Concerns Raised About Potential IRS Sharing Of ITIN-Related Information

IMMIGRANTS & EMPLOYMENT

INS Workplace Enforcement

Concerns raised about potential IRS sharing of ITIN-related information
Immigrants' Rights Update, Vol. 18, No. 1, February 17, 2004

Agents in the office of the U.S. Treasury Inspector General for Tax Administration (TIGTA) may have improperly targeted for investigation persons who used individual taxpayer identification numbers (ITINs) when filing their income tax returns. The TIGTA is the law enforcement arm of the U.S. Treasury Dept. Advocates are concerned that a result will be to discourage the nation's millions of immigrant taxpayers from filing tax returns.

Immigrant tax-filers who are not eligible for a Social Security number can apply for an ITIN so they can comply with their legal obligation to file tax returns. The confidentiality of that information is protected under section 6103 of the Internal Revenue Code. As the Internal Revenue Service's (IRS's) national taxpayer advocate recognized in her most recent annual report to Congress (dated Dec. 31, 2003), "Nowhere is the importance of the confidentiality protections of tax return information under IRC section 6103 more apparent than with the taxpayer population using ITINs . . . . Confidentiality of ITIN information . . . is critical to encouraging undocumented taxpayers to file tax returns." The annual report acknowledges that many taxpayers using ITINs are undocumented and that "[t]he IRS ITIN databank is understandably of interest to other federal agencies charged with enforcing the immigration laws and protecting national security." Nevertheless, the IRS recognizes that it must "vigorously protect" the confidentiality of ITIN information. As the report notes, "Despite the distinctly undesirably behaviors actually or potentially associated with ITINs, the [IRS] remains legally responsible for enforcement of the nation's tax laws with respect to ITIN holders."

Recently, however, it has come to light that Louisville, Kentucky-based TIGTA agents targeted for investigation tax-filers who used ITINs because the ITINs appeared on their W-2 forms, indicating that they were working without proper employment authorization. As a result of the investigations, the TIGTA filed federal criminal charges unrelated to the enforcement of tax laws against the ITIN-users, and the latter now face removal proceedings. Since the TIGTA and the IRS are separate agencies within the U.S. Treasury Dept., one possible explanation for how TIGTA agents knew whom to target was that Louisville-based IRS agents tipped them as to which tax-filers had used ITINs.

One taxpaying worker, a tobacco picker who in 2000 worked a few months for a nursery, is facing serious document fraud charges as a result of a TIGTA investigation. TIGTA agents used the fact that the worker's wife's W-2 contained an ITIN as a reason for contacting his prior employer and immigration authorities. The criminal charges the TIGTA subsequently filed against him are for alleged fraudulent use of a Social Security number and an alien registration (or "green") card, not for any violation of tax laws. A conviction of document fraud can permanently bar an undocumented person from adjusting to legal status or immigrating to the U.S. Compounding the seriousness of the TIGTA's action against the tobacco picker is the fact that the criminal complaint it filed in federal court contains the worker's legitimate ITIN, as well as the name, address, and Social Security number of the person whose SSN he allegedly used when applying for the nursery job-an alarming invitation to anyone with access to the complaint to steal the SSN-owner's identity.

The TIGTA agent who conducted the investigation advised the taxpayer's lawyer that the IRS has compiled a list of 250,000 persons nationwide whom the agency suspects are undocumented. The agent advised the lawyer that, for national security reasons, his personal intention is to prosecute as many of these people as possible. The IRS subsequently has denied that it has such a list.

In a letter to the taxpayer's lawyer, the IRS's national taxpayer advocate maintained that "it is not the policy of the IRS to release tax returns or return information to federal agencies for investigation of nontax crimes unless a Federal district court judge or magistrate has issued to us an ex parte order requiring the release of that information. IRC 6103(i)(1)." She acknowledged that congressionally-authorized taxpayer clinics for persons of low income serve immigrants who are not legally eligible to work in the U.S. She asserted that IRS employees are required to release information to TIGTA in the course of an official TIGTA investigation and that she had been personally advised by the acting Treasury inspector general for tax administration that it is completely inaccurate to state that TIGTA is investigating 250,000 taxpayers with the intent of prosecuting those who are undocumented and have committed document-related crimes. She advised the lawyer that "TIGTA is now looking into the way in which this particular case was handled" and that she has "been assured that this kind of issue and action is not in its normal investigative inventory for handling in the manner this case was handled." She reiterated that the "protections of IRC 6103 for tax returns and tax return information is [sic] very great." (For a copy of the national taxpayer advocate's letter to the tobacco worker's attorney, contact NILC's Joan Friedland at friedland@nilc-dc.org.)

However, in what is evidently a troubling departure of opinion and interests, the TIGTA made clear in a January 2004 report that it disapproves of restrictions on the IRS sharing ITIN-related information, complaining that this prevents the IRS from "assist[ing] with addressing unauthorized immigration or unauthorized work." (The report, titled "The Internal Revenue Service's Individual Taxpayer Identification Number Creates Significant Challenges for Tax Administration," Ref. No. 2004-30-023, Jan. 2004, is available online at www.ustreas.gov/tigta/2004reports/200430023fr-redacted.html.)

Immigrants' rights and taxpayers' advocates were gratified by the national tax advocate's clear recognition of the potential for cases such as the tobacco picker's to discourage taxpayers from filing tax returns. However, the impact of the TIGTA's actions call for a clear statement of commitment from the highest reaches of the Treasury Dept. that such enforcement actions will not be tolerated. Accordingly, the National Immigration Law Center, the Center for Economic Progress, the National Consumer Law Center, the National Council of La Raza, the National Employment Law Project, the Midwest Immigrant and Human Rights Center, and the Louisville Legal Aid Society Low Income Tax Clinic have written to the secretary of the Treasury, the IRS commissioner and other high-ranking Treasury Dept. officials seeking to obtain such a commitment.

The organizations expressed their deep concern that the IRS and the TIGTA are using their resources to enforce immigration laws, an activity that is not within their jurisdiction and that only serves to undermine tax administration purposes. If complying with the tax laws renders immigrants more vulnerable to immigration enforcement than they would have been had they not filed tax returns, then many of the resources that have gone into conducting outreach and education among the growing immigrant communities across the U.S. urging them to apply for ITINs and file their taxes will be for naught. As a law enforcement agency, the TIGTA should be focusing its efforts on fighting tax evasion, money laundering, and other tax-related criminal activities rather than acting as deputized immigration agents. Likewise, the IRS should be working towards removing the barriers to compliance faced by immigrant taxpayers rather than cooperating in immigration enforcement activities that will undo any efforts to bring all workers into the tax system.

This issue arises at a critical time during the tax-filing season. Before taxpayers' advocates can continue confidently assisting immigrant taxpayers this season and advising them that the IRS will not share the information on their returns with other government agencies, they need to hear a definitive and official public statement to that effect from the IRS commissioner and the Treasury Dept.'s inspector general and/or secretary. So do immigrants' advocates who educate and advise taxpayers about their rights and obligations with respect to tax laws. Anything less will result in advocates having to inform immigrant taxpayers that, while it is their obligation to file tax returns, if they do so there is also a great risk that, if they got their job by using fraudulent documents, they will be criminally prosecuted and possibly deported.

While advocates have always had some concerns about whether it is safe for immigrant tax-filers to use an ITIN, the post-9/11 climate has clearly made this an even more urgent concern. While these latest enforcement developments might be limited to Kentucky, and while it is possible that any further enforcement in these cases will be quelled, the risk of any future inappropriate enforcement action still exists unless the Treasury Dept. issues a clear policy statement and puts internal mechanisms in place to prevent it from occurring.

As a result of the renewed debate over immigration reform and what to do about the millions of undocumented immigrants now living and working in the U.S., many more immigrants are coming forward to file tax returns as a means of showing that they have voluntarily complied with U.S. tax laws and are persons "of good moral character." Discouraging people from filing their taxes clearly conflicts with the immigration law's requirement that immigrants, lawful or undocumented, comply with the tax laws, and it provokes fear within the immigrant taxpayer community that will make it more difficult for undocumented workers to "come out of the shadows" once immigration reform becomes a reality.