Personal Finance

Fixing Social Security requires addressing immigration ‘fraud’

Published

6 months ago

October 1, 2024

Republican vice presidential nominee, U.S. Sen. JD Vance speaks at a campaign rally at Radford University on July 22, 2024 in Radford, Virginia.

Alex Wong | Getty Images News | Getty Images

Many voters ages 50 and up say two issues — Social Security and Medicare — could decide how they cast their ballots this November.

The presidential candidate who wins on Nov. 5 — either former President Donald Trump or Vice President Kamala Harris — may be tasked with restoring solvency to those programs as they face looming trust fund depletion dates.

Republican vice presidential candidate JD Vance, in a Sept. 12 interview on CNBC’s “Squawk Box,” said that first addressing another issue, immigration, could help the programs’ funding woes.

Vance said Social Security and Medicare are facing a “massive fraud problem” because of undocumented immigrants who are collecting benefits, citing what he said were incidents of fraud related to him by some of his constituents and friends.

“Before we start talking about doing anything to the benefits for Americans who have earned them, let’s deal with the illegal alien fraud in our Social Security and Medicare system,” Vance said. “I think that costs us a lot of money.”

JD Vance blames 'illegal aliens' for fraud problems in Social Security and Medicare

It’s not the first time the Trump-Vance campaign has suggested immigration is hurting the programs that millions of retirees rely on for monthly benefit checks and health-care coverage.

Trump in March said on social media platform Truth Social that Democrats are “killing Social Security and Medicare by allowing the invasion of the migrants.”

Meanwhile, Harris has talked about creating an “earned pathway to citizenship,” which may encourage immigrants to work and contribute to the programs. The Harris campaign did not provide CNBC more details on those plans.

Who is eligible to benefit from Social Security?

The Social Security Administration assigns a unique Social Security number to each individual who is either a U.S. citizen; is lawfully admitted to the country as a permanent resident; is lawfully admitted on a temporary basis with Department of Homeland Security authorization to work; or has a valid non-work reason for needing a Social Security number, according to the agency.

A Social Security number is required for most jobs in the U.S., and employers are typically required to deduct payroll taxes from each employee to fund programs including Social Security and Medicare.

Over many years of work, the employee usually contributes a sufficient amount to be eligible to claim monthly Social Security checks and Medicare benefits when they retire or become disabled.

Documented immigrants — such as those with permanent status and dual intent temporary visas — pay the payroll taxes that contribute to Social Security and Medicare, according to Tara Watson, a senior fellow at The Brookings Institution and author of the book “The Border Within: The Economics of Immigration in an Age of Fear.”

Generally, undocumented immigrants are not eligible for Social Security or Medicare benefits, Watson said, but they may pay in to the programs anyway.

Some undocumented immigrants may use false Social Security numbers to work in jobs that require payroll tax contributions to Social Security and Medicare, and therefore they unofficially contribute to those programs, she said. Others, such as seasonal workers, may not pay payroll taxes.

Many long-term immigrants do receive benefits after contributing to the programs and earning eligibility, Watson said. Immigrants may eventually qualify for Social Security benefits if they are present in the U.S. lawfully and earn the required credits by working and contributing to the program, according to the American Academy of Actuaries.

Undocumented immigrants contributed $33.9 billion in federal social insurance taxes in 2022 toward Social Security, Medicare and unemployment insurance, according to the Institute on Taxation and Economic Policy.

Yet because of their immigration status, those workers are barred from accessing those benefits.

How widespread is Social Security fraud?

There are two common types of Social Security fraud involving immigration: When people who aren’t eligible for a Social Security number either steal one or create a false one so they can try to get a job in the U.S., and when people who aren’t eligible for Social Security or Medicare benefits use a fraudulent name or Social Security number to claim benefit payments.

Committing these kinds of fraud isn’t easy.

But it is possible for some people, including some undocumented immigrants, to carry it out.

Stealing benefits can be difficult, since it requires tapping into someone’s Social Security account and changing their bank account information to access the money, according to Andrew Biggs, a senior fellow at the American Enterprise Institute and former principal deputy commissioner at the Social Security Administration.

After the Social Security Administration started allowing individuals to change their bank deposit information through their online accounts, the agency and the Office of Inspector General began receiving complaints of unauthorized changes, Jeffrey Brown, deputy assistant inspector general at the Social Security Administration Office of the Inspector General, told the House Ways and Means Committee in 2023.

Audits found $33.5 million in benefits for 20,878 beneficiaries was redirected through unauthorized direct deposit changes between January 2013 and May 2018, according to Brown. However, another $23.9 million for 19,662 beneficiaries was prevented from misdirection by the agency before payments were made.

The investigation, from a 2019 report, did not implicate undocumented immigrants in that activity.

“Our audits found fraudsters may steal identities to work or to claim earnings-related benefits,” Brown said in his written testimony, which did not give demographic information on those committing the fraud.

There have been cases of undocumented immigrants found to be misusing Social Security numbers to fraudulently access benefits.

“There are certainly some immigrants who are getting benefits when they shouldn’t be, but I think it’s a relatively small group of them,” Watson said.

“This is not a problem that I’ve heard specifically that, as [Vance] says, is widespread,” Biggs said, referring to Vance’s comments about social services fraud by undocumented immigrants.

What happens to unclaimed earnings?

The type of fraud in which Social Security numbers can be misused for work purposes may be more common, experts say.

When someone is working using a Social Security number that isn’t theirs, their earnings may be credited to the person whose name matches that number in the agency’s records.

Alternatively, they may be credited to the Social Security Administration’s earnings suspense file.
The earnings suspense file is an electronic holding file for wage items where names and Social Security numbers on Form W-2s do not match the Social Security Administration’s records, an agency spokesperson said via email.

The wage records stay in that file until they can be verified and matched to a worker’s record. Despite the wage records’ unidentified status, the program’s trust funds have received revenues for the wage items placed in the suspense file, the spokesperson said.

A 2023 report from the Social Security Administration Office of the Inspector General showed the earnings suspense file had accumulated $2.15 trillion in wages for tax years 1937 through 2022.

The earnings suspense file includes undocumented immigrants, among other people, Watson said.
She said the existence of the earnings suspense file “gives you an indication that people are putting into the system and not claiming from the system.”

Immigrants in the labor market ‘very much a positive’

Immigration overall is a net positive to Social Security and Medicare, experts say.

Both programs rely on funding from payroll taxes. The experts say that more immigrants means more workers who contribute to both Social Security and Medicare through their paychecks.

“Immigration, in general, has a very positive role,” said Sam Gutterman, chairperson of the American Academy of Actuaries’ Social Security committee.

Neither the Social Security Administration nor the Department of Health and Human Services, which oversees Medicare, provided recent data on the effect of undocumented immigrants on their programs.

When asked about Vance’s statement that undocumented workers are draining Medicare and Social Security, HHS spokesperson Renata Miller said: “These claims are false and they serve as a distraction from the health care concerns that everyday Americans care about. HHS will continue working to lower health care costs so that patients can fill a prescription without rationing pills or going into medical debt.”

The Social Security Administration in an email explained that there are strict rules about who can legally receive benefits and Social Security numbers.

“The Social Security Act does not permit payment of benefits to noncitizens residing in the U.S. if they’re not lawfully present here,” a Social Security spokesperson said. “In order to get a Social Security number for work, by law you need to be a U.S. citizen or have [Department of Homeland Security] authorization. SSA has stringent evidentiary requirements to confirm the authenticity of documents and prevent issuance of numbers to ineligible individuals.”

In a 2013 report, the Social Security Administration said it is difficult to precisely identify the total amount of taxes paid and benefits that may have been received by unauthorized workers.

In that report, the office of the program’s chief actuary said undocumented immigrants paid as much as $13 billion in payroll taxes to the program’s trust funds in 2010, while about $1 billion in benefit payments were attributed to unauthorized work. That resulted in a contribution of roughly $12 billion to the program’s cash flow that year, according to the agency.

“We estimate that earnings by unauthorized immigrants result in a net positive effect on Social Security financial status generally,” the office of SSA’s chief actuary said.

“We estimate that future years will experience a continuation of this positive impact on the trust funds,” it wrote.

More recently, the Social Security Administration has said immigration tends to be beneficial for the program because those new entrants to the country tend to be working age.

“When they come to the country, they tend to come here for economic opportunity and enter the labor force, and that’s very much a positive,” Stephen Goss, chief actuary of the Social Security Administration, said in testimony before the House Budget Committee in June.

“That actually helps us with having more revenue coming in,” Goss said.

Those workers may eventually work the length of time necessary to qualify for benefits, Goss said.

However, some immigrants pay into the program and never collect benefits, he explained.

And if they have children, that helps to make up for the country’s low birth rate, which also benefits the program, Goss added.

Looming depletion dates are the more pressing issue

In a new report, the American Academy of Actuaries found immigration may “significantly enhance the future financial condition of Social Security, especially in the long term.” The report says immigration may help improve the worker-to-beneficiary ratio and slightly delay the depletion of the program’s trust funds.

However, immigration is “not a silver bullet to ‘solve’ 100% of Social Security’s financial problems,” according to the research, which analyzed the Social Security Administration’s latest annual trustees report.

Both Social Security and Medicare face pressures as the large baby boomer generation retires and taps the programs for benefits.

Absent action from Congress, the trust fund Social Security relies on to pay for retirement benefits is due to run out in 2033, when 79% of benefits will be payable, according to projections from the program’s trustees.

Medicare’s hospital insurance trust fund, also known as Part A, is projected to last until 2036, when 89% of benefits will be payable.

Biggs said the presidential campaigns should focus on policies to address those looming depletion dates that will prompt across-the-board benefit cuts, rather than fraud by undocumented immigrants, which is a much smaller issue for the programs.

Focusing on the undocumented immigrant angle first is a “total sideshow” when it comes to the larger Social Security and Medicare funding issues, Biggs said.

“I think he [Vance] is using it as a deflection because they don’t want to talk about fixing Social Security,” Biggs said.

Personal Finance

Disability advocates sue Social Security and DOGE to stop service cuts

Published

16 hours ago

April 3, 2025

Business Finance News

A Social Security Administration (SSA) office in Washington, DC, March 26, 2025.

Saul Loeb | Afp | Getty Images

A group of disability advocates filed a federal lawsuit against the Social Security Administration and the so-called Department of Government Efficiency on Wednesday aimed at stopping cuts to the agency’s services.

Recent changes at the Social Security Administration under DOGE — including staff reductions, the elimination of certain offices and new requirements to seek in-person services — have made it more difficult for individuals with disabilities and older adults to access benefits, the lawsuit argues.

The complaint was filed in the U.S. District Court for the District of Columbia.

The plaintiffs include the National Federation of the Blind, the American Association of People with Disabilities, Deaf Equality, the National Committee to Preserve Social Security and Medicare, the Massachusetts Senior Action Council and individual beneficiaries.

“The defendants’ actions are an unprecedented and unconstitutional assault on Social Security benefits, concealed beneath the hollow pretense of bureaucratic ‘reform,'” the complaint states.

In nine weeks, the new administration has “upended” the agency with “sweeping and destabilizing policy changes,” the plaintiffs claim, that have shifted agency functions to local offices while slashing telephone services.

“The result is a systematic dismantling of SSA’s core functions, leaving millions of beneficiaries without the essential benefits they are legally entitled to,” the lawsuit complaint states.

The “mass restructuring” of the agency is unlawful and violates the Rehabilitation Act and the Administrative Procedure Act, the lawsuit argues. The changes also violate multiple constitutional provisions, including the First Amendment right to petition the government for redress of grievances, according to the plaintiffs.

With 1.1 million disability claims pending, the recent actions could also be life threatening to individuals who are dying or going bankrupt while waiting for decisions, they allege.

The Social Security Administration did not respond to CNBC’s request for comment.

“President Trump has made it clear he is committed to making the federal government more efficient,” White House spokesperson Liz Huston said in an email statement. “He has the authority to manage agency restructuring and workforce reductions, and the administration’s actions are fully compliant with the law.”

Lawsuit alleges reform is ‘administrative vandalism’

People hold signs during a protest against cuts made by U.S. President Donald Trump’s administration to the Social Security Administration, in White Plains, New York, U.S., March 22, 2025.

Nathan Layne | Reuters

The Social Security Administration sends monthly checks to around 73 million Social Security and Supplemental Security Income beneficiaries.

DOGE, which is not an official government entity, has been tasked with cutting “waste, fraud and abuse” within the federal government. President Donald Trump issued an executive order creating DOGE on Jan. 20, the same day he was inaugurated.

Since then, the Social Security Administration has cut 7,000 employee positions and closed the Office of Civil Rights and Equal Opportunity and the Office of Transformation. The Office of Civil Rights and Equal Opportunity handled the agency’s equal employment opportunity and civil rights programs. The Office of Transformation was responsible for coordinating customer service-related initiatives like adding the ability to use digital signatures and electronic documents.

The Social Security Administration has also changed its identity proofing policies for claiming benefits and changing direct deposit information that is expected to require more individuals to visit the agency’s offices in person.

The agency has updated its policy, allowing individuals applying for Social Security Disability Insurance, Medicare, or Supplemental Security Income who cannot use a personal my Social Security account to complete their claim entirely over the telephone, starting April 14.

The reforms amount to the dismantling of “core functions of SSA, abandoning millions of Americans to poverty and indignity,” according to the plaintiffs’ complaint.

“What the defendants frame as ‘reform’ is, in truth, administrative vandalism,” the lawsuit states.

Beneficiaries face long waits, overpayment issues

The plaintiffs include seven individuals whose experiences, including long customer service waits and, in some cases, demands to repay large sums to the Social Security Administration, are detailed in the complaint.

One plaintiff, Treva Olivero, who has been legally blind since birth, was informed in March 2024 that she had been overpaid Social Security disability insurance benefits for five or six years, prompting the agency to demand she repay more than $100,000, according to the complaint.

Olivero’s Medicaid coverage was also terminated soon after, which left her without income and health coverage. She has since been in an “ongoing struggle” to have her disability benefits reinstated, while also facing almost $80,000 in medical debt, according to the complaint.

Fiserv CEO on the nomination to Social Security Commisioner role

Another plaintiff, Merry Schoch, who received Social Security disability insurance for many years, returned to work to help pay for large medical bills after she was hit by a waste management truck in 2022. She reported her income to the Social Security Administration, and the agency made no changes to her benefit payments, according to the complaint.

Two years later, Schoch stopped working and reported her unemployment to the Social Security Administration. In August 2024, the agency then terminated her benefits and informed Schoch that she owed $30,000 for the disability benefit payments she received while working full time, according to the complaint.

Last September, Schoch was informed she could reapply for benefits. However, she has since struggled to get in touch with the agency over the phone, online and in person.

Both Olivero and Schoch are members of the National Federation of the Blind, which is also a plaintiff.

The plaintiffs want the court to reverse the Social Security Administration’s recent reforms, including staff reductions, closures of certain offices and policies requiring in-person appointments.

Personal Finance

Amid trade turmoil, ‘you do not want to time the market’

Published

20 hours ago

April 3, 2025

Business Finance News

Pres. Trump unveils sweeping tariffs: Here's what to know

As President Donald Trump rolls out sweeping new tariffs on goods imported into the United States, Americans are growing increasingly pessimistic about their financial fate.

Consumers worry that the duties will cause inflation to flare up again, while investors fear that higher prices will mean lower profits and more pain for the battered stock market.

As of Thursday morning, futures tied to the Dow Jones Industrial Average were down 1,200 points, or 2.8%. S&P 500 futures sank 3.4%, and Nasdaq-100 futures lost 4%.

But sharp drops — or sudden spikes — in the market are to be expected, according to Jean Chatzky, CEO of HerMoney.com and host of the podcast HerMoney with Jean Chatzky.

“With these volatile markets, you do not want to time the market,” she said of the old adage. “Timing the market doesn’t work — it’s time in the market.”

Trade tensions, inflation and concerns about a possible recession have undermined consumer confidence across the board, several studies show.

Still, it’s normal for most Americans to feel unnerved during heightened volatility, Chatzky said.

“There’s very little doubt that consumers are feeling nervous, maybe more nervous than we’ve felt in quite some time,” she said.

Committing to setting money aside in a high-yield savings account, whether by scaling back on dining out or rideshare expenses, will help regain some financial control, Chatzky said.

Top-yielding online savings accounts currently pay 4.4%, on average, well beyond the savings account rates at some of the largest retail banks, which average just 0.41%.

“Taking action is the best way to feel more resilient,” she said.

It’s understandable why some may be hesitant to continue investing, however, when you are investing for the long term, a down market is an opportunity for dollar-cost averaging, which helps smooth out price fluctuations in the market, Chatzky said.

This is also a good time to check your investments to make sure you are still allocated properly and rebalance as needed, so you are not taking on more risk that you are comfortable with, she added.

Timing the market is a losing bet

Talk yourself down from making any sudden financial moves, Chatzky advised.

Trying to time the market is almost always a bad idea, other financial experts also say. That’s because it’s impossible to know when good and bad days will happen.

For example, the 10 best trading days by percentage gain for the S&P 500 over the past three decades all occurred during recessions, often in close proximity to the worst days, according to a Wells Fargo analysis published last year.

And, although stocks go up and down, the S&P 500 index has an average annualized return of around 10% over the past few decades.

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Personal Finance

How to file for a free tax extension if you can’t make April 15 deadline

Published

21 hours ago

April 3, 2025

Business Finance News

Galina Zhigalova | Moment | Getty Images

If you can’t file your taxes by the April 15 deadline, there’s a free, easy way to submit a federal tax extension online, experts say.

Nearly 1 in 3 American admit that they procrastinate when it comes filing their taxes, according to a January survey of more than 1,000 U.S. filers from IPX1031, an investment property exchange service. In addition, about 25% do not feel prepared to file their taxes, the survey found.

As of March 21, the IRS received roughly 80 million individual returns of the 140 million expected this filing season, the agency’s latest reporting shows.

Many natural disaster victims have an automatic tax extension, which varies by jurisdiction. Military members serving in a combat zone also have more time to file.

However, the federal tax deadline for the majority of taxpayers is April 15. It’s possible to push that due date to Oct. 15 by filing for an extension.

But “it’s an extension to file, not an extension to pay,” said Jo Anna Fellon, managing director at financial services firm CBIZ.

“It’s an extension to file, not an extension to pay.”

After the tax deadline, you will start incurring the failure-to-pay penalty of 0.5% of your unpaid taxes for each month or partial month that your taxes remain unpaid. The failure-to-pay penalty has a maximum charge of 25% of your unpaid taxes.

That’s cheaper than the failure-to-file penalty, which applies when you don’t submit your return by the deadline. The failure-to-file penalty is 5% of unpaid taxes monthly, also limited to 25%.

But you’ll also owe interest on your unpaid balance, which is currently 7% and accrues daily after April 15.

You can estimate your taxes owed by creating a “pro forma return” — or mock version of your filing — using as many tax forms as possible, Fellon said.

The ‘easiest way’ to file an extension

There are a few free options to file a tax extension.

For federal taxes, you can complete Form 4868 and mail it to the IRS. But it’s better to file digitally to avoid processing delays amid the agency’s shrinking workforce, experts say. Paper filing can also increase fraud risk, they say.

The “easiest way” is by choosing “extension” when making a payment for 2024, which automatically submits Form 4868, according to Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

“It takes all of five minutes,” and you can double-check the transaction via your IRS online account, he said.

IRS Direct Pay

Internal Revenue Service

Alternatively, you can file your extension for free online via IRS Free File, a public-private partnership between the IRS and several tax software companies.

For the 2025 season, you can use IRS Free File for returns if your adjusted gross income, or AGI, was $84,000 or less in 2024. But there’s no income limit to file an extension, Lucas said.