Do Illegal Immigrants Pay Taxes in the U.S.? Yes, and Here's How
Many undocumented immigrants do pay taxes. Here's how the process works and where the money ultimately goes.
Sept. 30 2021, Published 3:10 p.m. ET
While it might sound counterintuitive to the stories many Americans have heard, the fact remains that undocumented immigrants do pay U.S. taxes.
Here's how the process works and where the money goes, if not to the undocumented immigrants themselves.
Undocumented immigrants are paying billions in annual taxes.
According to the ITEP (Institute on Taxation and Economic Policy), undocumented immigrants paid about $11.74 billion in state and local taxes in 2017. The process has been going on for about 25 years.
Of that $11+ billion in tax revenue from undocumented immigrants, the majority of that comes from sales and excise taxes. The second-highest category is property taxes, while income tax makes up the rest.
About 50 percent–75 percent of undocumented immigrants pay an income tax rate of 8 percent to the U.S. government.
How do illegal immigrants pay taxes without a social security number?
Undocumented immigrants often get a tax ID number and file through IRS acceptance agents. There are 5,000 acceptance agents across the company that the nation's immigrants apply through.
The ITIN (Individual Taxpayer Identification Number) is different from an SSN (social security number). In 1996, ITINs were expanded to be used for foreign nationals and other people who aren't eligible for an SSN.
"The ITIN is a nine-digit number that always begins with the number 9 and has a range of numbers from 50 to 65, 70 to 88, 90 to 92, and 94 to 99 for the fourth and fifth digits. The ITIN is formatted like a SSN: 9XX-7X-XXXX," according to the American Immigrantion Council.
The IRS developed the tax ID program 25 years ago. The vast majority of the estimated number of immigrants in America have paid taxes ever since.
The reality is that immigrants are paying into a system that doesn't benefit them, but they continue to seek a new life in the U.S.
Some immigrants pay taxes to look good for the U.S. government.
An immigrant seeking a documented immigrant status from the U.S. government might want to look like a moral and upstanding citizen by showing a tax payment history to the country. These people have risked a lot for their families and themselves.
Also, immigrants often receive tax refunds if they have overpaid. As any American knows, refunds can be extremely helpful in tight economic times.
Even immigrants with social security numbers don't get benefits right away.
Despite the ill-tuned argument that immigrants are a strain on the system, the reality is that immigrants contribute to a society that doesn't provide benefits in return. It can take years for an immigrant to get a documentation status and an SSN, if they get one at all.
Once an immigrant gets an SSN, it takes five years for them to be able to access benefits like CareerLink, housing assistance, and more. That means that during the entire COVID-19 pandemic, undocumented immigrants were largely paying into a tax system that didn't provide assistance back to them. Meanwhile, many legally documented immigrants didn't receive those benefits either.
