Some see risks rising for undocumented who pay their taxes
NEW BEDFORD — Every year around this time, more than 400 undocumented immigrants make their way to a storefront economic development office here to get help filing their taxes.
Similar scenes play out across the state and the country, with more than 4 million people filing returns for 2015 using tax identification numbers issued by the IRS to people who don’t have Social Security numbers. Most of those are undocumented workers, filing taxes for the same reasons many Americans and legal residents do — to get a refund, and to obey the law.
“We have a very high rate of repeat customers,’’ said Corinn Williams, executive director of the New Bedford center. “It’s just a misnomer that immigrants are not paying their taxes.’’
In fact, they pay more taxes than you might think.
For 2015, the 4.4 million people who filed taxes using a nine-digit ID number known as an Individual Taxpayer Identification Number, or ITIN, paid $5.5 billion in payroll taxes, including Social Security contributions.
In total, they paid $23.6 billion in federal taxes, according to the Taxpayer Advocate Service, an arm of the Internal Revenue Service.
Separately, undocumented workers pay nearly $12 billion in state and local taxes per year, according to a March report by the nonprofit Institute on Taxation & Economic Policy in Washington, D.C. In Massachusetts alone, they pay nearly $185 million annually, including taxes on property and income, as well as sales and excise assessments.
When it comes to filing federal taxes each April, millions of immigrant workers without legal status go out of their way to play by the rules, even though they lack a valid Social Security number. Indeed, the IRS expects them to: Federal law requires anyone who’s been working in the United States for more than six months to file tax returns, no matter what their standing.
Employers in Massachusetts and nationwide routinely hire undocumented immigrants, sometimes unknowingly, for a simple and pragmatic reason: They need people to fill jobs. Some employees have valid work papers that expire; some use Social Security numbers that are not their own; still others obtain Social Security numbers by using fake birth certificates, according to the Social Security Administration.
There is a federal online system, called e-Verify, where employers can check workers’ documentation. But use of it is voluntary, and many employers don’t bother. Arizona in 2008 passed a law requiring all employers there to use the system, and 19 other states have since passed laws requiring its use by certain employers, including those working on federal contracts.
In Massachusetts, state agencies must use e-Verify. Some companies that work with large outside payroll companies also use it.
How any of this might change under the Trump administration is unclear. The president has vowed to crack down on the hiring of undocumented workers, but officials have not said whether there will be any change in the IRS’s collection of taxes. A spokeswoman for the administration declined to comment.
Last year, the IRS assigned 624,332 new ITINs, roughly the same number it has issued annually since 2013. (The levels were even larger before then, but dropped due to stricter enforcement under the Obama administration.)
For undocumented workers, this is a particularly frightening year to file records of any sort with the federal government. Even the tax advisers who help them are wary of information being shared with Immigration and Customs Enforcement under the Trump administration.
“The climate in the country has created real fear,’’ said Mimi Turchinetz, director of the Boston Tax Help Coalition, which assists more than 13,000 people in the region with taxes for free, including immigrants. While the IRS is legally bound to keep tax information confidential for all filers, “There’s a clear risk,’’ she said.
In a statement, the IRS said, “There is no authorization” under current law to share data with ICE.
Williams, of the New Bedford economic development center, said the number of new ITIN filers is down so far this tax season. To date, about 55 have filed, and she’s expecting a total of 79 by April 18, she said, fewer than the 100 normally processed.
In general, Williams said, she encourages people to file tax returns. Doing so helps people build a record of living and working in the United States, and it is typically required by immigration judges as part of demonstrating “good moral character.”
Among ITIN filers for 2015, 79 percent got refunds that averaged $2,896, according to federal data. That compares with 77 percent of people filing with a Social Security number. Their returns averaged $3,363.
Beyond refunds and future immigration status, there’s another important reason for undocumented workers to pay taxes, advisers say: It’s the only way to get credit for contributions to Social Security and Medicare and to collect on those benefits someday if they gain legal status.
For now, however, workers and their employers are paying billions of dollars into Social Security every year that will never be paid out to them.
According to the Social Security Administration, the federal retirement system had a $12 billion net benefit in 2010 as a result of undocumented workers and their employers paying into the system.
“That is a black hole of millions of people that are basically bolstering the rest of us,’’ Williams, of the New Bedford center, said.
And it’s been going on for decades. The Social Security Administration since 1937 has received payroll taxes from 333 million workers whose Social Security numbers weren’t valid or didn’t match their names, according to a 2015 report by the Office of the Inspector General.
Workers who file taxes, and who get a green card, which grants permanent legal status, citizenship, or other legal standing can later qualify for Social Security benefits. But they must be able to show they contributed for roughly 10 years and are at least 65 years old, according to Luz Arevalo, a senior attorney at the nonprofit Greater Boston Legal Services.
People want to comply with the law, she said, but the current political environment could make it feel riskier than ever for people to file.
“They’re between a rock and a hard place,’’ Arevalo said.
“If they don’t file, they’re breaking tax law. But if they do, they’re putting themselves at the mercy of potential immigration officials.”