Are you sure the "/etc/mail/aliases" file is the correct one? You need to fill this file by yourself to add aliases for local user. If you don't do so, it will stay empty.
a local user of did you add it as an email user?
I have noticed that where it is a local user, you don't need to add the domain name to login in by Squirrelmail.
Did you also create any Maildir for the local user?
Please correct me if I am wrong.