US to lose $313 billion in tax if immigrants stop filing taxes: Decoded

In a major policy shift, the United States Internal Revenue Service (IRS) has agreed to share specific tax data with immigration authorities—a move that could reshape the decisions of immigrants trying to adjust or secure their legal status.

 

Not just immigrants—experts are warning it could carry a steep cost for government revenue as well.

 

According to a report published on April 9, 2025, by the Yale Budget Lab, a US-based non-partisan policy research centre, the IRS is projected to lose more than $313 billion in tax revenue over the next decade. The reason: undocumented workers may stop filing or reduce tax payments, fearing their details will now be exposed to immigration enforcement.

 

 

The report estimates a $12 billion loss in the current financial year ending September 30. In financial year 2023, undocumented workers paid an estimated $66 billion in federal taxes, around two-thirds of it through payroll taxes.

 

The new arrangement was struck between the Treasury Department—which oversees the IRS—and the Department of Homeland Security. It allows immigration officials to request taxpayer data for law enforcement purposes. Although the Biden administration says the deal includes limits and applies only to criminal matters, it overturns decades-old IRS privacy protections.

 

Tax data now tied to immigration checks

 

Tax experts say the shift could affect how immigration authorities assess applications for visas, green cards, or citizenship.

 

“The IRS’s decision to share tax data with immigration agencies means immigrants’ tax records could now directly impact visa, green card, or citizenship applications by verifying income, residency, or compliance,” said Aditya Bhattacharya, partner at King Stubb & Kasiva, Advocates and Attorneys. “Filing taxes accurately—even via ITIN for undocumented individuals—is critical, as discrepancies or non-filing could risk application delays or denials, while clean records may help prove financial stability or ‘good moral character’.”

 

Bhattacharya said immigrants should now be more cautious. “Though privacy concerns exist, proactive steps—like fixing past filing errors, keeping records, and consulting tax or legal experts—can help immigrants manage risks and use tax compliance to strengthen their immigration case,” he told Business Standard.

 

Fear of deportation could lower compliance

 

The Yale report notes that trust in the confidentiality of tax filings has been key to ensuring that undocumented workers continue paying into the system—even though they aren’t eligible for retirement benefits such as Social Security or Medicare.

 

“The IRS has historically made clear to the undocumented immigrant population that their tax information is confidential and would not be used in such ways,” the report said. “Tax compliance could fall among that group if they become concerned that filing taxes could expose their personal contact information to law enforcement and be used to facilitate their deportation.”

 

The report offers a wide range for revenue losses over the next 10 years—between $147 billion and $479 billion—depending on how immigrants and employers respond to the policy change.

 

Concerns over privacy and legal safeguards

 

Immigration consultants say the policy risks damaging trust, especially among those seeking to regularise their status through legal channels.

 

“While the official intent behind this decision is to improve transparency and ensure compliance with immigration and tax laws, it raises important questions about privacy, due process, and trust in public institutions,” Varun Singh, managing director at XIPHIAS Immigration told Business Standard.

 

“As someone who has worked closely with immigrants navigating complex legal systems, I understand the concern this decision may cause,” Singh said. “Many immigrants, particularly those on work visas or undocumented individuals hoping to regularise their status, have relied on filing taxes as a way to demonstrate good moral character and establish a documented presence in the US.”

 

He added that the data-sharing wouldn’t apply across the board. “It’s crucial to understand, however, that not all data will be shared indiscriminately. What we are likely to see is a more targeted approach, focusing on cases where immigration benefits are being sought or where enforcement concerns are raised.”

 

Immigration crackdown under Trump

 

The policy change comes amid former US president Donald Trump’s renewed crackdown on undocumented immigration. Trump has pledged what he calls the largest mass deportation operation in US history. His campaign includes ramped-up raids, new cooperation between federal agencies, and public calls for undocumented immigrants to “self-deport.”