DHS Deal With IRS Sparks Massive Drop in Tax Filings Among Immigrants: Report

The recent data-sharing agreement between the Internal Revenue Service (IRS) and the Department of Homeland Security (DHS) has led to a sharp drop in tax filings among immigrants, particularly undocumented individuals, across the United States according to a new report by The Washington Post.

The memorandum, signed in April, authorizes Immigration and Customs Enforcement (ICE) to submit names and addresses of individuals with final deportation orders for verification using IRS records. Though federal officials insist the agreement is narrowly scoped and legally permissible, the effect on immigrant communities has been immediate and far-reaching.

U.S. District Judge Dabney Friedrich ruled on May 13 that the agreement does not violate federal tax privacy laws, stating that the IRS can disclose identity data such as names and addresses, so long as it was not provided directly by the taxpayer and certain legal standards are met.

Diana Avellaneda of DAPA Multiservices Advisors explained to The Washington Post that her firm filed 488 returns or extensions this year, down from 968 in 2024. “Our clients want to pay taxes and want to do good,” Avellaneda said. “But what happens if immigration [authorities] came because they filed their taxes and they got deported?” Avellaneda added that even immigrants with legal status hesitated to file, concerned they might endanger undocumented relatives.

The pattern is similar nationwide.

In Milwaukee, Itzel Ramirez saw filings fall by over half, as her firm filed only three returns on April 15, compared to dozens in previous years. In California, Carlos Lopez, who has helped immigrants with taxes since the 1986 amnesty, reported a 7% decline in filings.

Critics argue the policy marks a break from longstanding assurances made to immigrants that filing taxes would not risk exposure to immigration enforcement. “This one clearly does not [encourage compliance],” said Kyle Pomerleau of the American Enterprise Institute, warning that diminished trust in the IRS could lead to systemic declines in tax engagement.

The financial consequences could also be significant. In 2022, undocumented immigrants paid nearly $97 billion in taxes, according to the Institute on Taxation and Economic Policy. Economists caution that even a 10% drop in filings could result in billions in lost revenue.

Ken Cuccinelli, former acting deputy DHS secretary, acknowledged the tradeoff:

“Tax people may say, ‘People will be less forthright with their taxes.’ That’s true.” But, he said, “That’s why we elect presidents and other elected officials to other offices. They make those balancing-act calls”

The impact is also being felt in local economies. Angela Neira, also of DAPA, said immigrant-owned businesses have delayed filings or moved toward informal labor:

“Many undocumented employees are hesitant to share their [personal tax identification] numbers with their employers due to concerns about how their personal information might be used or shared,” Neira said. “[Some] prefer to work under the table. This creates a difficult situation for employers”