Where does ICE access to IRS data leave undocumented Minnesotans?

NINA MOINI: Today is tax day for Americans. This year marks a shift in policy at the Internal Revenue Service, the IRS, which is responsible for collecting federal taxes. Last week, the Trump administration announced an agreement which allows ICE officials to ask the IRS for personal tax information of undocumented immigrants who are, quote, "under criminal investigation." Several top IRS officials have resigned following the announcement.

Joining me to help break down what this means for undocumented Minnesotans is Caleb Smith. He's a professor at the University of Minnesota Law School's Tax Law Clinic. Thanks for joining us today.

CALEB SMITH: Thank you for having me. I appreciate it.

NINA MOINI: So, Professor, how big of a shift in policy is this that the IRS is going to be sharing information with ICE officials? Has this happened before?

CALEB SMITH: Well, it is not as if it creates a new law or anything to that degree. It's a policy change. I think the concern and where the ideas come in that it is a very big shift and that some people have potentially resigned that are higher up at the IRS because of it, is it really seems to indicate and signal a desire to really ramp up this preexisting law to disclose information on a much, much larger scale. That's the concern.

So I would say that just in the creation of the MOU, the Memorandum Of Understanding, it really indicates and signals a desire to really move forward and probably vastly expand the sharing of information. So it's hard to gauge right now exactly how big of a policy shift it is, but it certainly is a big signal.

NINA MOINI: And do you have concerns that it would go beyond just collecting that information and sharing that information with one group of people-- in this case, undocumented immigrants? Would it have further implications to other laws or other groups of people that you could foresee now?

CALEB SMITH: Well, the MOU is redacted, and that is a concern of some people for how far it could go. As it's written and the parts that are publicly available right now, it is laid out that it is basically just for criminal investigations of federal criminal statutes, generally involving people that are subject to removal orders. I think the general concern, again, is signaling. Everybody's wondering what this means and what this will do.

It's obviously in the very initial stages, so the question is one of trust more than anything. Will this MOU end up resulting in some sort of exchange of information that goes beyond just undocumented individuals? I'm not sure, but it certainly signals an idea that we are going to share more information than we previously have between government agencies. And I think that can lead to some people being worried, because historically, tax information is very privately guarded.

NINA MOINI: And I think some people might be surprised to even learn that undocumented immigrants pay taxes and then follow a tax filing process. Can you talk a little bit about how it is different?

CALEB SMITH: Sure thing. There are a lot of differences there. But the first overarching important thing to note is, yes, undocumented individuals-- anybody here that's earning money, really-- has to pay taxes. And many, many do. Our filing system is generally considered self-reported. You are the one to prepare the tax return, not the government in 99% of the cases, and undocumented individuals do so.

And there are a lot of differences in how the process works, because as a lot of people are probably dealing with today filing taxes, one of the first things you put in your tax return is your Social Security number. A big thing and a big difference that people are not aware of, perhaps-- well, if you're undocumented, you don't generally have a Social Security number, but you still have to file taxes by law. So the IRS has this-- basically, it's like a stand-in for a Social Security number, and it's very uncreatively named the ITIN, the Individual Taxpayer Identification Number. It looks just like a Social Security number, except for one thing. It always starts with the number 9.

So individuals that need to file tax returns get an ITIN from the government, and then they prepare-- and that process itself, frankly, can be kind of arduous. It's not particularly like the government is just handing them out. A lot of times, you have to send in source documents, including a passport, to get it. After that, you more or less prepare a tax return, in most cases, very similar to any citizen or resident, but with a few key exceptions, one being that if you have an ITIN, you generally aren't eligible for a lot of the tax credits that a citizen would get. So effectively, your tax rate is usually higher.

Another key difference-- and this isn't necessarily the filing of the tax return, but it's just how taxes work-- if you are an employee, you're getting money withheld from every paycheck. And some of that money withheld, and especially if you're low-income, the bigger part of it is not federal income tax. It's Social Security and Medicare.

Now, when you are an employee like that, you have a Social Security number because you're telling your employer you're able to work for them. But if you're undocumented, clearly, you don't have that. So most of the time, what's happening is you're basically being paid under an assumed Social Security number that isn't yours.

When you go to file your tax return, you put in your ITIN. And what that tells the government, basically-- this is very simplifying, but it's more or less how it works-- is the Social Security that was withheld from your paycheck and applied to or credited to the Social Security number that isn't yours, well, that just gets taken and put into, basically, a general pool. You're never-- you, the undocumented individual are never going to get that money, but it helps basically keep Social Security solvent. It's money that just becomes available.

So you are paying the tax. Even if you didn't file a tax return in that instance, you'd still have the tax withheld. But I don't know that there's actually numbers on what percentage of undocumented individuals pay or file taxes, but a large amount do.

NINA MOINI: Well, what would your advice be given all of this, these changes and some of the confusion that still may exist out there, if you were talking to folks who are maybe undocumented, who want to try to file taxes? You're saying it's still the right thing to do to do it, and safer to do it, because people might hear all this and be concerned about having information out there.

CALEB SMITH: Exactly. And I don't know if I can stress this enough. As a lawyer, I could never advise somebody who has a filing requirement, which undocumented individuals generally do-- I can't advise you don't file a return, because I'm basically advising you to break the law. But beyond that, and taking off my lawyer hat to what, from my understanding of the MOU and how the system is working right now-- although there's a lot of uncertainty-- I still cannot see reasonable advice that would say do not file taxes when you have a requirement to or just do not file taxes. I understand the concern, but I would note a few things in the MOU.

One question, just to take a step back-- what am I really opening myself up to if I file a tax return? What is ICE going to do with it? And I think the common idea or the common concern would be, well, ICE could just look for anybody who has an ITIN, which is easy to find. It's a number 9. Just ask the IRS for anybody with the number 9 in their-- where the Social Security number is. So the ITIN is 9. And where do they live?

If they could just dragnet that, that would be very scary. That would be just basically a list of here's where everybody with an ITIN filed a tax return. That's not what the MOU and not what the law would allow. The MOU requires that, basically, DHS or ICE request to the IRS beginning with the name and address of the taxpayer. So they theoretically already have a name and address of the person they're asking for information on. So they can't do this dragnet of just show me everybody with an ITIN, and then I'm going to find people that are here undocumented.

So all of this is to say the downsides of not filing, to me, and from some interactions with some other immigration attorneys, are still worse, I think. For one, you have a requirement, but two, you generally want to show good behavior. Sometimes you have to show that you've actually physically been present in this country for a while in certain circumstances. I don't think of an upside. I totally understand the fear. And I think that's, again, the signaling here.

But I really would say still file. The concern I think most people are going to have is, well, am I just giving my address away? And you could theoretically file with a PO box, but you'd still file your return. The biggest key parts of filing a return, frankly, are getting the right amount of tax.

NINA MOINI: OK. Well, thank you so much, Caleb Smith, for coming by and sharing your knowledge with us. I learned a lot. Thank you.

CALEB SMITH: Of course. Thank you for having me.

NINA MOINI: That was Caleb Smith, Professor at the University of Minnesota Law School's Tax Law Clinic.