Weaponizing Immigrant Tax Data: How IRS-DHS Cooperation Would Undermine Tax Compliance, Increase Burdens, and Threaten Data Privacy

Recent reports indicate the Internal Revenue Service (IRS) is nearing an agreement to allow immigration officials to use tax data to confirm the names and addresses of people suspected of being in the country illegally. If approved, the agreement would mark a “complete betrayal of 30 years of the government telling immigrants to file their taxes,” and a sharp reversal from just a few weeks ago. Late last month, the Department of Homeland Security (DHS) requested that the IRS divulge the home addresses of 700,000 people it suspected of being in the country illegally so that immigration authorities could locate them more easily, potentially for deportation proceedings. According to the Washington Post report that broke the news, IRS leaders initially refused the request, but newly-installed acting IRS commissioner, Melanie Krause, was interested in exploring options to fulfill the request without violating federal tax privacy laws. Even if this disclosure could be accomplished in a manner consistent with federal law, doing so would have severe effects.

Immigrants, including undocumented immigrants, pay hundreds of billions of dollars in federal and state taxes each year, despite the fact that they do not receive many of the federal benefits that these taxes fund. Disclosing their tax records to DHS for immigration enforcement would discourage tax compliance among immigrant communities, thereby weakening contributions to essential public programs and increasing burdens for U.S. citizens and nonimmigrant taxpayers. Furthermore, it would set a dangerous precedent for data privacy abuse, undermining the federal tax system and other federal programs more broadly.

The IRS was established to collect revenue and administer tax laws, not to serve as an arm of immigration enforcement. Upholding this simple distinction is crucial to maintaining an effective tax system that benefits all Americans.

Chilling Effects on Immigrant Tax Compliance 

Disclosing IRS records to DHS would broadly discourage tax compliance. Undocumented immigrants may stop filing their taxes altogether in order to protect themselves and their family members from efforts to deport them based on information they provide to the IRS. Additionally, U.S. citizens and legal residents in mixed-status households may avoid claiming undocumented dependents, avoid claiming certain tax credits, or stop filing taxes altogether to protect their loved ones who are undocumented. 

The IRS allows undocumented immigrants, visitors to the U.S. who earn income, and other people who do not qualify for social security numbers (SSNs) to file returns using Individual Taxpayer Identification Numbers (ITINs). ITINs do not provide legal immigration status or work authorization; they merely enable people without SSNs to pay taxes. ITINs also do not confer the same public benefits that U.S. citizen taxpayers receive, like Social Security or Medicare benefits, even though ITIN holders contribute billions of dollars to those programs through federal payroll taxes. 

Nevertheless, millions of ITIN holders, including undocumented immigrants, pay taxes every year. In fact, many undocumented immigrants do so primarily to demonstrate financial responsibility for future discretionary immigration proceedings. But if undocumented immigrants fear their tax data could be used against them for deportation proceedings, many may stop filing taxes altogether. This would lead to a significant tax revenue loss, especially in states with large immigrant populations, and would place increased tax burdens on U.S. citizens, Lawful Permanent Residents (i.e., Green Card holders), and nonimmigrant taxpayers, such as temporary visa holders.

Cascading Effects on U.S. Citizens and Nonimmigrant Taxpayers

If undocumented immigrants and other people stop filing taxes due to fear of their data being disclosed for immigration enforcement, the consequences would extend far beyond tax compliance and lost revenue. 

Disclosure of IRS records could drive more economic activity into the informal sector, where wages are often lower, worker protections are weaker, and businesses lose out on legal labor contributions. This would occur when undocumented immigrants prefer unreported employment to prevent the collection of their personal information and its disclosure for immigration enforcement purposes. This shift would undermine fair labor practices, put downward pressure on wages, and create additional obstacles for businesses seeking to comply with employment laws and tax regulations.

Nonimmigrants, such as foreign workers with temporary visas, could also face unwarranted scrutiny, errors, and delays in tax processing as their information gets swept up in response to requests from immigration authorities, even though they are lawfully present. Bureaucratic challenges to fix these errors could impose additional financial and legal burdens and further undermine tax compliance.

Legal Uncertainties and Dangerous Precedent for Data Privacy

Federal tax privacy laws, particularly Section 6103 of the Internal Revenue Code, strictly limit the disclosure of tax return information to protect taxpayer confidentiality. While there are narrow exceptions for certain law enforcement purposes, immigration enforcement is not among them, raising serious legal questions about whether such data-sharing would even be permissible. Any attempt to reinterpret these protections to justify disclosure will face legal challenges from advocacy groups, state governments, or even members of Congress, setting the stage for prolonged court battles over the scope of taxpayers’ privacy rights.

Furthermore, if the IRS grants DHS access to tax records for immigration enforcement, other agencies may also seek similar exceptions to use confidential taxpayer data for non-tax purposes. This would erode long-standing data privacy protections put into the tax code to promote tax compliance. 

Federal tax privacy laws offer some of the strictest privacy protections for data held by the government, so if DHS is able to bypass them, that would likely be only the first domino to fall. DHS almost certainly will seek immigrants’ data maintained by other federal benefit programs, too. DHS may be able to vitiate federal privacy laws protecting that data one-by-one, with cascading effects on U.S. citizens. For example, immigrant parents may not complete applications for federal student aid (“FAFSA forms”) for their U.S. citizen children, and immigrant mothers may not seek nutrition assistance through the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) for their U.S. citizen children, for fear that participation in such programs (and the information provided or withheld on applications to participate, such as the absence of a social security number on a form) will be used to identify them for immigration enforcement actions. In both examples, it is U.S. citizens who will suffer the loss of educational opportunity and adequate nutrition.   

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Protecting tax privacy is not about shielding individuals from immigration enforcement — it is about maintaining the integrity of data protections that promote compliance with tax laws. Undermining tax privacy by permitting the use of tax records for immigration enforcement could begin the process of undermining privacy laws that are key to public confidence in the programs that those laws promote.