Despite what you may have heard from anti-immigration types about foreign freeloaders taking our jobs and our services without chipping into the national kitty, an increasing number of undocumented immigrants pay taxes.
Filing your taxes is hard enough: All those forms! All those documents! All those hard-earned dollars scampering off to pay for humvees in Iraq! It gets even harder if you're trying to file taxes as an undocumented immigrant.
That's right despite what you may have heard from anti-immigration types about foreign freeloaders taking our jobs and our services without chipping into the national kitty, an increasing number of undocumented immigrants do pay taxes. The situation creates headaches and ironies galore for both the immigrants, people trying to do the right thing from a legally wrong position, and for a country with no clear policy on how to deal with the estimated 12 million undocumented immigrants in our midst.
The first surprising thing is that the IRS doesn't tip off Immigration and Customs Enforcement when undocumented workers show up in the system. Janice Foulk, of the Austin Territory Office of the IRS, says that privacy is privacy, no matter who the tax-filer is. And frankly, citizenship policing isn't the IRS' job. Undocumented immigrants "are realizing we're not out to get them. We just want them to file taxes," Foulk said.
Filing those taxes is harder than it sounds. At the Foundation Communities free tax center on South First, about a week before tax day, the office was jammed with tax-filers and volunteers helping them decipher their paperwork. Foundation Communities, a nonprofit organization that provides housing and social services to very low-income Austinites, began running the centers with city support after a 2004 IRS report showed around 14,000 low-income tax-filers were leaving their earned income tax credits unclaimed. That works out to $31.5 million in overpayed taxes flying to Washington instead of staying here in Austin and getting spent on live music and margaritas, not to mention sales taxes for the city. Hence the centers, which this year helped claim about $13 million in credits and refunds. "What all this means is that more money stays in the hands of people who can use it to provide for their families," Council Member Raul Alvarez said.
About 15% of the roughly 10,000 people served by the centers are undocumented immigrants. One, an elegant man named Faustino, came through the tax center door about noon on a recent Friday, his hair immaculately gelled and his black T-shirt tucked neatly into dark jeans. Faustino came to the United States three years ago from a small town in Oaxaca state. He's a dishwasher, earning just shy of $20,000 annually, and has filed taxes each year. This year, however, he ran into a snag: His wife only recently made the journey and does not yet have the critical key to filing taxes as an immigrant: the Individual Taxpayer Identification Number, which the IRS uses to track filers without Social Security Numbers.
The ITIN's were originally created to help noncitizens earning legal money in the U.S. such as foreign investors but more and more undocumented immigrants have been filing for them in recent years. The numbers allow immigrants to stay on the right side of the IRS they can legally pay taxes, even as they illegally work but their contradictory situation means the taxman's bite is often deeper for them than for legal filers.
Because employers cannot hire anyone without a Social Security Number, undocumented immigrants even those with ITINs generally use a fake Social Security Number and often a fake name. That means the taxes their employer takes out of their paychecks to submit to the Social Security system are credited to the real "owner" of that number right now, some undocumented immigrant could be contributing Social Security payments in your name. And that worker will never see the wages withheld from his or her checks. According to the Social Security Administration, some $7Êbillion in the trust fund came from bogus numbers or ones that didn't match up with the name given. (Immigrants aren't the only beneficiaries of traffic in Social Security Numbers Foulk, the IRS representative, learned her name and number were being used by an underaged stripper in Wisconsin.)
Other employers simply pay immigrants under the table as a way to weasel out of payroll taxes. This is great for the immigrant who wants to hide from the IRS but causes headaches for those who would rather come clean. Still other employers hire immigrants as self-employed contractors, which also allows them to skip the payroll taxes but which slaps the workers with an additional 14% self-employment tax on top of their regular income taxes. While any self-employed worker is sort of screwed in this regard, undocumented immigrants are in the weakest position to negotiate. "People say, 'Those immigrants should be paying taxes,'" said Elizabeth Colvin of Foundation Communities. "They don't realize it's the employers who should be paying their taxes."
Despite the hassles, Colvin says the number of undocumented filers at the tax centers is on the rise. She attributes it to the controversy about changing immigrant law in the weeks before April 15: Paying taxes is a way to establish residency and a history of productive work, should they ever apply for citizenship. The eventual payoff may be life-changing, but in the short term the cost of honesty is great. "I've seen people owe five or six thousand dollars," Colvin said. "These are people with an income of $24,000 for a family of four."