Can undocumented immigrants pay taxes?

In 1996, the IRS created the ITIN (Individual Taxpayer Identification Number) to allow foreign nationals and other individuals who are unable to obtain a Social Security Number (SSN) to comply with U.S. tax laws. (LINK ITIN article)

People who do not have lawful status can apply to obtain an ITIN. It is important to understand that an ITIN will not create legal immigration status and will not serve as evidence of legal presence in the United States. Also, an ITIN won’t provide work authorization and can’t be used to verify work authorization on an I-9 form. 

To comply with their return filing requirements, undocumented immigrants should pay taxes on their personal income and property taxes. According to research made by the Institute on Taxation and Economic Policy on immigrants’ State and Local Tax Contributions, on average, illegal immigrants pay 8 percent of their incomes in state and local taxes every year.

Even so, the ITIN may provide certain benefits to you. An ITIN does offer some advantages that would otherwise be out of reach for an undocumented immigrant, such as:

1. Opening an interest-bearing bank account. Individuals who do not have an SSN but have an ITIN may be able to open interest-bearing accounts at U.S. banks.
2. Having a driver’s license if your state accepts the ITIN as an alternative to the SSN to apply for and receive a driver’s license, driver’s permit, or state ID.
3. Proof of residency. An immigrant may need to provide evidence of their presence in the U.S. and having a tax return filed using an ITIN is one way to show that. It also shows fiscal responsibility and compliance with U.S. tax laws.
4. Tax Credits and Social Security Benefits. When taxes are reported and paid using an ITIN, the taxpayer will not qualify to obtain Social Security benefits or Earned Income Tax Credit (EITC). However, should they ever become eligible for those benefits (for example, by obtaining a green card), the earnings reported using the ITIN could be counted toward the amount the taxpayer is eligible to receive when and if they qualify for such benefits.

Does the government use the ITIN to track undocumented immigrants?

Please note the ITIN is not ever used for immigration enforcement. The whole purpose of the ITIN is to enable people who otherwise couldn’t pay their taxes. To that end, the IRS generally abstains from sharing anyone’s private information with immigration enforcement agencies, which is crucial to ensure safe tax compliance, of course, privacy is a cornerstone of the U.S. tax program. In fact, Section 6103 of the Internal Revenue Code established that the IRS is not legally allowed to release taxpayer information to other government agencies except for cases related to tax or criminal investigations. 

The list of documents the IRS will accept as proof of ID and foreign status can be found here:

How to get an ITIN

Currently, the IRS has the following application standards for ITIN. Each ITIN applicant must: Apply using Form W-7, Application for IRS Individual Taxpayer Identification Number; and Attach a federal income tax return to the Form W-7 or qualify under an Exception to the federal tax filing requirement. Applicants can apply by mail and do not need to apply in person. However, if they apply by mail, they have to send original documents (or certified copies of original documents) to the IRS, and it may take some time to get those documents returned.

There is also the option to apply in person at a Taxpayer Assistance Center (TAC), where the IRS can authenticate the applicant’s documents. Applicants who apply at a TAC can hold on to their original documents.

The IRS provides a list of U.S. Acceptance Agents by State than can help you complete your W-7 Form Here.