A couple of month ago I was made aware of a common practice among various communities known as the Earned Income Tax Credit (EITC) Scam. Basically, it consists of the filer claiming dependents that are not his or hers for the sole purpose of getting extra refund through tax credit. At first, I thought it was just an isolated case among taxpayers, but I later on realized that many people were attempted to engage in the scam.
First of all, the EITC is a tax credit available to persons who have earned wages through work. One of the conditions to enjoy such credit is through “qualifying child.” A “qualifying child” generally, is a child or sibling of the taxpayer, or a direct descendent thereof (niece, nephew, grandchild, etc.) who has lived with the taxpayer for more than half the calendar year. Fraudulently or mistakenly, claiming the EITC is a major problem that disproportionately affects the immigrant and refugee community.
Oftentimes, at the behest of bad advice or legal mistake, people claim credit to which they are not entitled. The Internal Revenue Service (IRS) has automated filters designed specifically to catch these fraudulent or mistaken claims. Once caught, the IRS has ten years to collect the debt, and may garnish a taxpayer’s wages, bank account, or a certain percentage of public benefits. In addition, interest and penalties accrue, which can increase the tax debt to far more than the initial refund amount. Furthermore, the taxpayer might be disallowed from claiming the EITC for the next two to ten years. Therefore it is vital for taxpayers to claim the EITC only when they qualify.
As far as refugees and immigrants are concerned, mistakenly claiming the EITC may hinder a person’s pathway to citizenship, and participating in an intentionally fraudulent EITC scheme may place a taxpayer’s permanent residency in jeopardy. Moreover, a taxpayer who shares his or his family’s personal identification information puts himself and his family at severe risk of identity theft that can be both financially crippling and extremely difficult to correct.
In seeking the largest refund possible, taxpayers should consider the irreparable harm that may occur to their families and their future prospects in America.`