For many years, the U.S. government has struggled to create a tool for undocumented immigrants to pay their taxes. That could be coming to an end. On Friday, numerous reports suggested an alliance between the IRS and ICE, where information directly from tax returns would be provided to help locate those with deportation orders.
This would erode the trust that the undocumented community has placed in the U.S. tax system, and it is likely that many will choose to return to the shadows, creating chaos both for the IRS and for businesses that rely on the services of undocumented workers.
Under a draft agreement between the IRS and Immigration and Customs Enforcement (ICE), the tax agency would verify whether immigration officials have the correct home address for individuals who have been ordered to leave the United States.
Many undocumented immigrants file tax returns with the IRS, providing the agency with information about where they live, their families, their employers, and their earnings. The IRS has long encouraged undocumented immigrants to pay their taxes, offering individuals without Social Security numbers a separate nine-digit code called an Individual Taxpayer Identification Number (ITIN) to file their returns.
The ITIN was created for tax purposes. It was introduced by the IRS in July 1996 to allow foreign nationals and others who are not eligible for a Social Security Number (SSN) to comply with U.S. tax laws.
Many immigrants have ITINs. People who do not have lawful status in the U.S. may obtain an ITIN. However, other people who are lawfully present in the country and must pay taxes, but who may not be eligible for a SSN, may also obtain an ITIN.
Of the approximately $100 billion in taxes paid by undocumented immigrants in 2022, about $59.4 billion was in federal taxes, and $37.3 billion was in state and local taxes, according to a 2024 study by the Institute on Taxation and Economic Policy. More than a third of those taxes went to Medicaid, Social Security, and unemployment insurance.
The Department of Homeland Security has pressured the IRS to turn over the addresses of roughly 700,000 undocumented immigrants it is seeking to deport, according to three people familiar with the matter, in a request that could violate taxpayer privacy laws.
