Threat to Immigrant Families’ Child Tax Credits in Payroll-Tax Deal

By Lesli A. Maxwell — December 16, 2011 1 min read
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As Congressional leaders and the White House feverishly negotiate a deal to extend the payroll tax cut, advocates for immigrants and children are scrambling to head off the possibility that undocumented immigrants who file tax returns will lose access to the Child Tax Credit.

Under the version of the payroll tax cut extension passed last week by the U.S. House of Representatives, poor immigrant families who currently are eligible to receive the refundable Child Tax Credit would no longer be able to get the break on their child care expenses, according to the National Council of La Raza. The Children’s Leadership Council is also weighing in on the issue.

What this means is that undocumented immigrants who do not have a Social Security Number would not be able to claim the credit when they file taxes. Under current law, undocumented workers can use an Individual Tax Identification Number, or ITIN, to file taxes with the IRS. Estimates for 2010 are that ITIN tax filers paid $9 billion in payroll taxes to support Social Security and Medicare, according to NCLR.

The poorest families—those who earn $30,000 a year or less—would be hit by this, according to Leticia Miranda, the associate director for economic policy at NCLR. And as many as 4 million children—U.S.-born, to undocumented immigrant parents—would be impacted, she said.

The idea for eliminating this tax credit for undocumented immigrants came from House Republicans, who apparently zeroed in on the issue after the Inspector General of the U.S. Treasury Department issued a report earlier this year on the rising number of individuals who are not authorized to work in the U.S. who are claiming the tax credit. According to the IG’s report, claims for the refundable credit have increased from $924 million in 2005 to $4.2 billion in 2010.

As Senate Democrats negotiate a different deal to extend the payroll tax cut, a slightly different version of stripping the Child Tax Credit for undocumented immigrants has emerged in their larger discussions. It would keep the access to the credit intact, but families could only claim it for children who are U.S.-born. Any children receiving care that were born outside the United States would not be eligible.

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A version of this news article first appeared in the Learning the Language blog.