By: Jeffrey Klein
Political Buzz Examiner

This bombshell dropped on Monday in Washington, D.C., causing outrage throughout the halls of Congress, and now beyond, to the “genuine” taxpayers who have been robbed all across America.

Investigative television reporter Bob Segall of Indianapolis NBC affiliate WTHR TV Channel 13, was contacted by a long-time central Indiana tax preparer, who blew the whistle on a multi-billion dollar tax fraud about which the IRS has done nothing, according to the TV news show video segment that aired on Monday.

“There is not a doubt in my mind there’s huge fraud taking place here,” he said, slowly flipping through the pages of a [heavily redacted] tax return.

“We’re talking about a multi-billion dollar fraud scheme here that’s taking place and no one is talking about it,” he said.

The scheme involves illegal immigrants that are filing tax returns, claiming child credits for multiple dependents under their support in “their” U.S. household, and collecting enormous cash refunds–such as one persons tax return that showed income of over $14,000, who collected a cash refund of over $10,300.

In 1996 during the Clinton Administration, the Individual Tax Identification Number (ITIN) was created in order for both resident and non-resident aliens, regardless of immigration status, to fulfill their tax filing and payment obligations under IRS regulations–even though an ITIN does not confer the right to work and receive income in the United States.

This year tax preparation offices across the country were flooded by an estimated 2 million illegal immigrants, who in growing numbers have been taking advantage of a tax loophole called the Additional Child Tax Credit–a fully-refundable credit of up to $1000 per child–meant to ease the income tax burden on working families who have children living at home.

However, Segall’s investigation and reporting found many illegal immigrants who were claiming these tax credits, but for kids who live in Mexico–even listing nieces and nephews.

“We’ve seen sometimes 10 or 12 dependents, most times nieces and nephews, on these tax forms,” the whistleblower told Eyewitness News. “The more you put on there, the more you get back.”

After Segall reviewed many of the heavily redacted tax returns, it was still clear that the tax filers had received large tax refunds after claiming child tax credits for many dependents.

“Here’s a return right here: we’ve got a $10,3000 refund for nine nieces and nephews,” he said, pointing to the words “niece” and “nephew” listed on the tax forms nine separate times.

“We’re getting an $11,000 refund on this tax return. There’s seven nieces and nephews,” he said, pointing to another set of documents. “I can bring out stacks and stacks. It’s just so easy it’s ridiculous.”

Under agreement not to reveal their identity or filming them face on, Segall of WTHR was able to speak with several of the illegal immigrants who, using Segall’s translator–confirmed it is easy.

One of the workers, who was interviewed at his [appeared to be a 2 bedroom mobile home] in southern Indiana, admitted that four other illegal immigrants used his address to file tax returns–even though they don’t even live there.

These four workers claimed that not only they, but a total of 20 children between them–about 30 people–lived in the residence.

As a result, the IRS sent the illegal immigrants tax refunds totaling $29,608.

Upon Segall questioning the man regarding that incredible residency claim, he replied … “They don’t live here … the other kids are in their country of origin, which is Mexico,” later saying that none of the 20 children have ever visited the United States–let alone lived here.

Segall then asked why ‘undocumented workers’ should receive tax credits for children living in a foreign country, which is a violation of IRS tax rules?

“If the opportunity is there and they can give it to me, why not take advantage of it?”

Segall then met with Russell George, the U.S. Treasury Department’s Inspector General for Tax Administration, who stated … “The magnitude of the problem has grown exponentially,” but that the IRS has known about the problem for years.

Mr. George said his department has repeatedly warned the IRS that additional child tax credits are being abused by undocumented workers–in 2009 alone, their annual audit report showed that ITIN tax filers received about $1 billion in additional child tax credits.

The same audit report from 2010 showed it cost the American tax payers more than $4.2 billion.

“Keep in mind, we’re talking $4 billion per year.” George continued by saying “It’s very troubling” that the IRS has not taken any action on the matter–despite these multiple warnings from their own inspector general.

“Millions of people are seeking this tax credit who, we believe, are not entitled to it,” said the inspector general. “We have made recommendations to [IRS] as to how they could address this, and they have [still] not taken sufficient action in our view to solve the problem.”

Segall’s investigation revealed that claims for additional child tax credits by ITIN filers have skyrocketed during the past decade–from $161 million in 2001 to $4.2 billion in tax year 2010.

He also found that illegal immigrants filed 3.02 million tax returns in 2010, with 72% of those returns (2.18 million) claiming the additional child tax credit.

Segall’s attempts to speak with any of the 100,000 employees of the IRS were rebuffed; instead they emailed this statement…

“The law has been clear for over a decade that eligibility for these credits does not depend on work authorization status or the type of taxpayer identification number used. Any suggestion that the IRS shouldn’t be paying out these credits under current law to ITIN holders is simply incorrect. The IRS administers the law impartially and applies it as it is written,” the statement said.

George disagrees with that position and believes the IRS should be doing more to prevent undocumented workers from getting billions in US tax dollars.

“The IRS is not doing something as simple as requesting sufficient documentation from people seeking this credit,” he said. “Once the money goes out the door, it’s nearly impossible for the IRS to get it back.”

Segall says that the IRS says it can’t change the system unless it gets permission from Congress; and closing this loophole requires lawmakers to pass a new law specifically excluding illegal immigrants from claiming additional child tax credits.

However, the IRS “Ten Facts About Child Tax Credit,” does not concur, as illegal immigrants, by definition, fail the citizenship qualification test.

Let’s remember, this is an election year, Barack Obama is CEO, Harry Reid can block any legislation in the Senate, and Treasury Secretary Tim Geithner, who is George Russell’s boss, is still claiming that Obamacare will reduce healthcare costs.

Tomorrow in my follow on article, learn how Congressmen are reacting to this incredible tax fraud–and what they intend to do about it.