This year’s Tax Day came just after the Trump administration finalized a deal with the IRS to hand over data about undocumented immigrant taxpayers.
The deal allows ICE to enter an undocumented immigrant’s name and address into the IRS database to pull up their tax records and cross-reference their identity.
Marco Guzman, senior analyst with the Institute on Taxation and Public Policy, says undocumented immigrants file using what’s called an Individual Tax Identification Number.
“This number is provided by the IRS as a way to simply comply with our federal tax laws, it doesn’t authorize any work in the U.S., it doesn’t provide eligibility to social security,” he said. “Undocumented immigrants file using ITINs primarily because they understand and want to, in a good faith way, comply with America’s tax laws as best they can.”
Guzman says the new deal threatens billions in tax revenue. Tax data from 2022 analyzed by his group found undocumented immigrants paid almost $97 billion in federal, state and local taxes. More than a third funds programs they can’t access, like social security and Medicare.
“It’s too early to tell, but there's significant concern that something like this will lead …undocumented immigrants to pull back from complying with federal tax laws and filing — if they believe they may get swept up in some sort of raid or deportation effort,” Guzman said.
Guzman’s group estimates even a 10% reduction in undocumented tax payer filings could result in a tax revenue dip — roughly $8.6 billion yearly drop in federal tax revenue, and a $900 million loss in state tax revenue. Their analysis shows a more than $10 million loss in Arizona.
He also says industries with an outsized share of undocumented immigrants could also see a dip, as people are more fearful of taking formal jobs.
Meanwhile, Jose Patiño, vice president of education and external affairs, with the Phoenix-based immigrant advocacy group Aliento in Phoenix, says undocumented parents of U.S. citizens also face a tough choice. Their children need them to file taxes in order to have access to education funding through FAFSA. But under the new rules, that information could be shared with immigration authorities.
“If you do complete them, potentially ICE could have your information. If you don’t complete it, then you’re not helping your child potentially be able to get a grant or scholarship or be able to go to college,” Patiño said. “I'm hearing more and more people that did not file taxes. And I'm hearing more and more of the students who are not thinking of completing the FAFSA.”
Arizona scored last in the country for FAFSA completion rates early last year. Patiño says he’s trying to encourage families to do what’s best for them but still consider FAFSA enrollment, with the understanding that ICE may already have their data if they’ve filed taxes in the past.
“We don't know, within the agreement, how far back it's going to go, whether it's one year, two years, five years, 10 years. The reality is that a lot of these families have already been filing their taxes,” he said. “It's always been a discussion, and in previous years there was always these sort of guard rails, these protections. We couldn’t guarantee that this year.”
