Immigration is a hotly debated topic in the United States that’s prompted many questions from VERIFY readers.
Over the past month, people online have been asking whether undocumented workers pay taxes, Google search data show.
Do undocumented workers pay taxes?
Yes, some undocumented workers pay taxes. These include federal and state income taxes, payroll tax deductions, and sales and property taxes.
WHAT WE FOUND
Undocumented workers pay federal and state income taxes, even though they do not have Social Security numbers, experts say.
Those who do not file income tax returns may still have taxes deducted from their paychecks, the nonprofit Institute on Taxation and Economic Policy (ITEP) explains. Officials have estimated that undocumented workers contribute billions of dollars to Social Security annually through payroll tax deductions.
In other cases, undocumented workers may be paid “under the table” in cash for their work and do not pay taxes on their income, experts say.
The Congressional Budget Office (CBO) said in a 2007 report that there are “no reliable data on unauthorized immigrants’ rate of compliance with tax laws.” But some researchers estimate that between 50 to 75% of undocumented workers pay federal, state and local taxes, according to the CBO report.
A spokesperson for the IRS told VERIFY that both U.S. citizens and what the agency calls resident aliens pay income taxes. Resident aliens, which can include undocumented workers and visa holders, have to meet either a green card test or a substantial presence test from the IRS.
The IRS does not have an estimate for how many undocumented workers pay federal income taxes because a person’s immigration status is not disclosed on their tax return, the spokesperson said.
Undocumented immigrants are not usually eligible for Social Security numbers (SSNs), which Americans typically need to file a federal income tax return. But federal law requires all wage earners, regardless of their immigration status, to pay taxes, the Bipartisan Policy Center and National Immigration Law Center (NILC) explain.
Instead of using a Social Security number, undocumented immigrants can file their taxes with what’s known as an Individual Taxpayer Identification Number (ITIN). The Internal Revenue Service (IRS) created the ITIN in 1996 to allow people who are not eligible for Social Security numbers to pay their taxes.
According to a blog post from the National Taxpayer Advocate, more than 2 million tax returns were filed using ITINs in tax year 2019, accounting for approximately $2.8 billion in tax revenue.
Some people who are lawfully present in the country, such as certain survivors of domestic violence, student visa-holders, and certain spouses and children of people with employment visas, can also receive an ITIN, according to the NILC.
But “most experts believe that the vast majority of tax returns filed with ITINs today are filed by undocumented immigrants,” the Bipartisan Policy Center said in 2018.
The ITEP also said in its 2017 report that “the best evidence suggests that at least 50% of undocumented immigrant households currently file income tax returns” using ITINs.
ITIN holders are not eligible for many of the benefits that U.S. citizens and other taxpayers can receive, according to our experts. For example, they cannot receive Social Security benefits or the Earned Income Tax Credit (EITC).
In addition to income taxes, undocumented immigrants pay other state and local taxes, according to the ITEP. These include sales and excise taxes on goods and services, as well as property taxes on their homes.
The ITEP estimated in 2017 that undocumented immigrants collectively pay $11.74 billion per year in state and local taxes.
There are a number of reasons why undocumented immigrants choose to pay income taxes, our experts say.
Some include demonstrating that they are complying with federal tax laws, proving they have “good moral character” if they have an opportunity to become U.S. citizens, and documenting their work history and physical presence in the U.S. in order to be eligible for legal immigration status, according to the NILC.
Undocumented workers may also be due a refund or certain tax credits if they file an annual return.