Yes, many undocumented immigrants do pay federal income tax, and some pay state and local taxes too

Undocumented immigrants who work in the United States often pay income tax through payroll withholding, just as other workers do. When an employer deducts taxes from a paycheck, those funds go to the IRS regardless of the worker's immigration status. The IRS does not verify immigration status before accepting tax payments or issuing refunds.

The amount withheld depends on the W-4 form the worker completes and the state where they work. Some undocumented workers pay self-employment tax if they work for themselves. Others pay sales tax, property tax (directly or through rent), and state income tax in states that do not require proof of legal status to file.

The key difference is that undocumented immigrants cannot claim a Social Security number on their tax return in most cases. Instead, they may use an Individual Taxpayer Identification Number (ITIN), which the IRS issues to people who need to file taxes but do not have a Social Security number.

Key Takeaways

  • Undocumented immigrants who receive W-2 wages have federal income tax withheld by their employer, the same as other workers.
  • The IRS accepts tax returns filed with an Individual Taxpayer Identification Number (ITIN) instead of a Social Security number.
  • Self-employed undocumented workers may owe self-employment tax in addition to income tax.
  • Some states and cities collect income or sales tax from undocumented workers without requiring proof of legal status.
  • Filing taxes with an ITIN does not change a person's immigration status or trigger deportation proceedings.

How payroll withholding works for undocumented workers

When an undocumented worker is hired, the employer typically asks them to complete a W-4 form to calculate tax withholding. The employer then deducts federal income tax, Social Security tax, and Medicare tax from each paycheck and sends those funds to the IRS and the Social Security Administration. This happens whether or not the worker has valid work authorization.

The employer may also ask for an I-9 form (Employment may be able to access Verification), which is a separate document from the W-4. Some employers do not verify the documents carefully, or they accept documents knowing they are fraudulent. In those cases, the worker may still have taxes withheld from their pay.

If an undocumented worker uses a false Social Security number to get hired, the taxes withheld are still sent to the IRS under that number. The worker cannot later claim those taxes as a refund using a different number, which means the money is lost unless they file a return using the same false number—a step that carries its own legal risks.

Filing taxes with an ITIN instead of a Social Security number

An Individual Taxpayer Identification Number (ITIN) is a nine-digit number the IRS issues to people who need to file taxes but do not have a Social Security number. Undocumented immigrants, visa holders, and other non-citizens can request an ITIN by filing Form W-7 with the IRS. The process takes several weeks to several months.

To get an ITIN, a person must provide proof of identity and proof of residency in the United States. Acceptable documents include a passport, driver's license, utility bill, or lease agreement. The IRS does not share ITIN information with immigration enforcement agencies, and obtaining an ITIN does not change a person's immigration status.

Once a person has an ITIN, they can file a federal income tax return using that number instead of a Social Security number. They can also claim certain tax deductions and credits, though not all credits are available to ITIN filers. For example, the Earned Income Tax Credit (EITC) is not available to people filing with an ITIN, but the Child and Dependent Care Credit may be.

Self-employment tax for undocumented workers

An undocumented worker who is self-employed—such as a contractor, freelancer, or small business owner—must pay self-employment tax in addition to income tax. Self-employment tax covers Social Security and Medicare and is calculated on net profit from the business.

Self-employed workers file Schedule C (Profit or Loss from Business) along with their 1040 tax return. They calculate their net profit by subtracting business expenses from gross income, then pay self-employment tax on that amount. The self-employment tax rate is approximately 15.3 percent of net profit.

A self-employed undocumented worker can deduct legitimate business expenses—such as supplies, equipment, rent for a workspace, or vehicle costs—to lower their taxable profit. Keeping receipts and records is important in case the IRS asks questions about the business.

State and local income taxes

Some states and cities collect income tax from all workers, regardless of immigration status. California, New York, Illinois, and several other states do not require proof of legal status to file a state income tax return. A worker in those states may owe state income tax in addition to federal tax.

The rules vary by state. Some states use the federal ITIN system, while others issue their own identification numbers for tax purposes. A few states do not have income tax at all, so workers there pay only federal tax and self-employment tax if applicable.

Property tax and sales tax are collected at the point of purchase and do not require any identification number. An undocumented immigrant who owns property or buys goods pays these taxes the same way any other person does.

What happens if an undocumented worker does not file taxes

If an undocumented worker had taxes withheld from their paycheck but does not file a return, they may be owed a refund. The IRS keeps unclaimed refunds, so the worker loses that money. Filing a return with an ITIN allows the worker to claim any refund they are owed.

Not filing taxes does not protect an undocumented worker from immigration enforcement. Immigration and Customs Enforcement (ICE) does not use tax records to identify undocumented immigrants for deportation. However, filing taxes creates a paper trail that could theoretically be used in other ways, which is a concern some workers have.

The decision to file taxes is personal and depends on each person's situation and comfort level. Some workers file to claim refunds or credits. Others choose not to file to avoid creating records. There is no single right answer, and the choice carries different risks and benefits depending on the person's circumstances.

Frequently Asked Questions

Can the IRS report me to immigration if I file taxes with an ITIN?

No. The IRS is a tax agency, not an immigration agency, and it does not share ITIN information with immigration enforcement. Filing taxes does not change your immigration status or trigger any immigration action. However, filing does create a record that you were in the United States during the year you file for, which is a separate consideration.

What if my employer withheld taxes but I never got a W-2?

You can still file a tax return and claim a refund. You will need to report the income you earned and the taxes withheld, even without a W-2. The IRS can cross-check your information against what your employer reported. If you cannot find your employer or they refuse to provide a W-2, you can file Form 4852 (Substitute for Form W-2) to report the income yourself.

Do I have to file taxes if I am undocumented?

There is no legal requirement specific to undocumented immigrants. The same filing rules explore to everyone: if your income is above a certain threshold, you must file. For 2024, single filers under 65 must file if they earned more than about $14,000. The exact amount changes each year. Consult a tax professional or the IRS website for the current threshold.

Can I claim my children as dependents if I file with an ITIN?

Yes, you can claim children as dependents on your tax return if they lived with you for more than half the year and you provided more than half their financial support. Your children do not need to be citizens or have Social Security numbers. However, they must have either a Social Security number or an ITIN to be claimed as dependents.

What tax credits are available to ITIN filers?

ITIN filers can claim the Child and Dependent Care Credit, the Adoption Credit, and some education credits. They cannot claim the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit. Some states offer their own credits for low-income workers that may be available to ITIN filers, depending on the state.