IRS-ICE Agreement Weakening Privacy Protections Poses Risks for All Taxpayers

In an unprecedented break from long-standing IRS practices related to taxpayer privacy, the Treasury Department and the Department of Homeland Security (DHS) signed a memorandum of understanding (MOU) on April 7 setting out a procedure for the IRS to share taxpayer data with U.S. Immigration and Customs Enforcement (ICE), reportedly to support the Trump Administration’s mass deportation efforts. This agreement poses serious risks not only for people without a documented immigration status, but for all taxpayers.

Federal tax law requires all residents to pay tax regardless of their immigration status. People without a documented immigration status paid an estimated $66 billion in federal taxes in 2023, according to the Yale Budget Lab. These payments help fund programs that people who are undocumented aren’t eligible for, such as Social Security, Medicare, and unemployment insurance. Also, the state and local taxes paid by people who are undocumented support education, roads, health care, and other services that have broad benefits for our nation.

People without a documented immigration status are ineligible for a Social Security number (SSN), so they — along with other people ineligible for an SSN despite having a lawful immigration status — file taxes with an Individual Taxpayer Identification Number (ITIN) they obtain from the IRS.

To clarify the IRS’s legal requirements to protect taxpayers’ privacy and to help people feel safe in providing their information, the IRS has explained that statutory requirements limit its ability to share their data for immigration enforcement purposes. In 2017, during the first Trump Administration, the IRS noted that:

The IRS has strong processes in place to protect the confidentiality of taxpayer information, and this includes information related to tax returns filed using ITINs. . . . There is no authorization under this provision [i.e., recent federal legislation that required many people to reapply for their ITINs] to share tax data with ICE.

If the IRS now proceeds to share taxpayer data with ICE, its actions would violate this understanding and could put taxpayers in harm’s way.

The Trump Administration submitted the April 7 MOU, with the specific data requests redacted, in a court filing as part of ongoing litigation to block the Administration from sharing taxpayer data. The lawsuit against the Administration points to statutes requiring the IRS to protect taxpayer data, with only limited exceptions.

The MOU has raised significant concerns within IRS and led to the departure of several senior IRS officials.

A shift in the IRS’s data-sharing practices could have a chilling effect on tax compliance among people who are undocumented, people who have a lawful immigration status but are ineligible for SSNs, and taxpayers more broadly. Because our federal tax system relies on voluntary compliance — with far too few enforcement resources (particularly after recent cuts to the IRS workforce and budget) to rely on audits alone for compliance — such chilling effects could lower revenues significantly. According to one estimate, tax payments by people who are undocumented could decline by roughly $313 billion over ten years.

The risks of IRS data sharing extend far beyond people who are undocumented. Individuals could be erroneously identified as targets of ICE investigations, since IRS databases are not designed for immigration enforcement and ICE has a checkered history of data errors. The Trump Administration risks violating the civil liberties of U.S. citizens or people with lawful permanent residence if it misidentifies individuals based on outdated address data or confuses people with similar names in the IRS database, even inadvertently, and then detains or deports them. Potential data errors also raise legal questions about the validity of any data-sharing agreement.

As further details emerge on the MOU and the separate implementation agreement named within (which has not been made public), Congress should scrutinize the legality of those agreements and demand that the Administration provide estimates of the revenue implications of such actions. An unprecedented weakening of taxpayer privacy protections in one area raises serious concerns across the board.