reduced fraud associated with the Additional Child Tax Credit and save an estimated $20 billion over the next 10 years, and this is an issue Congress should take up right away."

Last year, Senator Ayotte introduced legislation to address fraud in the U.S. tax code by requiring filers' children to have a Social Security Number in order to qualify for the Additional Child Tax Credit. The Joint Committee on Taxation estimated this change would save approximately $20 billion over 10 years. In October, she joined Republican and Democrat colleagues in writing to IRS Commissioner John Koskinen expressing concerns regarding the agency's failure to develop a plan to prevent identity-theft related tax fraud.

In 2011, the Treasury IG reported that individuals who were not authorized to work in the U.S. received $4.2 billion by claiming the ACTC. The ACTC is the refundable portion of the Child Tax Credit (CTC), which can reduce an individual's taxes owed by as much as $1,000 for each qualifying child. Under current law, there is no requirement that the filer - or the child - have a SSN to qualify. The absence of such common-sense requirements have led to massive fraud.

In a 2012 report from WTHR Indianapolis, one whistleblower characterized the credit as a "huge fraud" that allows undocumented workers to claim the tax credit for children who do not even live in the country. The whistleblower - a tax consultant - stated "we've seen sometimes 10 or 12 dependents, most times nieces and nephews, on these tax forms...the more you put on there, the more you get back." In fact, one of the workers interviewed in the investigation admitted that his address was used to file tax returns by four other undocumented workers who in total claimed 20 children, resulting in tax refunds totaling nearly $30,000.

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