Tax officials in the two states insist that taxpayers provide accurate information on their returns in order to get a refund, if one is due. But often, workers who are in the country illegally use a false Social Security number, then provide additional tax information when filing a return, reports The Kansas City (Mo.) Star.
For the feds, having an Individual Taxpayer Identification Number — created in 1996 for those without Social Security numbers to ensure every worker pays income taxes — attached to a return is enough even if there's a false Social Security number listed on the W-2 form.
From 1996 to 2003, people who filed returns using an ITIN contributed $48 billion to the U.S. Treasury and received $23 billion in refunds. In 2005, the IRS received 1.6 million ITIN applications, the most since 1996.
But in Kansas and Missouri, while the states are happy to receive the income taxes, they won't provide a refund because they say they can't be sure from whom the money was withheld unless there's a Social Security number.
Critics say it's a double standard for states to accept income tax payments from illegal immigrants, but not provide refunds when there has been an overpayment.
"Either you accept all of the payments and (give the) refund, or you return everything," said Maria Aranda, who helps immigrants file taxes at the social service agency El Centro Inc. "To me, it's either all or none. You can't have it both ways."
But state tax officials say taxpayers must provide truthful information, and that's not happening when an illegal worker uses a false Social Security number.
With Congress considering immigration reform that could provide a path to citizenship for immigrants who have properly paid their income taxes, more than money is at stake for those workers.
In Missouri, the Department of Revenue won't process a return if the worker uses an ITIN and attaches a W-2, said Jim Brentlinger, the department's tax bureau administrator.
In those cases, the state sends the worker a letter requesting documentation for why the return doesn't have the Social Security number that is on the W-2.
The department doesn't know how much tax money is collected from illegal immigrants or how much refund money isn't being paid out.
"When someone has gained employment with a Social Security number that's not their own, (the department) has no way to verify that that Social Security number belongs to them or that the money withheld by the employer was withheld for this employee," Brentlinger said. "Department of Revenue doesn't have an issue with immigration or employment — just data that has been submitted to us doesn't match."
In the past decade, the Kansas Department of Revenue has received 41,000 returns using ITINs, said Bev Ries, the department's public service administrator.
When the department receives an ITIN return seeking a refund based on income from a W-2, the state sends a letter to the employer requesting documentation that the person who filed the tax return is the same person who earned the wages.
But even if the employer confirms the identity of the person who presented the Social Security number, it still doesn't count as validation because the W-2 has a Social Security number and the return has an ITIN, Ries said.
A spokeswoman with the national Federation of Tax Administrators said the position taken by Missouri and Kansas makes sense.
"What's the state going to do?" said Verenda Smith, government affairs associate with the federation. "States cannot issue refunds for anyone who asks for it. If you did, that would just be opening the doors to the state bank and saying, `Here, guys, come on in."'