John Bullis: Congress needs tax provision for immigrants

Earlier this month the Reno paper had an article “Will immigrants pay back taxes”.

As I read that, I wondered if anyone had really tried to guess how much taxes an immigrant living illegally might pay if they lived in the U.S. for five years.

There seems to be some confusion on whether they must pay back taxes. The Obama administration indicated the president “…misspoke when he said that immigrants would have to ‘pay back taxes’…”. The bill seems to say they, among other things would have to have “…satisfied any applicable Federal tax liability…”.

Some assumptions need to be made. Assuming they have earned low wages (whether paid in cash or otherwise) and they have minor dependent children, they might owe little or no taxes and may even be entitled to refunds for the last three years. Remember IRS does not pay refunds for returns that are three years late in being filed, only three years returns with refunds will be paid.

First, if the dependent child is has not attained age 17 by the end of the tax year, there is a “Child Tax Credit” of $1,000 for each qualifying child. The child must be either a U.S. citizen or resident of the U.S. The credit first offsets any tax liability and the rest of the credit is a tax refund.

Second, perhaps the wages earned were not reported on a W-2 by the employer. Special rules apply then, but the taxpayer may be able to show they were employees, not independent contractors and they owe little or no self employment tax.

Third, if the Modified Adjusted Gross Income is less than $110,000 for a joint return or less than $75,000 for a single return, the Child Tax Credit is allowed. I’m guessing many of the folks involved in this had less than those amounts.

Fourth, there is another special tax benefit called the Earned Income Tax Credit for certain low income individuals. The amount of this credit varies based on earned income (i.e. wages) and how many qualifying children are in the household and what filing status is involved (joint return, single return, head of household, etc).

The Earned Income Tax Credit starts to be reduced when Adjusted Gross Income exceeds certain amounts. For example, a joint return with one child starts to “phase out” or be reduced with AGI of $43,941. That is also a refundable credit.

Lots of individuals with low income and dependent children get refunds instead of paying taxes. Maybe immigrants would get refunds by filing back years returns?

If 4 million immigrants qualify for just $2,000 refunds for each of three years of returns, that looks like paying out about $24 billion to them. It’s time to ask our members in Congress to get a provision that says “no refunds” to illegal immigrants.

Did you hear? “Whenever you possibly can, do good to those who need it,” Proverbs 3:27.

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.