With most individual income tax returns due April 17, Bipartisan Policy Center (BPC) contributor Hunter Hallman recently explored the issue of illegal employees and their U.S. income tax contributions.
“Agencies are singularly focused on their own mandates: the IRS is interested in maintaining a broad tax base and collecting all taxes owed to the government, regardless of the source, whereas immigration enforcement officials want to enforce the law against unauthorized work,” she wrote.
Hallman noted some realities of illegal employment and wrote that though some are paid “under the table” without paying income tax, others do, but the data, she said, was anecdotal.
She also wrote that though employers must verify work eligibility of individuals as a result of the Reform and Control act of 1986, including requiring a Social Security number, oftentimes employers do not see a Social Security card.
“Undocumented workers who are hired without valid work authorization may provide their employer a fake Social Security number, someone else’s number, or even a previously-valid number issue when they may have had work authorization that has since lapsed,” she wrote. “Furthermore, most employers do not—and, except for certain employers, are not required to—verify this information with any government entity at the time of hire.”
But without a Social Security number, immigrants sill may file a legal tax return if they obtain an Individual Tax Identification Number (ITIN)—which allow legal noncitizens to pay taxes on U.S.-earned income.
“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—a few categories of noncitizens who do not have a Social Security number and are not authorized to work but who are still earning income and legally residing in the United State,” Hallman wrote. “In 2010, ITINs were used to file over 3 million federal tax returns.”
She added that the ITIN application only asks for basic information and does note require “work authorization or proof that you are in the United States legally.”
Hallman also explored benefits, noting that undocumented aliens may not receive “most tax credits” and are ineligible for other benefits such as grants, student loans, Social Security, and many others.
She said that it would take congressional action to iron out many of these discrepancies and would “implicate millions of taxpayers” thereby ensuring “the current state of affairs will likely prevail for the foreseeable future.”
Read the complete report here.
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