Here Illegally, but Choosing to Pay Taxes

Times Staff Writer

They may be here illegally, but tens of thousands of undocumented immigrants are expected to abide by Uncle Sam’s rules by filing tax returns -- with the hope of someday becoming U.S. citizens.

Though there is no way of knowing how many people are filing taxes in response to the national debate on immigration, Southern California tax preparers are seeing a steady stream of clients eager to be on record as taxpayers.

“There has definitely been an increase,” said Noemi Munoz, a senior tax advisor at H&R; Block in Los Angeles. “After whatever they’ve heard on TV, I guess that’s why they want to file taxes.”


Some illegal immigrants have long paid taxes through special identification numbers issued by the Internal Revenue Service for people who are not eligible for Social Security numbers -- whether out of a sense of duty or hope for eventual citizenship.

But now that the U.S. Senate is considering a broad proposal that could lead to citizenship for migrants who have lived here for at least two years, there is a greater incentive to file a tax return. Some are pulling out their W-2s and heading to the nearest tax office -- not just to pay this year’s bill but to catch up on back taxes. In interviews, many said they wanted to prove how long they had lived in the United States and that they would be good citizens.

“It’s important for all of us to pay our taxes, to have proof that we are working in this country,” said Efrain Santa Cruz, 44, an illegal immigrant from Mexico who recently filed his return, “so someday maybe they will give us papers.”

Illegal immigrants often live in an underground cash economy and don’t have a paper trail establishing their presence, experts said.

“Proving that you have been here is sometimes a challenging task,” said Harry Pachon, president of USC’s Tomas Rivera Policy Institute, a Latino think tank. “As people start thinking there is a chance for legalization ... they are going to be much more conscious of that.”

Illegal immigrants can file taxes by applying for an Individual Taxpayer Identification Number, or ITIN, designed for foreigners living here legally but now widely used by illegal immigrants. Last year, the Internal Revenue Service issued an estimated 1.2 million tax identification numbers -- the vast majority of which ended up on tax returns, up from roughly 838,000 issued in 2004.

The IRS, which has issued more than 9.2 million tax identification numbers since 1996, does not ask whether immigrants are legal. “Our job is to make sure that everyone who earns income within our borders pays the proper amount of taxes, even if they may not be working here legally,” IRS Commissioner Mark W. Everson said in an e-mail.

How much illegal immigrants pay into the system is part of a larger debate over whether they are a drain or a benefit to the U.S. economy. In addition to sales taxes, many pay income taxes, and, in some cases, property taxes. But numerous studies have shown that their presence is a financial strain on hospitals, schools and local services.

Opponents of illegal immigration said offering illegal immigrants taxpayer identification numbers highlights the federal government’s contradictory approach in dealing with the problem. Immigrants who cannot get a Social Security number to work legally can get a taxpayer ID number to pay taxes.

“The issuing of these numbers to people who are here illegally is simply helping them to remain and work in this country, which is part of the federal government’s schizophrenia when it comes to illegal immigration,” said Rick Oltman, Western field director for the Federation for American Immigration Reform.

Opponents said the amount of money paid by illegal immigrants in taxes hardly makes up for what they cost this country in services.

The process of paying taxes, for illegal immigrants, essentially involves owning up to their undocumented status. Many have gotten jobs with fake Social Security numbers. Their employers make deductions based on those numbers. So these immigrants file returns using legitimate taxpayer ID numbers, but the tax preparer must attach a W-2 showing the fake Social Security number so that the IRS knows how much is due or owed, according to H&R; Block tax advisors.

When taxpayer ID numbers were first issued, tax preparers said, illegal immigrants were afraid to apply. But now there is less fear because tax preparers assure them that the IRS is prohibited from reporting the data to immigration authorities.

Many illegal immigrants earn so little that they don’t owe any income taxes. If they support children or parents in the U.S. or in Mexico, they can claim them as dependents, further reducing their taxable income. Some are entitled to refunds.

Illegal immigrants who are paid under the table have not had any taxes withheld by their employers, so they may owe the government money. But since there is no record of how much they earned, they may underreport their income.

On the other hand, many illegal immigrants have Social Security taxes withheld from their paychecks but are not entitled to collect any benefits. The Social Security Administration said $7 billion in payroll taxes had been credited to its trust fund from Social Security numbers that were either invalid or didn’t match names in the agency’s records. Undocumented workers are believed to make up a large portion of these contributors.

Income tax businesses are catering to this burgeoning clientele.

Outside H&R; Block on Western Avenue in Los Angeles, signs read in Spanish, “Hablamos taxes” (We speak taxes) and “Solicita tu ITIN aqui” (Apply for your ITIN here).

Inside the office last week, Carmelo Santiago Hernandez signed his tax return and learned he would receive a $15 refund. Hernandez, an illegal immigrant, arrived from Mexico four years ago and works as a janitor. Last year, he said he earned just over $11,000. He paid about $700 toward Social Security and $160 to Medicare.

Hernandez, 28, decided to apply for an ITIN and file taxes after an uncle suggested it might increase his chances to become a legal resident someday. “You never lose hope,” said Hernandez, who is married with three children.

Others say they are bound by a sense of duty.

Luis Vazquez, 26, was paid under the table as a day laborer most of last year. Last week, he arrived at H&R; Block with documentation that he had earned about $3,500 -- not much, he said, but he still wanted to comply with tax laws. He didn’t have the means to pay the government anything, so he was relieved to discover he was owed a refund: $4.

“I want to do things how they should be done,” said Vazquez, who crossed the border two years ago. “I’m here. The least I can do is demonstrate that I have good intentions ... that I came to work.”

Unlike Hernandez and Vazquez, who both filed for the first time this year, Santa Cruz, a dishwasher, has been filing tax returns for nearly a decade. He earned about $11,600 last year, paying roughly $720 toward Social Security and $170 to Medicare. He claimed his three children here as dependents and will receive a refund of about $890.

“Every year I have done them, and this year I did them too,” he said. “I have the hope that by paying taxes, I will have the right to become legal.”