Undocumented immigrants in the United States paid an estimated $96.7 billion in federal, state, and local taxes in 2022, according to the Institute on Taxation and Economic Policy. Of that, $59.4 billion went to the federal government and $37.3 billion to state and local governments, working out to roughly $8,889 per person. The money moves through the same channels most taxpayers use: payroll withholding, income tax returns filed with an Individual Taxpayer Identification Number, sales taxes at the register, and property taxes paid directly by homeowners or built into rent.
Where the Money Comes From
Payroll is the largest single stream. When an undocumented worker is employed on the books, the Federal Insurance Contributions Act requires the employer to withhold 6.2 percent of wages for Social Security and 1.45 percent for Medicare, with the employer paying a matching amount. Those deductions happen regardless of whether the name and Social Security number on the W-2 match agency records. In 2022, undocumented workers paid $25.7 billion in Social Security taxes, $6.4 billion in Medicare taxes, and $1.8 billion in unemployment insurance taxes. Federal and state income taxes come out of the same paychecks.
Independent contractors carry a heavier per-dollar load. Without an employer to split the cost, a self-employed worker owes the full 15.3 percent self-employment tax — 12.4 percent for Social Security and 2.9 percent for Medicare. And when a contractor can’t supply a valid taxpayer identification number on a W-9, the business paying them is required to withhold 24 percent of the gross payment as backup withholding and send it to the IRS.
Sales and property taxes reach everyone. Retailers collect sales tax at the register with no exemption tied to immigration status. Homeowners pay property tax directly to local taxing authorities; renters pay it indirectly through rent that reflects the landlord’s tax bill. Undocumented immigrants contributed more than $7 billion in state and local income taxes in 2022, on top of billions more through sales and property taxes. Measured as a share of income, their overall effective tax rate came to about 26.1 percent, with an average state and local rate of 8.9 percent.
Filing a Return With an ITIN
The IRS issues Individual Taxpayer Identification Numbers so people who aren’t eligible for a Social Security number can still file federal returns. An ITIN is a nine-digit number that works purely as a tax processing tool. To get one, you file Form W-7 alongside original documents proving identity and foreign status, such as a valid passport or a combination of birth certificate and government photo ID. Once assigned, the number lets you file Form 1040 like any other taxpayer.
Roughly 3.8 million tax returns were filed using at least one ITIN in tax year 2022, and ITIN filers paid approximately $15.7 billion in federal taxes in tax year 2023. The ITIN itself confers no immigration status and no work authorization.
One detail catches many filers off guard: an ITIN that hasn’t appeared on a federal return for three consecutive years expires on December 31 of that third year. If yours lapses, you’ll need a fresh Form W-7 with updated documentation before you can file again.
What ITIN Filers Can and Can’t Claim
Paying in is not the same as being eligible for what the payments fund. The Earned Income Tax Credit requires a valid Social Security number for the filer, spouse, and any qualifying children, so ITIN filers are shut out entirely. The Child Tax Credit and the refundable Additional Child Tax Credit require the child to have a Social Security number.
What ITIN filers can claim is the $500 Credit for Other Dependents, a nonrefundable credit available for dependents with an ITIN. It can reduce a tax bill to zero but won’t generate a refund on its own. Standard deductions and some education-related credits may apply depending on the filer’s situation. The practical result: undocumented taxpayers pay into programs they can’t access and claim fewer credits than citizens or permanent residents at the same income.
Social Security Contributions That Won’t Be Collected
When a name and Social Security number on a W-2 don’t match the Social Security Administration’s records, the taxes still get collected, and the wage records land in what the agency calls the Earnings Suspense File. As of July 2023, that file held $2.15 trillion in wages and more than 405 million individual wage items dating back to 1937. Those contributions support the solvency of the Social Security and Medicare trust funds even though the workers behind them can’t claim benefits. More than a third of the total taxes undocumented immigrants pay each year goes toward payroll taxes for programs they’re barred from accessing.
Penalties for Not Filing
Filing obligations apply to anyone who meets the income thresholds, regardless of immigration status. The IRS charges a failure-to-file penalty of 5 percent of unpaid tax for each month a return is late, up to 25 percent. If a return is more than 60 days overdue, the minimum penalty is $525 or 100 percent of the unpaid tax, whichever is less. A separate failure-to-pay penalty of 0.5 percent per month accrues on any balance unpaid after the due date, also capping at 25 percent.
There’s a second consequence specific to immigration. Tax transcripts and a record of consistent filing can serve as evidence of continuous physical presence in the United States, which matters in proceedings like cancellation of removal. Not filing eliminates a paper trail that can be difficult to reconstruct later.
Confidentiality of Tax Returns
Federal law makes tax returns and return information confidential. No officer or employee of the United States may disclose a return or return information obtained through their work except as specifically authorized by the Internal Revenue Code. As a rule, the IRS cannot hand your return to immigration authorities because you filed with an ITIN. The protection isn’t absolute; narrow exceptions exist for certain law enforcement proceedings and court orders. Political conditions around this issue shift, and anyone worried about a specific situation should talk with an immigration attorney before filing decisions.