Law accommodates tax returns for illegal aliens |
Rob Gebhart

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Law accommodates tax returns for illegal aliens

While President Bush urges Congress to reform immigration laws, the Internal Revenue Service has already revised the tax code so illegal aliens can be claimed as dependents on tax returns.

Tax agent Lee Philips heard about the tax reform in early January through H&R Block, the tax company for which she works. By filing a W-7 form, Phillips learned, illegal aliens could obtain an Individual Taxpayer Identification Number and file a joint United States tax return with a legal resident. Illegal aliens could also obtain a tax identification number if a legal resident wanted to claim them as a dependent.

In the past, Philips said, legal residents who had an illegal spouse but legal children usually lied on their tax returns, said they were a single parent, and filed as head of household. This filing status falsely qualified them for an earned income tax credit of $5,000 to $6,0000.

The illegal practice was costing the government money, so the tax code was revised to allow for illegal dependents. A legal resident can file jointly with an illegal spouse and receive a standard joint filing deduction of $9,500 plus a standard deduction of $3,000 per dependent.

A legal resident supporting family in a foreign country can claim his dependents in that country, too, as long as those people obtain taxpayer identification numbers.

It’s better to forgo the earned income tax credit and file a legal tax return, because the IRS will eventually find out the return was fraudulent, Philips said. By law, tax agents are required to complete returns as truthfully as possible to the best of their knowledge. So if a man comes in and claims three children as dependents but says he has no wife and would like to file as head of household, Philips is going to be suspicious. She’ll wonder who is watching the kids all day.

Other people are caught when they apply for legal resident status. When found out, the IRS requires them to pay back the tax credits, as well as interest and penalties. This can put people in a worse position than they were in when they first came to America, Philips said.

Philips has talked to 15 people about filing W-7s since she completed a correspondence course regarding the forms. She said she is the only tax agent in Craig or Steamboat Springs who files W-7s. However, eligible parties can apply to file on their own. To apply for a taxpayer identification number, aliens must submit a W-7 form, a completed tax return, and a document that proves their identification, such as a driver’s license, visa, passport, birth certificate, or foreign voter registration card. But a tax agent can verify these forms without sending them to the IRS.

Many people interested in filing W-7s are Mexican nationals, Philips said. Birth certificates are problematic for them, because in Mexico one must apply for a birth certificate. But Mexican voter registration cards bear the owner’s photograph, and work well as identification.

When she first heard of the program, Philips feared illegal aliens would file W-7s and then their information would be promptly forwarded to the U.S. Immigration & Naturalization Service.

After speaking to the INS and IRS, she said she was assured provisions in the Patriot Act prohibited the agencies from sharing information.

Rob Gebhart can be reached at 824-7031 or by e-mail at