Undocumented Head to Accountants to Pay Taxes

For Carlos Rodriguez, a self-declared undocumented immigrant, tax day isn’t about refunds or money he’ll have to pay to the government. It’s about establishing a record.

“I don’t have any reason to hide,” he said on a recent evening, while waiting along with a handful of other immigrants, for his appointment at a free tax clinic on Mission Street.

Tax preparers throughout the Mission District, say that tax filers like Rodriguez are increasing, despite the recession. They are walking, W-2s in hand, into storefronts along Mission Street advertising tax prep services in Spanish or the handful of free clinics run out of non-profits and community centers on evenings and weekends.

Such tax services in the Mission rival taquerias for the highest number of storefronts and have become ubiquitous in most heavily Latino communities as millions of undocumented immigrants file tax returns each year, even without collecting the benefits for which they pay.

For ten years, Rodriguez, a roofer who is now unemployed, has diligently declared his income to the Internal Revenue Service so that he can prove his tenure in the country if there is immigration reform and that he—like a legal resident—has contributed to government coffers.

Paying income taxes is the law for anyone who earns wages in the United States. Yet undocumented immigrants face special challenges in filing a return.

To work legally in the country, an employee needs a valid social security number. But undocumented workers are ineligible for one.

That leads many undocumented workers to make up social security numbers or acquire somebody else’s number, said Francine Lipman, a professor of tax law at Chapman University in Los Angeles.

Since 1996, the IRS has issued Individual Taxpayer Identification Numbers, or ITINs, which has reduced the confusion this creates, she added. The nine-digit codes are issued to anyone ineligible for a social security number and serve as a unique identifier for the purpose of paying taxes.

ITINs can also be used for other things, like opening bank accounts or getting a car loan. But they do not give a person the right to work legally in the country.

“The system is oxymoronic,” said Lipman. “The tax return has an inconsistency in that the W-2s don’t match the ITIN.”

That inconsistency has not diminished their popularity.

Peter Gomez, a tax preparer who works out of the back of a travel agency on Mission Street, said that every Saturday people walk in off the street after spotting a folding sign he puts out on the sidewalk: “Federal & State Income Tax Service / se habla español.” He said that many clients have a similar request: “Quiero mi ITIN.”

Between 1996 and 2007, the last year of available data, the IRS issued 12.5 million ITINs nationally. And in 2007, more than 2 million tax returns were filed with them. The Pew Hispanic Center estimated that there were 8.3 million undocumented workers in the United States in 2008.

The IRS does not ask about immigration status when taxpayers apply for an ITIN, says Jesse Weller, a spokesperson for the agency, so there are no statistics on how many people using them are undocumented.

But Lipman said there is only one likely explanation for the rapid growth of tax returns with ITINs in recent years: more undocumented workers are using them to file.

For many undocumented workers, she added, there’s a more immediate upside to filing taxes than staying right by the government in case there is immigration reform. Many lower-income workers are eligible for refunds.

Taxpayers who file with an ITIN do not receive social security benefits or the earned income tax credit. But they are eligible for the child tax credit, said Lipman. And if they have dependents in Canada or Mexico, they can claim those, too.

This year, undocumented immigrants who are married to legal residents are also eligible for the Making Work Pays tax credit. The stimulus measure gives $800 to a married couple filing jointly, as long as either the husband or the wife has a valid social security number, said Lipman.

These benefits have made ITINs an attractive option for Evelyn Herrera’s more than 1,000 clients, many of whom are Mexican nationals. The accountant, who works out of an office cramped with desks on 24th Street, says that roughly half of her clients use ITINs. Usually, she said, they are the first to complete their returns.

“They want to pay taxes and comply with the law,” she said.

Still, some neighborhood tax professionals said that there are plenty of undocumented immigrants who are afraid of paying taxes or choose not to.

Carlos Loucel, who runs an accounting business near 16th and Mission Streets, said he still hears lots of undocumented workers give excuses for not paying. Some, he added, have no intention of becoming legal residents. Others are afraid to give the government information about their whereabouts.

The IRS’s Weller said that the agency is prohibited by law from sharing taxpayer information with other government agencies, including Homeland Security, except in cases involving terrorism or fraud.

That assurance brought Manuel Lozano and his brother, Alberto, to Liberty Tax Services on 24th Street on a recent afternoon. The siblings sat in a tidy waiting area across from a wall where dozens of IRS forms—in English and Spanish—were neatly arrayed for clients.

Lozano says he started going to Liberty because it is clean and the staff are professional. His first tax preparer in the Mission lost his birth certificate when he was applying for an ITIN.

Asked why he was filing taxes, the restaurant worker said that he and his brother had done so ever since they came to the United States four years ago from Guanajuato, Mexico. “If you’re here, I believe you should follow the rules,” he said.