Immigration Enforcement Policy Undermines Tax Compliance and Revenue

Trump administration’s crackdown includes an IRS agreement to share undocumented immigrants’ names and addresses with ICE and removes the child tax credit for immigrant parents, even if their children are citizens. Tax advisers say fear of deportation led many undocumented workers to skip filing, raising compliance concerns.

The Guardian

The IRS kept taxpayer data confidential to encourage compliance, especially among undocumented workers. A federal judge paused the IRS-ICE data-sharing agreement in November, ruling it illegal, but risk remains. The child tax credit, available to parents of citizen children regardless of status, ended for undocumented parents in 2025.

The Guardian

About 50 % of undocumented households file returns, $96.7 billion (Institute on Taxation and Economic Policy). Yale’s Budget Lab projects $147 billion–$479 billion in lost revenue over the next decade, and up to 2.7 million citizen children could lose the child tax credit.

The Guardian

The National Immigration Law Center urged the administration to obey court order barring IRS data sharing and to stop using tax information for enforcement. The judge’s injunction remains, but agencies have not clarified data-exchange practices.

The Guardian

Advocacy groups say the policy harms children, undermining a tool meant to reduce poverty. Tax professionals warn that eroding trust jeopardizes compliance, as undocumented workers rely on confidentiality to demonstrate participation. Child poverty has risen to 13 %–16 %, affecting 10–11.4 million children.

The Guardian

Tax adviser Daisy Schmidt saw a 75 % drop in clients amid ICE fears; Edgar Villacorta reported 30 %–40 % of his clients did not file, citing child-tax-credit loss. Urban Institute found one in four adults worry about deportations, and one in six know someone taken into ICE custody.

The Guardian

Revenue loss estimates range from $147 billion to $479 billion. No data quantify the filing decline, and the IRS has not commented. Judge halted the data-sharing program, but ongoing exchange remains unclear.

The Guardian

• “Our target is the Latino community, and many people didn’t file taxes because of fear of ICE,” — Daisy Schmidt, tax adviser

The Guardian

• “They said: ‘If they can deport me, what am I filing taxes for?’” — Daisy Schmidt, tax adviser

The Guardian

• “The system relies heavily on this trust, because people can decide not to do it,” — Luisa Godinez-Puig, senior research associate, Urban-Brookings Tax Policy Center

The Guardian

• “The government’s priority should be to ensure everyone feels safe when following the law and filing their taxes.” — Ben D’Avanzo and Sarah Krieger, National Immigration Law Center

The Guardian

The administration must address court order halting the IRS-ICE data-sharing agreement and consider restoring the child tax credit for eligible children. Tax seasons will reveal whether courts enforce the pause and whether changes can rebuild trust among undocumented taxpayers.

The Guardian