The voices of Tax Policy Center's researchers and staff
Why do we make it so hard for immigrants to pay their federal income taxes? Why do we throw so many roadblocks between them and their civic duty?
Many are citizens, though they may have family members who are not. Some are legal residents and some are undocumented. But wherever you come down on the current immigration debate, it seems beyond dispute that people who want to pay their taxes should be able to do so without getting hopelessly lost in a bureaucratic morass.
The complexity of the tax code makes filing a challenge for nearly everyone. But immigrants face special difficulties the rest of us do not. One revolves around incredibly complex rules for certain credits and exemptions. The other is the process of filing itself. At a recent Tax Policy Center program, a panel of experts described the problems.
Families with children
Claiming tax credits such as the Child Tax Credit, the refundable portion of the CTC, and the Earned Income Tax Credit (EITC) is hard enough for native born households. But the rules can become nightmarishly difficult for immigrants with children. Worse, they are different for each credit and exemption.
My Tax Policy Center colleague Elaine Maag has described the challenges for families with children here. In short, children who are U.S. citizens or nationals qualify their households for the CTC, EITC, and dependent exemptions if they live in the United States and both of their parents have Social Security numbers (SSNs); children may be eligible for the dependency exemption alone if they reside in the U.S., Canada, or Mexico and their parents otherwise qualify; children must reside in the US for their households to qualify for the CTC; children must reside in the U.S. and have an SSN for their household to be eligible for the EITC.
Got that? I didn’t think so. But there’s more.
Children who don’t have SSNs may still qualify for the CTC and the American Opportunity Tax Credit if they have an Individual Taxpayer Identification Number, or ITIN. Their parents need an SSN or an ITIN to file returns for themselves and their children.
Getting an ITIN
The IRS estimates that about 4.6 million taxpayers are ineligible for a Social Security number and must get an ITIN to comply with their income tax obligations. Without one, people may lose their eligibility for tax credits, owe late filing penalties, and be subject to higher withholding taxes.
Yet, Congress and the IRS make getting an ITIN incredibly hard. People can apply for a new ITIN only during tax filing season—just when the IRS is busiest. Last year, the IRS had to process about 900,000 applications. Unsurprisingly, so many requests in such a narrow window led to big backlogs—a weekly average of 80,000.
The consequences of these delays are severe. Without an ITIN, people can no longer file for the child tax credit. Many may have stopped filing returns entirely because they could not get an ITIN, turning them from once-compliant tax filers into evaders.
There’s more. You must send the IRS your passport along with an application. Not a copy. Your original passport. Which the IRS will return to you—within two months.
You can avoid that problem if you apply through a walk-in IRS Taxpayer Assistance Center (TAC) or what the IRS calls a Certified Acceptance Agent (CAA), which can be a private business or a government agency. If you apply in person through one of those, staff can certify your documents and you can take them home.
Except…There are not nearly enough CAAs, and because of the IRS’s never-ending budget problems TACs only accept appointments a couple of days a week. During working hours. When many immigrants are likely to be…working. And if you are undocumented, getting into a government building presents its own set of challenges and risks.
Congress made the problem worse in 2016 with the PATH Act. While the law expanded the CAA program, it also imposed a strict schedule for deactivating ITINs. All ITINs issued before 2013 must now be renewed according to a formal schedule. And if a taxpayer does not file a tax return for three consecutive years, his ITIN is automatically revoked. Blocking unused ITINs may help reduce identify theft, but making millions of people automatically reapply is not a great solution, especially given the agency’s problems administering the program.
The IRS Taxpayer Advocate has repeatedly raised concerns about these problems (here and here) and the IRS has tried to address some, but progress is slow.
There are several common sense ways to fix this mess. Congress could set identical eligibility rules for the credits and the dependent exemption. The IRS could make it easier for people to apply for, receive, and maintain ITINs. Renewals could be accepted prior to filing season. The agency could also ensure that more CAAs are located outside of government buildings.
Immigrants pay taxes, often enthusiastically, even though they may never receive the benefits of citizenship. The least we can do is make it easier for them to do so.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
Share this page
Javier Flores Garcia, center, emerges from the Arch Street United Methodist Church, accompanied by his wife, Alma Lopez, center left, daughter, Adamaris, center right, and sons, Javier, left, and Yael, in Philadelphia, Wednesday, Oct. 11, 2017. Garcia, who has been living in the church for nearly a year to avoid deportation to Mexico, walked free Wednesday. In 2004, he was stabbed and worked with the government to capture the men responsible. His actions made him eligible for a special type of visa for people who help police. Photo by Matt Rourke/AP.