The New 2025 OBBBA Rule That Can Instantly Reject Your Tax Return—and Cost You Every Credit

To make sure you get every credit you’re entitled to, I just need to confirm your DHS work authorization is still valid

The new One Big Beautiful Bill Act of 2025 (OBBBA) brings major changes for immigrant taxpayers—and new risks for tax professionals who fail to verify client identity and authorization.

Beginning with 2025 returns, certain clients will have to present both their Social Security number (SSN) and valid DHS work authorization if they want to receive key tax credits. What once passed quietly in prior years will now trigger instant rejections, penalties, or lost refunds.

Which Credits Are Now Affected

Under OBBBA, the IRS will deny or reject credits tied to invalid or expired SSNs. These include:

• Child Tax Credit (CTC)

• Earned Income Credit (EIC)

• American Opportunity Tax Credit (AOTC)

• Premium Tax Credit (PTC)

• No-tax-on-tips and overtime deduction

Each of these now requires a valid-for-work SSN issued by the Social Security Administration before the filing deadlineand—if DHS-restricted—an active Employment Authorization Document (EAD) at the time of filing.

If the work permit expires even one day before the tax return is submitted, those credits are automatically disqualified.

Why This Matters for Tax Professionals

The IRS has rolled out real-time SSN verification through its new Targeted Identification Provision (TIPs). When a preparer transmits an e-file:

• The IRS now cross-checks SSNs with the Social Security Administration (SSA) and Department of Homeland Security (DHS) instantly.

• If the SSN is invalid, restricted, or tied to an expired EAD, the system will reject the return immediately—no waiting, no pending review .

This means a single oversight can cost your client their credits—and cost your firm your reputation.

 Luis Ortega

Example: Luis Ortega

Luis, a warehouse worker with Temporary Protected Status, holds a Social Security card marked “Valid for Work Only with DHS Authorization.”

If his authorization is active on filing day, his SSN passes verification and he can claim the EIC and CTC for his U.S.-born children.

But if it’s expired—even by a few days—his return is blocked at e-file, and both credits are denied .

"The New 2025 OBBBA Rule That Can Instantly Reject Your Tax Return—and Cost You Every Credit"

Emily Vu

Example: Emily Vu

Emily, a California beautician, earned legal wages in 2025. Her EAD expired on March 15, 2026.

If she files her return in February, her SSN is valid and she qualifies for the credits.

If she waits until April, after expiration, she can still file—but she loses every credit tied to “valid-for-work” status .

Professional & Ethical Standards

Under Circular 230 §10.22, tax preparers must exercise due diligence as to accuracy.

Ignoring DHS restrictions or EAD expiration can now trigger:

• §6695(g) penalties of $610 per credit missed,

• §6662 accuracy penalties for negligence, and

• §6694 preparer penalties for understatement (up to 50% of fees or $5,000 for reckless conduct) .

Multiple rejections for the same issue may also flag your practice for IRS Return Preparer Office audits or suspension of e-file privileges.

Visa Status and the Child Tax Credit

OBBBA also tightens the rules for visa holders:

• Pre-2025: Only the child needed a valid SSN.

• Post-2025: Both the child and the taxpayer(s) claiming the credit must have SSNs valid for employment.

• For married filing jointly, at least one spouse must hold a valid SSN .

This affects F, J, M, Q, H, L, and K visa holders as well as DACA recipients and TPS beneficiaries.

Best Practices for Compliance

The New 2025 OBBBA Rule That Can Instantly Reject Your Tax Return—and Cost You Every Credit

1. Always inspect the Social Security card. Look for phrases like “Valid for Work Only with DHS Authorization.”

2. Request supporting documents. Form I-766 or I-765 (EAD card) is your proof.

3. Check expiration dates. The authorization must be valid through the date of filing.

4. Document everything. Keep copies in the client file for §6695(g) protection.

5. Educate your team. Every staff member must know not to assume a W-2 means eligibility.

6. Advise early. Encourage clients to renew their EADs before tax season to prevent rejection .

Why This Feels Different

The OBBBA doesn’t introduce brand-new SSN rules—it enforces them with automation and real-time cross-agency communication.

In short: the IRS, SSA, and DHS now talk to each other instantly.

Errors that used to surface months later are now caught before a return is accepted.

Bottom Line for 2025 and Beyond

These changes place tax professionals in the eye of the hurricane.

You’re not enforcing immigration law—you’re protecting your clients’ credits and your firm’s compliance.

• When in doubt, verify.

• When unsure, document.

• And when you see a card marked “Valid for Work Only with DHS Authorization,” stop and confirm before you file.

Because under OBBBA, one unchecked expiration date can cost a client their refund—and cost you your credibility.