John R. Bullis: Illegal immigrants may be able to get big tax refunds

It now seems an illegal immigrant under President Obama’s executive action can now get special refunds.

The normal statute of limitations is three years to amend a income tax return, but if you never filed, the statute of limitations never starts to run. It now appears, if an illegal immigrant gets a Social Security number today, they can file returns and claim the Earned Income Tax Credit for refunds for the last three years.

IRS Commissioner Koskinen recently indicated to U.S. Sen. Charles Grassley of Iowa, the IRS is following a 15-year-old opinion that “a taxpayer may claim the Earned Income Tax Credit for a taxable year using a Social Security number acquired in a later taxable year ...”

Sen. Grassley indicated it seems illegal immigrants would be able to claim tax benefits that “shouldn’t reward those who broke our immigration laws ...”

If the president’s executive action is upheld by the courts, the immigrants in question would not only get Social Security numbers but be able to file and receive refunds for the last three years.

As a reminder, the Earned Income Tax Credit is like income tax withheld from wages. It mainly applies to low-income taxpayers, with a table that shows the amount of the credit depending on the level of income and how many persons in the household.

If you have “low” earned income, you may not owe an income tax or any self employment tax (or not much), but will still get a refund because of the Earned Income Tax Credit. For example, if the income is $22,000 and a joint return is filed with three children as dependents, the Earned Income Tax Credit is about $6,143.

It is generally thought most illegal immigrants work for low wages, but many times are not treated as employees, and do not receive a W-2 form because they do not have a Social Security number.

Now, even if they received unreported wages, they could file back years returns, report the wages and claim the Earned Income Tax Credit for refunds — even for the last three years they did not have a Social Security number.

Sen. Grassley believes this could amount to maybe even billions of dollars in tax benefits. He has vowed to overturn the IRS position; it will be interesting to see how this all ends up.

Did you hear? “Tolerance is the positive and cordial effort to understand another’s beliefs, practices, and habits without necessarily sharing or accepting them.” — Joshua Liebman.

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.