Indiana lawmakers work to close IRS loophole


State legislators are looking at new rules to keep Indiana tax dollars from going to illegal immigrants.

An Eyewitness News investigation first exposed last spring an IRS loophole allowing illegal immigrants to get more than $4 billion per year in child tax credits. Now, state lawmakers astonished by the findings are promising change.

"I had no idea we had something going on like this in the state," said Senator Jim Tomes (R-Wadesville).

Tomes says he was shocked to see the nationwide problem that 13 Investigates discovered right in our own backyard. We discovered undocumented workers collecting huge tax refunds they're not entitled to.

One man admitted his address was used this year to file tax returns by four other undocumented workers who don't even live there. Those workers told the IRS 20 children live inside one trailer home in southern Indiana. As a result, the IRS sent the illegal immigrants combined tax refunds totaling more than $29,000 - most of that money for nieces and nephews who don't live in Indiana and who've never even visited the United States.

13 Investigates found fraud involving child tax credits is costing American taxpayers more than $4 billion a year and people who work inside the IRS told us they've been told to ignore the fraud for years.

"We're not supposed to look into anything. We're not supposed to examine anything. It's like an assembly line. It's just 'Get it out of here.' Boom, boom, boom. Get it out of here and don't worry about the fraud. Fraud slows us down," said IRS tax examiner Howard Antelis.

The IRS is now working on closing a massive tax loophole and, in the meantime, Tomes wants the State of Indiana to do the same thing.

"I think, as legislators, we have an obligation to make sure our tax dollars do not get away from us," Tomes said.

He's been working with the Indiana Department of Revenue to come up with this. It's a bill that would limit state child tax credits to kids who are U.S. residents and actually living in the United States.

"We're hoping to prohibit people from filing fraudulent tax returns on dependants who don't live in this country or never visited this country or who are here illegally," Tomes said.

Tomes says he knows there are thousands of illegal immigrants living in Indiana with children who were born here and who are legal US residents. He says those kids will not be affected and that his bill is really aimed at those who are scamming the system.

"We're only targeting the people who are the culprits," he said.

The legislation also includes penalties for those found cheating on their child tax credits. Tomes believes the bill could save the state millions of dollars each year. It's already been filed in the Senate and will be formally introduced at the Statehouse next month.