The Trump administration is leaning on the Internal Revenue Service to upend how undocumented immigrants can file their taxes, as officials discuss changes that could force people to tell the agency about their immigration status or disengage from the tax system entirely.
At the center of the deliberations between Trump administration officials and the I.R.S., described by three people familiar with them, are potential changes to a nine-digit code, called an individual taxpayer identification number or ITIN, that people without a Social Security number can use to file their taxes.
Currently, a relatively large pool of people can receive an ITIN to put on their tax returns. It includes people living abroad who owe U.S. taxes, some immigrants with legal status and those without it. The codes can also be used to open a bank account, apply for a credit card and, in some states, get a driver’s license.
The change under discussion would differentiate codes for undocumented immigrants from those of other people with ITINs, the people said. Such a shift could require people applying for the codes to explicitly reveal their immigration status to the I.R.S., potentially discouraging them from getting a code or filing their taxes at all.
The proposal to assign the codes to separate categories is an evolution of an earlier idea from the Trump administration to create a new question on tax returns directly asking people if they are living in the country illegally, the people said.
The precise goal of the Trump administration push is unclear. Tax information on file at the I.R.S. is closely controlled, and an administration effort last year to share the agency’s data about undocumented immigrants with Immigration and Customs Enforcement has been blocked in court.
The White House referred a request for comment to the Treasury Department, which did not respond. The I.R.S. also did not respond to a request for comment.
But the deliberations are a sign that the Trump administration may once again try to harness the power of the I.R.S. to advance its immigration agenda.
As the Trump administration has pulled back on its highly visible militarized deportation raids this year, the White House has shifted to focus on other ways to squeeze the lives of undocumented immigrants within the hopes that they will voluntarily leave the United States.
The efforts have included making it harder for undocumented immigrants and those with legal protections to obtain public housing and other benefits. Earlier this year, Stephen Miller, Mr. Trump’s deputy chief of staff and architect of his immigration policy, also peppered officials with questions about how undocumented immigrants use credit cards, potentially as part of an effort to crack down on their ability to open accounts and spend money, according to officials with knowledge of the discussions who were not authorized to discuss them.
Within the I.R.S., officials worry that the current ITIN effort could compromise the agency’s mission to collect taxes if it causes migrants to avoid paying taxes, the people familiar with the deliberations about potential changes to ITINs said. They were granted anonymity to discuss them candidly.
Last year’s attempt to facilitate tax information sharing with ICE caused upheaval at the I.R.S. Several top leaders resigned because they thought the plan would violate federal tax privacy law. Ultimately, the addresses of roughly 47,000 people were shared with ICE before judges halted the program, though immigration officials have said in court that they did not use that information.
For decades, the I.R.S. has in effect looked the other way on immigration status, focusing instead on encouraging people to pay the taxes that they may owe. Undocumented immigrants have been estimated to pay roughly $60 billion a year in federal taxes, and they are generally ineligible for federal benefits, including tax credits.
“There’s no tax reason for knowing whether someone is undocumented,” said Nina Olson, formerly the taxpayer advocate at the I.R.S. and now the executive director of the Center for Taxpayer Rights, a nonprofit that sued over the data sharing. “If you have people who aren’t eligible for tax credits claiming credits, that isn’t due to their undocumented status. They’re ineligible because they have an ITIN, which under the law disqualifies them.”
Ms. Olson said that specifically identifying undocumented immigrants through the tax system could inflame concerns about the I.R.S. using tax information to try and enforce immigration laws. Even though the data sharing with ICE has been blocked, the news of the practice has caused some undocumented immigrants to forgo filing their taxes, potentially resulting in the government collecting less tax revenue.
Many undocumented immigrants work conventional jobs, with taxes withheld from every paycheck. For them, filing their taxes could result in receiving a refund from the government if they overpaid over the course of the year. Migrants who work as contractors or are self-employed may owe taxes when they file.
If the I.R.S. is seen as an unreliable custodian of private information, undocumented immigrants may leave conventional jobs and instead do work that is paid under the table and avoid paying taxes at all. Reduced tax collection could have an outsize effect on Social Security and Medicare, the fiscal health of which undocumented immigrants support through payroll taxes.
“The government wants individuals to meet their tax obligation regardless of the source of income or their immigration status,” said Mark Everson, a former I.R.S. commissioner and now the vice chairman at alliantgroup. “As they work through this area, they should work to avoid taking actions that result in more people working off the books.”
Hamed Aleaziz contributed reporting.
Andrew Duehren covers tax policy for The Times from Washington.
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