Obama orders provide immigrants IRS ‘bonus’

WASHINGTON – Millions of immigrants benefiting from President Barack Obama’s executive actions could get a windfall from the IRS, a reversal of fortune after years of paying taxes to help fund government programs they were banned from receiving.

Armed with new Social Security numbers, many of these immigrants who were living in the U.S. illegally will now be able to claim up to four years’ worth of tax credits designed to benefit the working poor. For big families, that’s a maximum of nearly $24,000, as long as they can document their earnings during those years.

Some Republicans are labeling the payments “amnesty bonuses,” one more reason they oppose Obama’s program shielding millions of immigrants from deportation.

“I represent hard-working, law-abiding Texans,” said Rep. Sam Johnson, a senior Republican on the House Ways and Means Committee. “I think these amnesty rewards, and that’s what they are, need to be stopped.”

Advocates argue that many of these immigrants pay taxes, so they should be able to claim the same tax credits as anybody else. During the past decade, immigrants in the U.S. illegally have paid an estimated $100 billion in Social Security payroll taxes, even though few will ever be able to collect benefits, said Stephen Goss, Social Security’s chief actuary.

Obama has issued executive orders shielding about 4 million immigrants from deportation.

Republicans in Congress are trying to use a funding bill for the Department of Homeland Security to overturn Obama’s actions. Democrats are resisting, resulting in a stalemate that is threatening to shut down the department.

The dispute over tax credits illustrates the complicated relationship that many immigrants have with the U.S. tax system. Social Security estimates that immigrants living in the country illegally work at about the same rate as the rest of the population, even though federal law bars them from employment.

In general, they are less likely to pay federal taxes. Those who do have been boosting Social Security’s finances for years.

How does Social Security know when it receives taxes from immigrants who are in the U.S. illegally? There is no foolproof method, Goss said. One way is by tracking reported wages in which the Social Security number does not match the name the agency has on file.

Some of these are clerical errors or unreported name changes, but Goss estimates that a majority of these wages come from immigrants who have made up Social Security numbers or used someone else’s.

The numbers are huge.

From 2003 to 2012, the total was nearly $750 billion in wages. Tellingly, only 7 percent of these wages are ever claimed and credited to an actual worker, Goss said.

The IRS accepts tax returns without reporting the taxpayers to immigration authorities, IRS Commissioner John Koskinen said. That encourages the workers to pay taxes.

“We don’t enforce the Social Security laws; we don’t enforce the immigration laws,” Koskinen said of his agency. “In fact, the reason illegal immigrants file taxes with us is they know we aren’t sharing that data with anybody. We treat it as taxpayer-protected information.”

Even if these immigrants pay taxes, they are ineligible for most federal programs. They cannot legally get food stamps, unemployment benefits, Pell grants or federal student loans. They cannot get Medicaid, except for emergency medical services, and are ineligible for subsidies under Obama’s health law.

They can claim some federal tax breaks, if they file tax returns.

But until now, they were not eligible for Social Security, Medicare or the Earned Income Tax Credit (EITC), one of the government’s largest anti-poverty programs.

Obama’s executive actions will offer Social Security numbers to these immigrants, something that eventually could make them eligible for Social Security and Medicare. For Social Security, you generally have to work and pay payroll taxes for 10 years before you qualify for retirement benefits.

Once the immigrants in Obama’s program get Social Security numbers, they can file tax returns claiming the EITC, as long as they meet the income requirements and can document their earnings.

They also can file amended tax returns for up to three years after they were due.

The maximum credit for families with three or more children is about $6,000, so some families could get as much as $24,000 in credits.