Undocumented Workers Collecting Billions In Tax Refunds

Undocumented Workers Collecting Billions In Tax Refunds

CREATED May 21, 2012 - UPDATED: Mar 11, 2014

By Ben Hall

Investigative Reporter

NASHVILLE, Tenn.- They may be here illegally, but many undocumented workers pay income taxes and even get tax refunds.

An exclusive NewsChannel 5 investigation has uncovered a scheme that involves undocumented workers getting huge tax refunds by filing bogus returns.

A search warrant prepared by the IRS claims a Murfreesboro tax company encouraged undocumented workers to lie on their tax returns by claiming children who live in Mexico as dependents.

NewsChannel 5 Investigates asked employees inside the business about the allegation.

"Has this business encouraged people to lie on their tax returns?" NewsChannel 5 Investigates asked.

An employee responded, "I can't speak to you guys I'm sorry."

Mundo Hispano is located in a Murfreesboro strip mall.

It is back open after an IRS raid in March, in which agents took computers and documents as part of an investigation into tax fraud.

Employees at the business next door to Mundo Hispano said during tax season, non-english speaking people lined up and waited for hours to get inside.

"Our customers couldn't even get in because it was so packed they would be lined up in front of our office," Kimberly Rainey said.

In fact, the IRS says Mundo Hispano has filed 6000 tax returns over the last three years.

And although Mundo Hispano's clients only paid $3.3 million in taxes, they were able to claim more than $17 million in refunds.

The refunds left United States nearly $14 million in the hole.

The IRS does not care if a person is here legally, or not.

It just wants to collect taxes on all money earned inside the United States.

So, the IRS issues Individual Taxpayer Identification Numbers to undocumented workers so they can file taxes.

When they file, they can claim Child Tax Credits.

IRS Special Agent, Christopher Henry, says more than 85% of tax returns filed by Mundo Hispano were filed by undocumented workers or others who are not eligible for a social security number.

"It does show to us a red flag, something we really need to take a close look at," said Henry.

The IRS believes Mundo Hispano encouraged its clients to claim child tax credits they didn't deserve, including credits for children who had never even been to the U.S.

"These dependents that are on these returns are relatives living in Mexico," Henry said.

Agent Henry detailed a sting the IRS conducted at Mundo Hispano.

He said a Mundo Hispano employee encouraged an undercover IRS agent to claim a niece and nephew living in Mexico on the agent's tax return.

So, instead of owing the IRS $189, the undercover agent was suddenly eligible for a refund of more than $3000.

"It's infuriating," said Congresswoman Diane Black, (R) Tennessee.

"This is not the first time that I've been made aware of these cases," Black continued.

Congresswoman Black is concerned this was found in her district, but says it points to a much bigger problem.

A report from the Treasury Inspector General for Tax Administration from July of 2011, states "Individuals not authorized to work in the U.S. were paid $4.2 billion in refundable credits," in 2010.

"It's just ridiculous that we have people who are in the country illegally, and are taking advantage not only what is in our law, but even greater than that, by the fraudulent activity that's happening here," Congresswoman Black said.

She has signed onto a proposal that would require a social security number, which undocumented workers don't have, to get the Additional Child Tax Credit.

The IRS acknowledges it is a huge problem.

"All across the country we are dealing with these types of schemes, refund schemes," Agent Henry said.

The IRS says Mundo Hispano charged fees based on the amount of the refund.

The business is still open because the IRS is not finished with its investigation. No charges in the case have been filed.

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