Individual Taxpayer Identification Number (ITIN)

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service (IRS) to individuals who are required to have a U.S. taxpayer identification number but are not eligible for a Social Security Number (SSN). This includes nonresident aliens, resident aliens, and undocumented immigrants who have federal tax filing obligations. The ITIN enables these individuals to comply with U.S. tax laws by filing tax returns and paying taxes. 

Benefits of ITINs for Undocumented Individuals

1. Tax Compliance: ITINs allow undocumented immigrants to fulfill their legal obligation to file federal income tax returns. This compliance is crucial, as failure to file taxes can have legal consequences and may negatively impact future immigration proceedings. 

1. Contribution to Public Services: By paying taxes, undocumented immigrants contribute to essential public services such as Social Security, Medicare, and infrastructure development. In 2022, undocumented immigrants paid approximately $96.7 billion in federal, state, and local taxes, including $25.7 billion in Social Security taxes and $6.4 billion in Medicare taxes. Despite being ineligible for these benefits, their contributions support the overall economy. 

1. Financial Opportunities: Possessing an ITIN enables individuals to open bank accounts, apply for credit, and secure loans. Some financial institutions accept ITINs in place of SSNs, facilitating access to financial services that can aid in building credit history and achieving financial stability. 

1. Pathway to Legalization: Maintaining a history of tax compliance can be beneficial for undocumented immigrants seeking legal status. Proof of consistent tax payments may demonstrate good moral character and continuous physical presence in the U.S., which are factors considered in certain immigration applications. 

Drawbacks of ITINs for Undocumented Individuals

1. Ineligibility for Benefits: Despite contributing to programs like Social Security and Medicare, ITIN holders are not eligible to receive benefits from these programs. Additionally, they cannot claim the Earned Income Tax Credit (EITC), which is designed to assist low- to moderate-income workers. 

1. No Legal Work Authorization: An ITIN does not provide legal authorization to work in the United States. It is solely intended for tax purposes and does not alter an individual’s immigration status. Therefore, while an ITIN facilitates tax compliance, it does not protect against employment-related legal issues. 

1. Limited Access to Tax Credits: ITIN holders are restricted from claiming certain tax credits. For instance, under the Tax Cuts and Jobs Act of 2017, from 2018 through 2025, taxpayers can only claim the Child Tax Credit for children with a valid SSN. This limitation excludes many ITIN holders from accessing this benefit. 

1. Potential for Policy Changes: Immigration and tax policies are subject to change based on the prevailing political climate. For example, stricter immigration enforcement policies could deter undocumented individuals from applying for ITINs due to fear of exposure, despite IRS assurances that tax information is not shared with immigration authorities. 

Considerations Under President Trump’s 2025 Administration

As of February 2025, President Donald Trump’s administration has implemented stricter immigration enforcement policies, including increased deportations of undocumented individuals. These policies may have significant implications for ITIN holders:

• Decreased Tax Revenue: Mass deportations could lead to a reduction in tax revenues. The Social Security Administration previously estimated that such actions could result in a loss of up to $20 billion annually in tax contributions. 

• Economic Impact: The removal of undocumented workers may disrupt local economies by eliminating a substantial labor force and eroding the tax base that supports public services. This could have broader economic consequences, particularly in industries that rely heavily on immigrant labor. 

• Increased Fear Among Immigrants: Heightened enforcement may deter undocumented individuals from applying for or renewing ITINs due to fear of detection and deportation, potentially leading to decreased tax compliance and further marginalization. 

Conclusion

The ITIN serves as a vital tool for undocumented immigrants to comply with U.S. tax laws, contribute to public services, and access certain financial opportunities. However, it does not provide legal work authorization or eligibility for many tax benefits. Under the current administration’s stringent immigration policies, ITIN holders face additional challenges that may impact their willingness to engage with tax systems and their overall economic stability. It is essential for policymakers to consider these factors when shaping tax and immigration policies to ensure that they promote compliance, economic contribution, and the well-being of all residents.