Washington Post

Illegals Paying Millions in Taxes

Most Don't Seek Refunds For Fear of INS Action

By Mary Beth Sheridan

Washington Post Staff Writer

Sunday, April 15, 2001; Page A01

The work-wearied mom slumped over her kitchen table in the Maryland suburbs one recent night, frowning at the 1040 form and her handful of W-2s. The dreaded moment had arrived for her, as for millions of Americans.

But Silvia, 33, isn't an American at all. She sneaked into the country in 1989 and lacks a work permit. No matter; the cleaning woman is determined to be a law-abiding illegal immigrant.

"We live here. We use public services," said Silvia, a woman with dark hair and chubby cheeks. "We have to pay taxes, even though it hurts."

As the tax season draws to a close tomorrow, many undocumented workers like Silvia are paying into public coffers. Largely overlooked in the political furor over the costs of illegal immigration, such workers appear to be paying billions of dollars a year in income, property and sales taxes.

The government does not pursue the tax paper trail to illegal immigrants, both because of privacy laws and a desire that everyone pay his or her taxes. But evidence of their contributions is popping up all over: from tax-preparation sessions in the Washington area to the Social Security Administration, which has been stymied by a mysterious, bulging file of contributions it can't trace.

It might seem odd that undocumented workers contribute to a federal government they are desperately hiding from. But many have no more choice than legal employees. That's because those immigrants are "on the books" -- receiving a paycheck from a restaurant, vegetable grower or construction firm that deducts taxes.

Many such workers give fake Social Security numbers to employers, who may be so pressed to fill jobs they don't ask questions, according to government studies and immigration experts. A thriving industry in phony cards has grown since a 1986 law ordered employers to require such identification.

"The image of the public is that [illegal immigrants] are standing around on the street as day laborers, getting paid cash," said Barrie A. Peterson, a labor specialist at Seton Hall University in New Jersey who last year co-wrote a study of immigrants in that state. His study estimated that half the state's undocumented workers were, in fact, on the books.

"Undocumented workers have penetrated all industries," Peterson said, listing as examples construction companies, hotels and convenience stores.

No one knows exactly how much undocumented workers contribute in taxes. Because the Internal Revenue Service doesn't ask whether taxpayers are legally working, it has no such tally. But at the Social Security Administration, there is striking evidence of the multimillion-dollar payments being made by illegal residents.

The evidence comes from the agency's "suspense file," a record of employee earnings kicked back by computers, generally because the name or Social Security number differs from the agency's records.

The file is created by such simple mix-ups as people who forget to report their new married names. But because the file has ballooned in recent years, government inspectors suspect another source: illegal immigrants who give their bosses phony Social Security numbers.

The Social Security Administration believes that such workers "account for a major portion of suspended wage items," the agency's inspector-general said in a report issued in January.

How major? No one knows. In 1990, 3.6 million "wage items," or W-2 forms, were posted to the suspense file, representing workers with $1.2 billion in Social Security contributions that year. In 1998, the latest figure available, nearly twice as many W-2s were added to the file, with nearly $4 billion paid to Social Security.

Over the eight-year period, the mystery workers were responsible for more than $20 billion paid in Social Security taxes -- but they received no credit for them. Their payments have helped contribute to the system's surplus, which will reach $2.5 trillion by 2011, it is estimated.

Bound by law to keep personal information confidential, the Social Security Administration has rebuffed suggestions that it work with U.S. immigration authorities to trace how much of the money is from illegal workers.

But the inspector general's office has found ample clues nonetheless of their contributions. It found, for example, that nearly half the workers in the "suspense file" were employed by three industries which are believed to hire many illegal immigrants -- agriculture, restaurants and bars, and low-skill services such as janitorial companies.

Homing in on agriculture, inspectors discovered even more stunning evidence. For example, at just three farm companies, inspectors found 11,000 workers using Social Security numbers that didn't exist. An association representing more than 1,000 California growers bluntly told inspectors that "90 percent of the agricultural workforce is illegal," according to the January report. Yet many were contributing to Uncle Sam.

But even if undocumented workers contribute through payroll deductions just like legal residents, their tax season may be far more traumatic.

Consider Silvia's experience:

In 1989, the college dropout and her two young children slipped over the Mexican border into California, where she bought a fake Social Security card. She presented the number to her employers in the Washington area over the next decade: two Burger Kings and several families who hired her to clean their homes and care for their children.

To the outside world -- the government, employers, her neighbors on the quiet street of tidy brick homes in Montgomery County -- Silvia appears to be working legally. But she has lived in constant fear of discovery and asked a reporter not to use her last name or other identifying details.

Many undocumented workers whose taxes are automatically deducted don't file an IRS return, even if they are due a refund, because they fear discovery. But Silvia has registered with the IRS for an Individual Taxpayer Identification Number, or ITIN, which is granted to those without a Social Security number.

Some years, Silvia has gotten tax refunds; other times, she wound up paying hundreds of dollars because insufficient deductions had been taken from her paychecks.

"It would be easy to not pay," Silvia said in Spanish. "But we think, one day, we want to improve our situation, to legalize and pay taxes. . . . You look for a way to do it. But there are barriers because you're undocumented."

Now, Silvia's past is catching up with her.

On a recent night, she sat at her tiny dining set, a table with four unmatched chairs in a celery-green room, and pored over documents. There is the good news: her W-2s from last year, which show about $15,000 in earnings. Then there is the bad news: four letters from the Social Security Administration, asking why her name and Social Security number don't match their files.

"I never answered the letters. What can I say?" she groaned.

Panicked that she will be found out or get her employers in trouble, she has decided to no longer use her fake ID and to work only for cash. Still, she plans to keep paying her taxes.

Despite her fears, Silvia has little cause to fear retribution because of her tax payments, officials say. The IRS maintains confidentiality for all workers' records. And the government is eager to have everyone pay their taxes -- even those here illegally.

"We certainly don't want to create a scenario where undocumented aliens are working in the United States in violation of one federal law, and to compound that, we establish a mechanism that basically discourages them from paying their taxes as well," said Russ Bergeron, a spokesman for the Immigration and Naturalization Service.

Local groups that help low-income people file taxes have seen evidence that illegal immigrants pay into public coffers. In some cases, they say, workers who are paid in cash file tax returns, hoping it will eventually help them qualify for immigration amnesty or a work program. To gain U.S. citizenship, immigrants must show they have paid their taxes.

In other cases, immigrants who have obtained a work permit turn up with years of returns that need to be amended to reflect a new, authentic Social Security number.

"We spent the past year amending returns at a great rate," said Pat Risinger, manager of the Tess Community Service Center, a Montgomery County agency, noting that many people hoped to qualify for a program offering some Latin Americans permanent residence.

Scholars agree that illegal immigrants generally pay much less in taxes than legal immigrants, who far outnumber them, because they tend to earn less. And only a minority of those paid in cash are believed to voluntarily pay income taxes.

But undocumented immigrants' contributions still add up to a significant amount, because, like other residents, they also pay sales taxes and property taxes, which are often factored into the rent of a house or apartment.

Donald Huddle, an economist at Rice University, estimated that undocumented immigrants paid $12.6 billion in taxes in 1996. He found, however, that such immigrants used far more in government services, such as education for their children.

In fact, scholars have reached widely varying conclusions on the cost undocumented workers impose on governments, differing on even such basic assumptions as the number of illegal immigrants. The INS has estimated they number 6 million, but recent census data suggest there could be up to 50 percent more.

Some academics believe illegal immigrants are a drain on the government; others think the costs are limited. The results can depend on whether the study includes long-term factors, like the eventual earnings of the workers' children.

For immigrants like Silvia, such mathematical gymnastics pale beside the contortions necessary to work and pay taxes.

"I'm a dignified person. I don't want to cause harm to the people I'm working for. It's an incredible stress," she said.

© 2001 The Washington Post Company

-- Anonymous, April 15, 2001

Answers

The headline is probably true, but I differ on the contribution of the illegal worker. True, most work unskilled jobs at minimum wage, but most are very adept at using the "free" services provided by the counties and states in which they reside. If you factor in the free medical and hospitalization, the various gov't sponsored food/welfare programs, and free education for their children (and many adult hispanic illegals down here receive free language classes), I can't see where we gain more than we pay in our increased property/income taxes.

Dennis

-- Anonymous, April 15, 2001

perhaps, Dennis, but it doesn't look like they will be collecting SS benefits, does it?

Uncle Sam could get down to the bottom of this and start visiting a few of these employers and ask some pointed questions. but they won't. it's just a book-keeping issue.

the cheap labor these people provide will never be questioned by TPTB nor stopped.

everything is proceeding according to plan.

-- Anonymous, April 15, 2001

Regarding the Hispanics we have in Durham, the only free English classes available are those taught by volunteers at various churches. Far as I can tell, the children of these immigrants are doing well in school and will get better jobs than their parents. They are doing jobs that the locals won't do--roofing, yard work, housework, construction, etc.

-- Anonymous, April 15, 2001

I agree with both of you...illegal immigration will not be stopped, it's a monetary thing. I just disagree with the article's inferring that they contribute much more. Most illegals I'm familiar with know how to add 6 or 8 dependents on the W-4 they fill out for employment. Not much tax with held. And most I know work in fabrication shops as welders, machine operators, etc. Not necessarily unskilled labor.

-- Anonymous, April 16, 2001

I guess it depends on the area of the country and state of enforcement of various laws in those areas. Looks as if it depends too on the kinds of jobs they have. I do know this Triangle area couldn't expand the way it has if it weren't for cheap and hard-working Mexican Hispanic labor.

I also know from the Census that if it weren't for the influx of Hispanics, this area would be majority black now--and whites would begin to flee in panic, the way they have elsewhere.

-- Anonymous, April 16, 2001