When tax compliance is weaponized because of the "status" of an individual there is a risk in attempting compliance and a risk in non-compliance. The undocumented in the USA have a lot in common with US citizens outside the USA. (NYTImes.com gift article)www.nytimes.com/2026/04/14/u…
— John Richardson (@expatriationlaw.bsky.social) 2026-04-17T12:52:36.628Z
Part A – Why tax systems be restricted to taxation and not be used as a mechanism to enforce immigration laws
The New York Times article includes:
For decades, the I.R.S. implicitly encouraged undocumented taxpayers to file a return as part of its broader mission to promote tax compliance. Before the agreement between the I.R.S. and ICE, unauthorized immigrants paid roughly $60 billion annually in federal taxes, according to an estimate by the Institute on Taxation and Economic Policy, a progressive think tank. Much of it went to Social Security and Medicare, which are programs that undocumented immigrants cannot benefit from.
With few exceptions, taxpayer information was kept walled off from other government agencies, and that won a measure of trust among many undocumented immigrants. But under President Trump, the effort to find as many immigrants to deport as possible led the administration to try to exploit that trust.
Bottom line: The assumption that the information in a tax return would not be shared to other government agencies has been shattered. The “undocumented” have reasonable grounds for worry.
Of further interest is:
John Koskinen, who was the I.R.S. commissioner from 2013 to 2017, said the potential consequences of sharing tax data with D.H.S. were evident.
“Our job was to collect taxes owed, not enforce immigration laws,” said Mr. Koskinen. “That was the job of D.H.S. And it was clear to me that, if immigrants thought their information was going to be shared, many of them would quit filing their tax returns.”
The link in the article is a “Gift Link”. Hence, you can see the comments which are interesting.
Part B – Thinking about the FATCA related transmission of taxpayer data to the United States
It’s obvious that the U.S. government believes that taxpayer data can and should be used for purposes that extend beyond taxation. Although this is not a surprise, it is clearly one more reason why the countries should not be transferring data to the United States pursuant to FATCA IGAs.
The Canada/US Tax Treaty restricts the use of information received pursuant to the treaty to tax administration!
1. The competent authorities of the Contracting States shall exchange such information as may be relevant for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes to which this Convention applies insofar as the taxation thereunder is not contrary to this Convention. The exchange of information is not restricted by Article I (Personal Scope). Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the taxation laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the administration and enforcement in respect of, or the determination of appeals in relation to the taxes to which this Convention applies or, notwithstanding paragraph 4, in relation to taxes imposed by a political subdivision or local authority of a Contracting State that are substantially similar to the taxes covered by this Convention under Article II (Taxes Covered). Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. The competent authorities may release to an arbitration board established pursuant to paragraph 6 of Article XXVI (Mutual Agreement Procedure) such information as is necessary for carrying out the arbitration procedure; the members of the arbitration board shall be subject to the limitations on disclosure described in this Article.
Whereas, Article XXVII of the Convention Between the United States and Canada with Respect to Taxes on Income and on Capital done at Washington on September 26, 1980, as amended by the Protocols done on June 14, 1983, March 28, 1984, March 17, 1995, July 29, 1997, and September 21, 2007 (the “Convention”) authorizes the exchange of information for tax purposes, including on an automatic basis;
Under the treaty, the United States is permitted to use information received pursuant to FATCA IGAs ONLY for tax related purposes. Given the USA clearly is now using tax information for immigration enforcement (and who knows what else).
Can the United States be trusted to restrict the use of FATCA related information to tax enforcement?
This question has a new urgency now that the European Court of Justice will be considering the issue of the FATCA IGAs.
Part C – Why the undocumented are members of the U.S. tax, form and penalty club
April 15, 2026 was the tax filing deadline for U.S. taxpayers. One is a U.S. tax resident and subject to all the tax, form and penalty requirements if one is one or more of:
1. A U.S. citizen
2. A green card holder
3. Somebody with enough physical presence in the United States to be deemed to be resident for tax purposes. Note that the legality of the physical presence is irrelevant. Therefore, it is quite common for “undocumented immigrants” to meet the physical presence test and be taxable on his/her worldwide income.
To put it simply: the undocumented meet the “substantial presence test” found in 7701(b) of the Internal Revenue Code.
Part E – The similarity between U.S. citizens abroad and undocumented aliens
Undocumented aliens ARE U.S. residents and U.S. citizens abroad are NOT U.S. residents. Nevertheless, they are similar in that:
– both groups suffer with the anxiety of comparing their perceived risk of not filing with their perceived risk of filing
– both groups have taxes extracted from them and without any reciprocity of benefits
– both groups are misunderstood and treated very unfairly by the U.S. tax system because and only because of their status!!
Part F – Professor Francine Lipman – explaining why the “undocumented” are actually taxed more punitively than other U.S. taxpayers
University of Nevada law professor Francine Lipman has done incredible work in exposing how unjustly the U.S. tax system treats the undocumented.
I highly recommend her work:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1292960
Abstract
“Illegals do NOT pay taxes.” As a law professor researching and writing about undocumented immigrants and their tax issues I see this comment in my email inbox and hear it during outreach efforts routinely. Every time I hear or read this or a similar comment, my whole body cringes. This short statement truly embodies the exploitation of the immigration debate. While this statement is often delivered from mainstream individuals, its origin can be traced to extremist rhetoric. Anti-immigrant and anti-Latino extremists have used outright bigotry to frame the immigration debate to advance their own supremacist agenda. By positioning themselves as legitimate advocates against illegal immigration in America these groups have broadened their base and mainstreamed their message. These groups “are frequently quoted in the media, have been called to testify before Congress, and often hold meetings with lawmakers and other public figures.” As a result, in many American communities immigrants live in fear and suffer a toxic environment in which hateful rhetoric targeting immigrants has become an acceptable part of daily news and discourse. This Essay is an answer to this insidious vilification and arrant racism.
This Essay will debunk the short, but maladroit statement that “illegals do NOT pay taxes.” First, calling a group of people “illegals” is hateful, “racially loaded, imprecise, and pejorative.” Scholars, and children, understand that language and discourse can contribute to vile acts including crime, abuse and other social problems. Historical and current atrocities including the Holocaust, Darfur and the murder of Matthew Shepard are horrific examples of this intolerable truth. The term “illegals” is patently dehumanizing and inappropriate terminology, and its persistent use by extremists, as well as mainstream media and the general population, must stop now.
Second, as a low-income taxpayer and human rights advocate, I understand that pervasive misunderstanding regarding undocumented immigrants evinces the frustration and fear that many Americans feel about the challenging state of the U.S. and global economies. Restrictionists feed this frustration and fear with inflammatory propaganda about undocumented immigrants and our tax systems. Because of overwhelming complexity and lack of transparency in this system it is easy to misrepresent and distort the facts. As a result, some Americans believe the absolutely irrational and self-delusional assertion that undocumented immigrants do not pay any taxes. This gross falsehood is counterproductive for the speaker, the subject, and the U.S. and global economies.
Finally, as a tax professor I am charged with teaching tax and these comments broadcast loudly and boldly how misinformed Americans are about our tax systems. The well documented facts evidence that undocumented immigrants have paid hundreds of billions of dollars in American taxes to date. In most cases undocumented immigrants pay more in tax each year than similarly situated U.S. citizens. This additional tax, which is first exposed and labeled here as “the undocumented immigrant tax,” is the subject of this Essay. This Essay will describe the depth and breadth of undocumented immigrants as a resource for tax payments made to government coffers across the country. The depth and breadth will be evinced by describing the myriad of different federal, state and local taxes undocumented immigrants are subject to and pay. But most notably this Essay will verify that not only do undocumented immigrants pay the same taxes that U.S. citizens and documented residents pay, but in addition they are subject to and pay what I am describing as “the undocumented immigrant tax.” The undocumented immigrant tax is effectively an additional tax burden, a surtax or tariff on undocumented immigrants and their families. As a result, not only do undocumented immigrants pay taxes, but they bear a greater tax burden than similarly situated U.S. citizens and documented residents.