Yes, undocumented immigrants do pay taxes—both income tax and payroll tax—though the amount and method varies by how they work and where they live.

Undocumented workers pay federal income tax, state income tax, and Social Security and Medicare taxes (called payroll tax) when they earn wages. The IRS does not require citizenship or legal status to file a tax return or pay tax. Many undocumented immigrants file returns using an Individual Taxpayer Identification Number (ITIN), which the IRS issues to people who cannot get a Social Security number but have U.S. tax obligations.

The confusion often comes from the fact that undocumented status and tax obligation are separate things under U.S. law. You can be required to pay tax without legal immigration status, just as you can have legal status and owe no tax if you earn below the threshold. This guide explains how the system actually works.

Key Takeaways

  • Undocumented immigrants who earn wages are required by law to file federal income tax returns and pay federal, state, and payroll taxes.
  • An Individual Taxpayer Identification Number (ITIN) allows people without a Social Security number to file tax returns and pay tax to the IRS.
  • Employers withhold payroll tax from undocumented workers' paychecks the same way they do for any employee, and that money goes to Social Security and Medicare.
  • Tax filing does not require proof of legal status and does not trigger immigration enforcement, though undocumented status itself remains a separate legal matter.
  • Self-employed undocumented workers must file returns and pay self-employment tax, just like any other self-employed person.

How Undocumented Workers Pay Income Tax

When an undocumented immigrant works for an employer, that employer withholds federal income tax from each paycheck, the same as for any employee. The employer sends that withheld tax to the IRS. The worker then files a federal income tax return to report all income earned during the year and claim any refund owed.

To file that return, the worker needs a tax identification number. If they do not have a Social Security number, they can obtain an ITIN from the IRS by submitting Form W-7 (process for IRS Individual Taxpayer Identification Number) along with proof of identity and proof of U.S. residency. The ITIN works like a Social Security number for tax purposes only—it does not grant any immigration status or work authorization.

Many undocumented immigrants file returns every year and receive refunds when they have overpaid during the year. The IRS processes these returns and issues refunds without regard to immigration status. Filing a tax return does not put someone at risk of deportation; the IRS and immigration enforcement are separate agencies with different missions.

Payroll Tax and Social Security

Undocumented workers who are paid as employees have Social Security and Medicare tax (together called FICA tax) withheld from their paychecks. This is 6.2% for Social Security and 1.45% for Medicare, taken directly from wages. The employer also pays a matching amount on behalf of the employee.

That Social Security tax goes into the Social Security trust fund. However, undocumented workers typically cannot claim Social Security benefits later, because benefits require proof of legal status or citizenship. This means many undocumented workers pay into a system they cannot draw from. Estimates vary, but research suggests undocumented immigrants collectively pay billions in Social Security tax each year that they will never receive as benefits.

The same applies to Medicare tax—it funds the Medicare program, but undocumented immigrants cannot enroll in Medicare. The tax is still withheld and paid.

Self-Employment Tax for Undocumented Workers

An undocumented immigrant who is self-employed—running their own business, doing contract work, or freelancing—must file a tax return and pay self-employment tax. Self-employment tax covers both the employee and employer portions of Social Security and Medicare tax, totaling 15.3% of net business income.

Self-employed workers file Schedule C (Profit or Loss from Business) along with their 1040 tax return. They report all income from the business and deduct legitimate business expenses. They then calculate self-employment tax on Schedule SE and pay it with their return or through quarterly estimated tax payments.

The same rule applies: the IRS does not require citizenship to file these forms or pay this tax. An ITIN works for self-employed filers just as it does for wage earners.

State and Local Taxes

Most states require anyone earning income within the state to file a state income tax return and pay state income tax, regardless of immigration status. Some states have no income tax at all. The rules vary by state, but the principle is the same: income earned in the state is subject to state tax.

Many cities and some counties also impose local income tax or wage tax. Philadelphia, for example, taxes wages earned within the city. These local taxes are withheld by employers and paid to the city or county, just like federal and state tax.

An ITIN can be used to file state and local returns in most states. Some states have created their own identification numbers for tax purposes, but most accept the federal ITIN.

What Happens When Employers Misclassify Workers

Some employers deliberately misclassify undocumented workers as independent contractors to avoid withholding tax and reporting requirements. When this happens, the worker may not have tax withheld from their pay. The worker is still required to file a return and pay tax on that income, including self-employment tax.

If a worker receives a Form 1099 (for independent contractor income) instead of a W-2 (for employee income), they should report that income on Schedule C and pay self-employment tax. Many undocumented workers do file these returns and pay the tax owed, even when employers have not withheld it.

Misclassification is illegal under labor law, but it does not change the worker's tax obligation. The worker can report the misclassification to the Department of Labor or a state labor agency, though doing so carries its own risks.

Tax Credits and Refunds for Undocumented Workers

Undocumented immigrants who file tax returns may be able to claim certain tax credits, depending on their situation. The Earned Income Tax Credit (EITC) is available to low-income workers, but only if they have a valid Social Security number—an ITIN does not may have access to. This means most undocumented workers cannot claim the EITC, even if their income would otherwise make them may be able to access.

However, undocumented workers can claim the Child Tax Credit for dependent children if they have an ITIN and meet other requirements. They can also claim the standard deduction, which reduces taxable income. Many undocumented workers end up with a refund because they have overpaid during the year through withholding, even without access to the EITC.

Some states offer their own earned income tax credits that do not require a Social Security number. California, for example, allows ITIN holders to claim the state EITC. The rules vary by state.

Frequently Asked Questions

Can the IRS report me to immigration if I file a tax return?

No. The IRS is a tax agency, not an immigration agency. The IRS does not share tax return information with Immigration and Customs Enforcement (ICE) or other immigration authorities. Filing a tax return does not trigger immigration enforcement. However, undocumented status itself remains a separate legal matter unrelated to tax filing.

What is an ITIN and how do I get one?

An ITIN is an Individual Taxpayer Identification Number issued by the IRS to people who need to file taxes but do not have a Social Security number. You explore by submitting Form W-7 to the IRS with proof of identity (passport, consular ID, or similar) and proof of U.S. residency (utility bill, lease, bank statement). The IRS processes the process and mails the ITIN, which you can then use to file returns.

Do I have to pay taxes if I work under the table?

Yes. If you earn income, you are required to report it and pay tax on it, whether or not your employer withholds tax. Working under the table does not eliminate your tax obligation. Many undocumented workers file returns and pay tax on cash income even when employers have not reported it to the IRS.

Can I get a refund if I overpaid taxes?

Yes. If you file a tax return and have overpaid during the year through withholding, the IRS will issue a refund. You can receive the refund by direct deposit to a bank account, by check, or in some cases by prepaid debit card. You do not need legal status to receive a tax refund.

What if my employer says I cannot file taxes because I am undocumented?

Your employer is wrong. You have the right to file a tax return and pay tax regardless of immigration status. Your employer's refusal to provide a W-2 or other tax documents does not prevent you from filing. You can file using the income information you have and report the employer's failure to provide documents to the IRS.