Treasury Moves to Stop Billions in Tax Benefits From Reaching Illegal Aliens

What Happened

The Treasury Department has announced a regulatory push to prevent illegal immigrants from receiving certain federal benefits distributed through the tax system. Treasury Secretary Scott Bessent said the department is moving to classify several refundable tax credits as federal public benefits.

This change would bar illegals from receiving them. The credits involved include the Earned Income Tax Credit, the Additional Child Tax Credit, the American Opportunity Tax Credit, and the new Saver’s Match Credit. The Saver’s Match Credit is scheduled to begin next year.

According to Treasury officials, past payment audits show that a share of refundable credit dollars has gone to people who are not legally eligible. The department maintains that inconsistent eligibility checks and mismatched Social Security number requirements have allowed some payments to slip through. The new rule is meant to close those gaps. It does this by aligning the credits with long-standing benefit restrictions already in federal law.

The announcement reflects the administration’s position that taxpayers should not be funding refundable credits for individuals who do not meet legal residency requirements. Bessent stated that these benefits belong to Americans. He said the new rules are designed to give agencies clearer authority to deny payments when applicants do not qualify under immigration law.

Why It Matters

Refundable tax credits represent a major stream of federal spending. The Earned Income Tax Credit alone accounts for tens of billions of dollars each year. It is one of the most common credits claimed by low and middle income households. Because these credits are refundable, the government pays out money even when claimants owe no income tax. That structure makes them valuable and vulnerable to improper payments.

Federal watchdogs have flagged high improper payment rates in programs like the EITC and the Additional Child Tax Credit. The Treasury Department says part of that problem comes from cases where applicants lack a valid Social Security number or provide documentation that cannot be verified.

Under current rules, some families with mixed immigration status can legally receive certain credits. Others cannot. Eligibility depends on which household members meet identification requirements. The department has argued that this patchwork system has created opportunities for payments to be made in ways Congress never intended.

Treasury officials say the updated rules will give the IRS greater authority to deny refunds when an applicant does not meet immigration related eligibility requirements. They expect that change to reduce improper payments and tighten compliance across the board. In the process, they believe it will correct a long-standing oversight problem.

How It Affects Readers

Refundable credits like the Earned Income Tax Credit and the Additional Child Tax Credit account for tens of billions of dollars in federal spending each year. IRS audits estimate improper payment rates for the EITC at roughly 22% to 26%. Even a small reduction in those errors would save taxpayers billions. Treasury says tighter eligibility and identification checks are aimed at reducing those losses. They also hope to bring more consistency to how the IRS processes these refunds.

For eligible people, the underlying requirements do not change. U.S. citizens and lawful residents can still claim them as before. Treasury says the changes moving forward will be on verification. The department will focus on ensuring claimants have valid Social Security numbers and meet the legal standards for each credit. As the IRS updates its systems to enforce those checks more consistently, some returns may take longer to process.

This announcement has extended the immigration debate into federal benefit administration. Instead of focusing on border enforcement, the government is tightening controls within programs that pay out large sums each year. By linking these financial safeguards to legal status, the Treasury is sending a message that immigration compliance will be enforced at entry points and across the federal system.