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Illegal Immigration and Tax Issues Recent Changes Affect Available Deductions and Credits for Dependents

Source: cpajournal.com - Jun 18, 2018

Taxpayers may be surprised to know that, prior to the enactment of the Tax Cut and Jobs Act of 2017 (TCJA), under certain conditions illegal aliens or undocumented immigrants could be claimed as a dependent on individual tax returns, which also allowed the taxpayers to claim various tax credits. Section 10 of the TCJA has repealed the old law, making it now impossible to claim this dependency deduction. The law does still allow individuals to claim qualifying aliens for certain tax credits. There are tax preparer due diligence requirements for some of these tax credits, and a new provision in the TCJA extends due diligence to apply to individuals filing as heads of households [Internal Revenue Code (IRC) section 6695(g)].

This article discusses specific considerations when claiming dependency and tax credits for individuals without legal immigration status. The authors review the law prior to the TCJA as important foundational information for claiming tax credits under the new law, as well as for filing amended returns. It will also serve as future reference material when and if the newly enacted laws sunset on December 31, 2025.

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Category: General Business