An inspector general report reveals systemic failures at the IRS in preventing misuse of tax credits by foreigners with nonwork Social Security numbers, costing taxpayers hundreds of millions annually.
| PULSE POINTS |
❓ WHAT HAPPENED: The Internal Revenue Service (IRS) paid $213 million in Earned Income Tax Credits (EITC) to foreign citizens with nonwork Social Security numbers in 2023 and 2024, according to a report from the agency’s inspector general. These numbers, issued for limited purposes such as accessing services, are not intended for work eligibility or tax credit claims. 📺 DETAIL: The report said the IRS lacks sufficient data from the Social Security Administration (SSA) to determine why certain nonwork Social Security numbers were issued, limiting the agency’s ability to automatically block improper claims. Investigators found the IRS identified about 12,600 suspicious returns through risk-based screening and manually reviewed roughly 5,100 of them, preventing nearly $11 million in improper payments. Auditors said the IRS’s current system relies heavily on manual reviews and cannot efficiently detect all ineligible claims because the agency does not receive complete information from the SSA about whether the Social Security numbers were issued solely for federal benefits, which would disqualify recipients from claiming the credit. The watchdog report also noted that refundable tax credits remain highly vulnerable to fraud, with the Earned Income Tax Credit alone generating an estimated $21.1 billion in improper payments in fiscal year 2025. 🎯 IMPACT: The misuse of the EITC, a program designed to support low-income workers, not only drains taxpayer funds but also undermines trust in government oversight. In 2025 alone, the IRS estimated $21.1 billion in erroneous EITC payments, with both fraud and unintentional errors contributing to the problem. This ongoing issue highlights the need for improved interagency cooperation and data-sharing to prevent future losses. 💬 KEY QUOTE: “Having timely, updated, reliable eligibility information would enable immediate eligibility determinations and would avoid costly, resources intensive, post-filing determinations,” said Kenneth Corbin, chief of the IRS Taxpayer Services Division. 📺 FLASHBACK: In 2017, the inspector general recommended that the IRS collaborate with the SSA to improve data-sharing and prevent misuse of nonwork Social Security numbers. Despite initial exploration of the issue, no viable solution has been implemented in the years since. |
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