Although undocumented workers are not eligible for federal benefits, the report released Thursday by the Treasury Inspector General for Tax Administration concludes that federal law is ambiguous on whether these workers qualify for a tax break based on earned income called the additional child tax credit.
Taxpayers can claim this credit to reduce what they owe in taxes, often getting refunds from the government. The vagueness of federal law may have contributed to the $4.2 billion in credits, the report said.
The IRS said it lacks the authority to disallow the claims.
Wage earners who do not have Social Security numbers and are not authorized to work in the United States can use what the IRS calls individual taxpayer identification numbers. Often these result in fraudulent claims on tax returns, auditors found.
Their data showed that 72 percent of returns filed with taxpayer identification numbers claimed the child tax credit.
The audit recommended that the IRS seek clarification on the law and check the immigration status of filers with taxpayer indentificaion numbers.