One of the most common questions that I get is whether undocumented immigrants pay taxes. The short answer is, yes. The IRS estimates that about 6 million undocumented immigrants file individual tax returns every year. The follow up question is often—how can they pay taxes if they don’t have a social security number?
Typically a person who is in the United States undocumented and has never applied for any type of immigration benefit does not have a social security number. In July of 1996, the Internal Revenue Service created the Individual Tax Identification Number (ITIN) to provide a way for foreign nationals who earn income in the United States including legally-present noncitizens who do not have Social Security numbers, to pay taxes on money earned in the United States while not being technically employed by a U.S employer. For example, ITINs allow foreign nationals to pay taxes on the interest earned in a U.S. bank or investment account. They also allow spouses of work-authorized visa-holders to pay taxes on self-employment income, among other uses.
According to the Bipartisan Policy Center, most experts believe that the vast majority of tax returns filed with ITINs today are filed by undocumented immigrants rather than the intended recipient groups mentioned above.
It’s easier for undocumented immigrants to avoid paying taxes, especially if they get paid in cash. However, many choose to pay taxes with the hope that one day this will help them in obtaining legal status in the United States.
Paying taxes falls under the concept of good moral character—a term often used in immigration proceedings. Good moral character is character which measures up to the standards of average citizens of the community in which the applicant resides. Being a person of good moral character is often one of the requirements in qualifying for certain immigration benefits.
Although today there is no pathway to legal status solely based on good moral character, there could potentially be the possibility of future immigration reform that will one day address the millions of undocumented persons in the United States. If and when immigration reform is passed, it’s expected that two major hurdles of eligibility will be—proving physical presence and good moral character.