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Tax Returns Rise for Immigrants in U.S. Illegally

Suzanne DeChillo/The New York Times

In a Queens senior center, Elsa Forero, an immigrant from Colombia, gets tax aid from John Quing of Food Change, a nonprofit agency.

Published: April 16, 2007
With the tax deadline approaching, illegal immigrants are sending in federal returns in what appear to be record numbers despite fears heightened by recent immigration raids around the country.

The increase in filings comes amid talk of an immigration overhaul, with some proposals introduced in Congress linking amnesty to the payment of taxes. Many illegal immigrants showing up at tax preparation offices around the country say they hope that filing a return will create a paper trail that could lead to citizenship one day.

In Raleigh, N.C., a tax preparer found 350 immigrants waiting outside his office at 7 a.m., including one dragging a suitcase that held $14,000 in cash for back taxes. In Baltimore, a community agency offering free tax help that was deserted the day after 69 people were rounded up in immigration raids elsewhere in the city was crowded again within 24 hours.

And a help center in Queens did record business among illegal immigrants like Dionicio Quinde Lima, who has worked in construction strictly off the books since he arrived from Ecuador three years ago, but was eager to join the fold of United States taxpayers last week.

“I feel it’s my responsibility to pay,” said Mr. Lima, 39, clutching a $202 money order for the Internal Revenue Service. “And if it helps me get papers, fine. The most important would be a permit to travel back and forth to see my family.”

Illegal immigrants do not have Social Security numbers, but the Internal Revenue Service allows them to file taxes by assigning applicants individual taxpayer identification numbers. The numbers were introduced in 1996 to encourage noncitizens with United States income, including foreign investors, to file returns. It is generally accepted that most of the 11 million numbers issued since then have gone to illegal immigrants.

The I.R.S., which does not ask about immigration status, is barred from divulging taxpayer information, with very limited exceptions, to other agencies, like the Department of Homeland Security.

In the 2005 tax year, the last for which such data is available, 1.9 million returns were filed with the primary taxpayer’s using an individual taxpayer number, known as an ITIN, up 30 percent from 2004.

Applications for the numbers spiked last year, with 1.5 million new ITINs issued through the beginning of November, more than any full year since the program started.

Nancy Mathis, a spokeswoman for the I.R.S., said the agency did not know the reason for the increase, but added, “It is likely due to more effective outreach by community organizations and proposed legislation last year linking payment of taxes to eventual citizenship.”

In 2005 alone, more than $5 billion in tax liability — the total owed, including money withheld from paychecks during the year — was reported in the 2.9 million returns that listed at least one person with an ITIN, she said. And between 1996 and 2003, such filers reported nearly $50 billion of tax liability.

Organizations pushing for stricter immigration enforcement have criticized the use of the individual numbers by illegal immigrants, saying that allowing them to file returns, pay taxes and receive refund checks legitimizes their illegal presence. But the I.R.S. says it is just doing its job as a tax collector, and is not an immigration enforcement agency.

“Clearly, we maintain a separation between the two systems,” Mark W. Everson, the commissioner of the I.R.S., said recently. “We want your money whether you are here legally or not and whether you earned it legally or not.”

And because most immigration bills make the payment of back taxes a prerequisite for legal status, that message seems to be getting through more clearly than ever.

“Right now there’s quite a stampede going on in many areas, including mine,” said Blaire Borthayre, a consultant in Hispanic marketing based in Raleigh who described early-morning crowds gathering outside Family Tax Service, her husband’s tax preparation business. “It’s word of mouth.”

One client, she said, was a Mexican man who lugged in a suitcase holding $14,000, cash he had set aside to pay his taxes over six years of work as a landscaper. Like many, he had only recently learned that he could file a legitimate tax return, said Ms. Borthayre, who is the author of several books on tax preparation with ITINs.

Like Social Security numbers, individual taxpayer numbers have nine digits, but all begin with a “9.” The appeal of the numbers grew as they were accepted in some places as alternative identification to open a bank account, qualify for credit or even obtain a driver’s license — all uses that the I.R.S. opposed and has tried to curb, Ms. Mathis said.

Since 2003, applications for an ITIN must be accompanied by a tax return, with few exceptions. And to avoid confusion with a Social Security card, the I.R.S. now sends a letter assigning a number, instead of a card.

Those changes did not mollify critics like Mark Krikorian, director of the Center for Immigration Studies, which opposes bills that would let some longtime illegal residents achieve legal status.

“First of all, almost all the people filing tax returns are doing it because they’re going to get tax refunds,” Mr. Krikorian said. “It’s a bad thing, because they’re not obeying the law — they’re deciding which laws they prefer to obey. If they were interested in demonstrating their law-abiding nature, they would pack up and go home.”

At a senior center in Jackson Heights, Queens, where Mr. Lima waited with an envelope decorated with an American flag and the label “Important Tax Records,” organizers of the free tax-help program said that ITIN refunds were much less common there than tax bills.

Of 1,700 ITIN returns prepared there between mid-January and early April, two-thirds of the filers owed money, said P. J. Kim, director of income policy at Food Change, a nonprofit agency in New York City that uses laptops and software lent by the I.R.S. The average income was $9,400 a year, the average tax bill was $623 and the highest was $7,275.

Mr. Lima said that he had been a police officer for 16 years in Ecuador, before the country’s economic crisis left him unable to support his wife and three daughters on his wages. He sent them about half the $12,000 he made last year, he said. “I’m not afraid,” he added. “I really don’t feel I’m doing anything wrong. I’m working and I’m paying taxes.”

Others are afraid, but file anyway, said Lourdes Montes-Greenan, Latino services manager for the nonprofit East Harbor Community Development Corporation in Baltimore, where a day of immigration raids around that city disrupted tax preparation, even though the group’s office was not raided.

“The day after the raid, nobody showed up in the office,” Ms. Montes-Greenan said. “People were scared.” Yet by the end of the week, she added, the flow of taxpayers was as high as ever.

“They say they want to be compliant,” she said. “In case immigration reform comes, they want to be ready.”

Another reason for a surge in ITIN filers, Ms. Borthayre suggested, is that tax preparation chains like Liberty Tax Service and H & R Block are waking up to the market, and are learning to navigate the complications. Under tax treaties with Mexico and Canada, for example, ITIN filers can even claim deductions for dependents who live in those countries, reducing their taxable gross income by about $3,300 per child, she said. But children must have their own ITINs to be listed, fueling demand that has pushed the price per application as high as $200 at some unscrupulous mom-and-pop operations.

“People are desperate,” she said. “They believe immigration reform is either here or on its way.”

In the Queens center, Ana Andrade, 32, from Mexico, had other incentives. She presented a W-2 form that showed withholding of more than $3,000 from the $24,000 she had earned as a cook in a Manhattan restaurant, at $10 an hour. Like more than seven million such W-2 forms nationwide, hers bore a false Social Security number.

No problem, the senior tax specialist explained. Her return would be filed under her ITIN, with the problematic W-2 form, and the I.R.S. would simply credit her wages to her ITIN. The result: a $2,000 refund, based mainly on child credits for her two American-born children, 9 and 10.

Ms. Mathis of the Internal Revenue Service said that if the name on the W-2 matched the name on the ITIN, the return would be processed.

At the next table, Elsa Forero, 35, from Colombia, knew no refund was possible. She watched anxiously as a tax specialist and a volunteer parsed her cash wages as a baby sitter and her deductions for two children, including a 4-year-old son born in New York. The bottom line: She had to pay the federal government $579, but could expect a state tax credit for $115.

“I want to pay taxes because I live in this country and I like to follow the rules,” she said.

And how would she pay?

“Little by little,” she said.

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