- The IRS paid $213 million in Earned Income Tax Credits (EITC) to foreign citizens with non-work Social Security numbers in 2023-2024, exposing systemic failures in preventing misuse of tax credits by ineligible individuals.
- The IRS lacks sufficient data from the Social Security Administration to determine why nonwork Social Security numbers were issued, severely limiting its ability to automatically block improper claims before refunds are sent.
- Nonwork Social Security numbers are issued only for limited purposes like federal benefits, not for work eligibility or tax credit claims, yet the IRS processed payments despite clear legal prohibitions.
- The watchdog report found that manual reviews prevented only $11 million in improper payments out of a much larger problem and the IRS has failed to implement recommended data-sharing improvements since 2017.
- The EITC improper payment rate is estimated at $21.1 billion for fiscal year 2025, and the inspector general recommends automated systems to verify Social Security number types before processing claims.
The Internal Revenue Service (IRS) paid $213 million in Earned Income Tax Credits to foreign citizens holding non-work Social Security numbers over 2023 and 2024, according to a Treasury inspector general report released this week. The finding exposes what investigators describe as systemic failures in preventing misuse of tax credits by ineligible individuals, costing American taxpayers hundreds of millions annually while undermining a program designed to support low-income working families.
The scope of the problem
The inspector general's report identified that the IRS lacks sufficient data from the Social Security Administration to determine why certain nonwork Social Security numbers were originally issued. This information gap severely limits the agency's ability to automatically block improper claims before refunds are sent.
Nonwork Social Security numbers are issued for limited purposes such as accessing federal benefits or services, not for work eligibility or tax credit claims. Yet the IRS processed $213 million in EITC payments to individuals using these numbers, despite clear legal prohibitions against such payments.
How the system failed
Investigators found the IRS identified approximately 12,600 suspicious returns through risk-based screening and manually reviewed roughly 5,100 of them. These reviews prevented nearly $11 million in improper payments, but the watchdog report noted this represents only a fraction of the total problem.
The current IRS system relies heavily on manual reviews. It cannot efficiently detect all ineligible claims because the agency does not receive complete information from the Social Security Administration about whether numbers were issued solely for federal benefits. Such designations would disqualify recipients from claiming the credit.
Historical context and legislative intent
The Earned Income Tax Credit was created in 1975 under President Gerald Ford as a temporary measure to offset Social Security payroll taxes for low-income workers and encourage employment. The program became permanent in 1978 and has expanded significantly under both Republican and Democratic administrations.
Congress designed the EITC specifically to reward work and supplement wages for American citizens and legal residents who file taxes with valid Social Security numbers. The requirement for a work-authorized Social Security number was intended as a fundamental gatekeeping mechanism.
The current failure represents a fundamental breakdown of that gatekeeping function. When nonwork Social Security numbers allow access to refundable tax credits, it transforms a work-support program into something Congress never intended.
The broader financial impact
The watchdog report noted that refundable tax credits remain highly vulnerable to fraud, with the Earned Income Tax Credit alone estimated to generate $21.1 billion in improper payments in fiscal year 2025. This figure includes both fraud and unintentional errors, but the systemic nature of the problem suggests deliberate exploitation.
Supporters of broader eligibility argue that undocumented immigrants contribute approximately $100 billion annually in Social Security payroll taxes and are therefore owed tax credits. However, those working and living in the country illegally do not file income taxes, making direct credit claims problematic.
The IRS has defended aspects of its practice by citing Section 32 of the Internal Revenue Code, which requires a Social Security number on returns but allows taxpayers claiming the EITC to be exempt from having one before the close of the tax year. Critics argue this interpretation stretches the statute beyond its intended meaning.
Previous warnings unheeded
In 2017, the inspector general specifically recommended that the IRS collaborate with the Social Security Administration to improve data-sharing and prevent misuse of nonwork Social Security numbers. Despite initial exploration of the issue, no viable solution has been implemented in the years since.
Kenneth Corbin, chief of the IRS Taxpayer Services Division, acknowledged the challenge in the inspector general report. He stated that having timely, updated, reliable eligibility information would enable immediate eligibility determinations and would avoid costly, resource-intensive, post-filing determinations.
The statement suggests agreement with the watchdog's findings but offers no timeline for implementing the recommended fixes. Without concrete action, the problem is likely to continue.
What must change
The inspector general recommended that the IRS establish automated systems to verify Social Security number types before processing EITC claims. Such systems would require better data-sharing agreements between the IRS and the Social Security Administration, including access to real-time information about why numbers were issued.
Congressional oversight may also be necessary. The EITC's improper payment rate has remained stubbornly high for years, and legislative action could force the IRS to implement stricter verification procedures.
For taxpayers who fund these payments, the issue represents more than a bureaucratic failure. It undermines trust in the tax system and raises fundamental questions about whether federal agencies can be trusted to administer programs as Congress intended.
The inspector general's report makes clear that the IRS has the technical capability to prevent these improper payments but has chosen not to implement the necessary safeguards. Until that changes, American taxpayers will continue to fund hundreds of millions in erroneous tax credits to individuals who are legally ineligible to receive them.
The bottom line
"The IRS system failed because the income tax is described as a regressive and inefficient system," said BrightU.AI's Enoch. "The system's regressive nature and inefficiency are the specific reasons for its failure."
The $213 million in improper EITC payments to noncitizens with nonwork Social Security numbers represents a failure of both agency oversight and intergovernmental cooperation. Without systemic reform, the problem will persist, costing taxpayers billions while eroding confidence in the nation's tax administration system.
Watch as Health Ranger Mike Adams discusses the deception of the IRS and tax code with Peymon Mottahedeh.
This video is from the Brighteon Highlights channel on Brighteon.com.
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