What Everybody Ought to Know About Undocumented Immigrants and Taxes


Paying taxes is not only a civic duty, but in a sense, it’s an act of faith. Most Americans pay them dutifully and with the hope that they will be put to the best uses possible—but also with the knowledge they will one day collect benefits from those contributions. However, there are millions of people in the U.S. who pay their taxes each year knowing full-well they may never actually receive many of the benefits associated with their tax contributions, like social security and disability benefits.

Yet, despite their status “the best evidence suggests that at least 50 percent of undocumented immigrant households currently file income tax returns using Individual Tax Identification Numbers (ITINs),” according to the Institute on Taxation and Economic Policy. In addition, many more undocumented immigrants have taxes deducted from their paychecks, even if they do not file income tax returns.

Undocumented immigrants pay sales, income and property taxes. ITEP reports that in 2013 for example, the average effective state and local tax rate of undocumented immigrants was 8 percent, compared to 5.4 percent for the top 1 percent of all taxpayers. This translated into $11.6 billion in state and local taxes paid by the undocumented community in 2013.

Not only are undocumented immigrants paying taxes, but some go through additional layers of red tape to apply for a special number issued by the Internal Revenue Service, known as an ITIN. ITINs let more people pay into the system, which builds the tax base. In fact, over 3 million people—not all necessarily undocumented immigrants however— paid over $870 million in income taxes using an ITIN, and according to the IRS, ITIN filers pay $9 billion in payroll taxes annually.

However, ITIN holders are not eligible for all of the tax benefits and public benefits that U.S. citizens and other taxpayers can receive. For example, an ITIN holder is not eligible for Social Security benefits or the Earned Income Tax Credit (EITC). However, if that person becomes eligible for Social Security in the future (for example, by becoming a lawful permanent resident), the earnings reported with an ITIN may be counted toward the amount he or she is eligible to receive. Yet, if they never become eligible, they never collect on their contributions.

This tax season, as millions of Americans file their taxes and fulfill their civic duty, keep in mind that there are millions of undocumented immigrants also paying their fair share towards the public good and hoping they too will one day benefit from their contributions.

Photo by Chris Potter.

This post originally appeared on Immigration Impact. © 2016 Immigration Impact. All rights reserved. Reprinted with permission.

About The Author

Wendy Feliz Wendy Feliz, MA is the Director of Communications at the American Immigration Council. Prior to joining the Council, Ms. Feliz served as Director of Development at New America Media, after having worked at the Open Society Institute, and public radio station WAMU 88.5 as the Manager of Foundation Relations and Public Information. Ms. Feliz has spent much of her career in the non-profit world including with The California Hispanic Commission on Alcohol and Drug Abuse in East Los Angeles and The Young Adult Institute and Latino Worker’s Center in New York City. Ms. Feliz received her M.A. in Public Communication from the American University in Washington D.C. and she holds a B.A. in Liberal Arts from the New School University in New York.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.