IRS Draft Form 1040 Adds Citizenship Question; Treasury Moves to Limit Refundable Credits

The Internal Revenue Service has posted a draft 2026 Form 1040 that, for the first time on the main individual return, asks filers whether they are legally authorized to work in the United States. The question appears in the “Other Information” section and is not yet final. It would apply to returns for tax year 2026, filed in 2027, if the draft survives review and Office of Management and Budget approval. The form is marked “DRAFT, NOT FOR FILING.”

The wording is a yes-or-no check: “At the time you file your return, are you, and your spouse if filing jointly, a U.S. citizen, U.S. national, or an alien lawfully authorized to work in the U.S.?” A Treasury representative said the question would give the IRS “important and necessary information” to ensure tax benefits go to people eligible under the law. The administration has described the change as part of an effort to keep federal tax benefits from people who lack legal status. The 1040 question does not ask whether a filer is a “qualified alien,” the narrower category used in 1996 welfare law. A companion draft, Schedule 3-A titled “Federal Public Benefit,” does ask that question.

On Aug. 19, Treasury and the IRS proposed regulations treating the refunded portions of four credits as federal public benefits under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. PRWORA generally bars aliens who are not “qualified aliens” from those benefits. The credits are the child tax credit, the earned income tax credit, the American opportunity tax credit, and the adoption tax credit. Only the amount that exceeds income-tax liability and is paid out as a refund would be restricted. A filer who is not a qualified alien could still use the credit to reduce tax owed. For a joint return, only one spouse must be a citizen, national, or qualified alien on the date the return first claiming the credit is filed. The taxpayer would have to declare eligibility under penalty of perjury.

Treasury Secretary Scott Bessent said, “Under President Trump, the days of illegal aliens collecting taxpayer-funded benefits are over. The federal law is clear, and Treasury is enforcing it.” He said American taxpayers should not foot the bill for benefits barred by law. Qualified aliens under PRWORA include lawful permanent residents, asylees, refugees, and certain other groups named in the statute. The definition does not include DACA recipients, many holders of work or student visas, or some people on temporary protected status, even if they have work authorization and a Social Security number. Green-card holders generally qualify. Current tax law already limits the EITC, child tax credit, and American opportunity credit to people with work-authorized Social Security numbers. The adoption credit has been available to a broader group; the proposal would apply the qualified-alien test to its refunded portion.

Treasury and the IRS estimated that about 24 million taxpayers will receive the refundable portion of at least one of the four credits for tax year 2026. They estimated 200,000 to 700,000 of those filers — 0.8 percent to 2.8 percent — would be ineligible under the proposed rule, with $700 million to $2.6 billion in refunds disallowed if the regulations are finalized. IRS CEO and Social Security Commissioner Frank Bisignano told Newsmax earlier this month that the credit rule is about ensuring benefits go only to those legally entitled to them. “Only those afforded benefits should be those who actually earned or deserve the benefits,” he said.

People without Social Security numbers may still file using an Individual Taxpayer Identification Number. An ITIN does not authorize work or confer immigration status. Federal law still requires filing when income thresholds are met. Courts have blocked bulk IRS sharing of taxpayer data with ICE; the agency previously provided addresses for about 47,000 people. Critics, including former IRS official Nina Olson of the Center for Taxpayer Rights, said the 1040 question is not needed to administer the tax code and would deter filing. Tax Policy Center researcher Margot Crandall-Hollick said the qualified-alien rule reaches people who are authorized to live and work in the country. The draft form and the proposed regulations remain separate tracks. Neither is in force until the 1040 is approved and the credit rules are finalized.