7 Million ‘Dependents’ Have Vanished After Rule Revised

It seemed like a relatively innocuous new rule, but what it produced was the Great Disappearing Act of 1987.

The 1986 tax reform law required taxpayers to include on their returns the Social Security numbers of all claimed dependents over age 2. Lo and behold, 7 million dependents disappeared from the tax roles.

To put that in perspective, that’s enough people to populate 42 cities the size of Glendale.

Where did all the dependents go?

More than 7% were actually being supported by government programs, such as welfare, according to an Internal Revenue Service study.

Another 2% were claimed twice. In other words, both divorced parents maintained that they were the primary source of support for the kids.

But most amazing were those who just evaporated. Some 11,627 families seem to have misplaced seven or more dependents between 1986 and 1987, the IRS said. Another 66,612 families lost between four and six dependents in that one year, according to the IRS survey.

Sure, some of those children might have grown up and left the nest. But seven in one year? The IRS thinks not.

About 4% of the cases that the IRS studied have been referred to criminal investigation. Some 750 other returns were adjusted, with the taxpayer liable for an average of $2,200 more per return.

The end result: The Treasury earned $2.8 billion more in tax revenues than it expected in 1987 alone.