Experts warn that even a 10% decline in ITIN filings could reduce federal and state revenue by $9.5 billion annually.
Tax preparers have reported a decline in filings by undocumented immigrants following news that the IRS would share taxpayer data with ICE. Although a federal judge blocked the measure earlier this year, the ruling is not final, and the courts could ultimately side with the Trump administration in a future appeal.
In the meantime, tax preparers advise individuals to consult an attorney, as the decision to file taxes is a personal one that should be made with full awareness of the potential risks.
If the number of immigrants filing taxes continues to decline, the loss in government revenue could be significant.
Undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022, according to the Institute on Taxation and Economic Policy, a nonprofit, nonpartisan research organization. Of that amount, $59.4 billion went to the federal government and $37.3 billion to state and local governments. The organization estimates that even a 10% drop in tax filings among undocumented immigrants would reduce tax revenue by $9.5 billion annually.
“The biggest issue from a revenue standpoint is that opening up tax records for immigration enforcement is going to reduce tax compliance among immigrants, whether undocumented or not, and that will have a significant impact on tax revenue,” said Tom Bowman, policy counsel with the Center for Democracy and Technology’s Security and Surveillance Project.
A possible agreement between the IRS and ICE would break with the federal government’s longstanding practice of assuring taxpayers that their information would not be used to pursue deportation. Attorneys and immigrant advocates have long shared that message. However, that sense of security has eroded under new Trump administration policies.
“It’s like a broken promise. It’s like a betrayal,” one immigrant said in Spanish, requesting anonymity out of fear of deportation.
Assistant DHS Secretary Tricia McLaughlin said in a statement that President Donald Trump is taking necessary steps by sharing information across government agencies “to solve problems.”
McLaughlin previously stated, “Information sharing across agencies is essential to identify who is in our country, including violent criminals, determine what public safety and terror threats may exist so we can neutralize them, remove these individuals from voter rolls, and identify what public benefits these individuals are using at taxpayers’ expense.”
Undocumented immigrants and individuals without Social Security numbers can file taxes using an Individual Taxpayer Identification Number (ITIN), which the IRS created in 1996.
According to court filings, ICE must include specific information when requesting tax records from the IRS, including the individual’s name and address, the alleged offense under investigation, and an explanation of why the tax information is relevant to a criminal proceeding.
Tax and immigration experts warn that the policy shift could erode public trust in government institutions and further reduce tax compliance.
“This is not just an attack on undocumented immigrants. It’s an attack on everyone who calls this country home,” said Murad Awawdeh, president and CEO of the New York Immigration Coalition.
ICE did not immediately respond to requests for comment. The Treasury Department, which oversees the IRS, also declined to comment.
The Institute on Taxation and Economic Policy estimates that for every 10-percentage-point drop in tax compliance among undocumented immigrants, annual tax revenues would decrease by $9.5 billion — including $8.6 billion in federal revenue and $900 million in state and local revenue.
“That’s going to have ripple effects that place increased financial burdens on citizens across the country,” Bowman said, noting that reduced revenue could affect major federal programs such as Social Security and Medicare — programs for which undocumented immigrants are not eligible.
“The implications are massive,” he said.
