Tax season is difficult for everybody. But this year, undocumented workers who pay their taxes have been dealt a serious blow.
Last week, the Internal Revenue Service (IRS) finalized a deal with the Department of Homeland Security to share taxpayer information that could help identify undocumented immigrants.
According to the IRS’s official memorandum, the agreement was settled on April 7th, granting the IRS authority to cross-reference the identities of suspected undocumented immigrants and individuals under investigation by U.S. Immigration and Customs Enforcement (ICE).
The news has caused upheaval among undocumented taxpayers, who fear it may jeopardize their identities and place them at risk of deportation.
“It raises a lot of concerns within the undocumented community, because the IRS has made a long promise about withholding that information,” said Heydy Vasquez, an undergraduate student government senator at USC and incoming co-executive director for the Undocumented Trojan Success Assembly.
Undocumented individuals living in the United States can, and very often do, pay taxes. This is typically done using an Individual Taxpayer Identification Number, or ITIN.
“Because of the ITIN program, individuals who are undocumented can be able to file taxes… without any fears of that information getting spread anywhere else,” Vasquez said “But now this raises fears within the community about being undocumented and potentially being deported. And it’s like, ‘Should I even file taxes?’”
What is ITIN?
An ITIN can be used by people without a Social Security number to pay taxes or open a bank account, said Adrian Lores de la Peña, a Miami-based tax lawyer. Despite this, having an ITIN does not grant legal status in the United States.
According to the Center for Migration Studies of New York, a nonpartisan educational center and think tank, undocumented immigrants using ITIN numbers paid $59.4 billion in federal and $13.6 billion in state and local taxes in 2022.
In California alone, home to roughly 2 million undocumented immigrants, the California Budget and Policy Center estimated that taxpayers using ITIN paid nearly $8.5 billion in state taxes that year.
Despite their sizable contributions to services like Social Security and Medicare, undocumented immigrants are ineligible to benefit from them, said L.A.-based immigration attorney Alma Rosa Nieto.
“A lot of people, unfortunately, under this administration are blaming undocumented individuals for taking benefits,” Nieto said. “They should add up all of the amount of millions and millions of dollars that they do pay over a long period of time...they’re contributing, they’re helping the economy, they’re consumers.”
A legal challenge
In early March, two Illinois immigrant advocacy groups, Centro de Trabajadores Unidos and Immigrant Solidarity DuPage, filed a lawsuit against the IRS. Also named were Scott Bessent, secretary of the Treasury, and Melanie Krause, acting commissioner of the IRS, who plans on to resign “amid internal chaos,” according to a CNN report.
The complaint alleges that an agreement to share taxpayer information with Homeland Security violates federal law and the government’s role in protecting this information.
The plaintiffs argue that the IRS is forbidden by law from disclosing the names and addresses of taxpayers who have ITIN numbers with immigration officials, especially for the purpose of enforcing immigration laws.
Attorney de la Peña outlines that taxpayers, regardless of their immigration status, have safeguards.
“There are legal protections under current law for taxpayers, be it someone that has a Social Security or
someone that has an ITIN, in the event that the information is used without their consent,” de la Peña said. “Specifically, Internal Revenue Code section 6103 strictly protects taxpayers’ information. [The] IRS cannot share data with immigration authorities without legal authorization… this protection encourages voluntary compliance and builds trust.”
A chilling effect
Workers who are not legal residents or citizens of the U.S. still have an incentive to pay taxes here, de la Peña said.
“There is a consensus that those who actually want to be right with immigration…must have some sort of tax compliance record, as it shows good character at the time of the application for their specific immigration process” he said. “It basically shows good character and morals.”
Nieto said she believes it’s this that leads many undocumented immigrants to file and pay taxes, with hopes of one day gaining legal status in the United States. Nieto said this new agreement may discourage undocumented taxpayers from filing, even those that have done so for decades.
“People are saying, ‘Then why pay taxes? There’s no possibility of an amnesty under this administration, and they’re going to find me. So why comply?’” she said.
Both Nieto and de la Peña said that a drop in undocumented taxpayers could lead to a decrease in overall tax revenue, and significantly impact the U.S. economy.
It remains unclear how the agreement between the IRS and the Department of Homeland Security will function, who will be targeted, and how. More legal action is anticipated.