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Immigrants Pave Way with Taxes

Immigrants - both legal and illegal - are paying billions in taxes

Every day at 5:30 a.m., Cesar, a Herndon resident who was born in Peru, wakes up, puts his clothes on and spends the day trying to find work.

“I can usually only work for a day or a week at a time, and what I’m working on is varied,” Cesar said. “Sometimes I’ll paint a house, I’ll put in a floor somewhere, I’ll work on a construction crew. It might last 15 days or it might last a month, but I go out and find what I can.”

Cesar is an undocumented immigrant who arrived in Herndon via the U.S. border with Mexico about two and a half years ago to seek better opportunities to make money for his family. He estimates that he makes between $400 and $500 a week on average.

This year, Cesar joined the ranks of taxpaying residents by filing with the Internal Revenue Service to pay his share of the federal and state income tax.

According to a recent Urban Institute study, immigrants living in Fairfax County, regardless of their legal residency status, contributed $3.2 billion in taxes in 1999 and 2000. This amounts to nearly a quarter of the total taxes paid by Fairfax residents.

“When I first came here, I didn’t know what taxes were … so I didn’t pay anything at first,” Cesar said. After learning that all workers in the United States are required to pay taxes, “I realized that I needed to pay them as well. It’s a way of being. You have to follow the rules, the law doesn’t discriminate when it comes to your legal status.”

Cesar is still waiting to find out how much money he will owe to the IRS, as he was paid in cash over the course of the last fiscal year.

“I wish that I could send that money to my parents or spend it on something that I needed, but what can you do? It’s the law,” he said.

CESAR IS ONE of a number of immigrants in Northern Virginia who are filing taxes returns with the IRS, just as millions of native-born U.S. citizens do each year, according to a recent study conducted by The Community Foundation for the National Capital Region.

“A lot of people think that these people are coming over here illegally and then just living high on the hog off of Uncle Sam without paying any taxes, but that’s really not true,” said Jorge Rochac, a former Herndon Town Council candidate.

Rochac is owner of the Castro Travel Agency in Herndon, which also operates as a tax service, preparing income tax returns for more than 700 local immigrants.

The IRS refers to immigrants filing tax returns as “resident aliens” regardless of their legal status. Those who have legal status to work have Social Security numbers, while others file under their own individual taxpayer identification numbers (ITIN). Currently, the IRS cannot share information on taxpayers filing with individual taxpayer identification numbers, even with other government agencies including immigration agencies or the Department of Homeland Security.

There were an estimated 870,000 immigrants residing in the metropolitan Washington, D.C. area in 2000; that number is now estimated to be 1.2 million, according to the May 2006 study. Of which, it is estimated that 40 percent are originally from Latin America.

Just fewer than one quarter of the local immigrant population is undocumented, while another 17 percent are authorized to work either as residents under temporary protective status or as political refugees. About 32 percent of local immigrants are naturalized citizens and 27 percent are legal permanent residents, according to the study, which was conducted using data compiled from the Pew Hispanic Center and the 2000 U.S. Census.

The Immigration and Naturalization Service has granted some immigrants legal authorization to work under temporary protective or political asylum because of revolutions or natural disasters in their home countries. The majority of these people entered the United States illegally or on temporary visas and later applied for this status, the study added.

MOST OF THESE RESIDENTS with or without legal authorization to work in the United States have been regularly paying taxes to the federal and state government, according to Rochac.

“Most of [the immigrants], if they’re here working with a legal work authorization, they’re paying taxes,” Rochac said. “A great majority do. They have to. They’re working with a W-2 [tax filing form] the same as anyone else and have deductions made from their paychecks … most of them have refunds coming at the end of the year.”

“There are very few who have never paid their taxes,” he added. “When you get a W-2 and you own a car or a house and you’re not paying taxes, Uncle Sam can come down on you pretty hard.”

Rochac said that immigrants are motivated to pay their taxes to be sure they are in good standing with the federal government if someday they might qualify as permanent legal residents of the United States.

“These workers want to be in good standing with what the INS is calling ‘good moral behavior,’ … so they can one day apply for citizenship,” Rochac said. “This includes not abandoning any of your children, not being convicted of any crime and having loyally paid your taxes.”

Many pay taxes in the hope that the current debate in Congress on immigration might result in more opportunities for citizenship. Immigrants pay their taxes as a way of building up a history as a law-abiding worker in the United States, Rochac said.

“Believe it or not, there are some [immigrants] who feel that they owe it … that they have a moral obligation to pay taxes, so that’s why they pay them,” said Paul Good, an immigration attorney in Herndon. “But the practical reason is to be able to adjust [their immigration status to legal permanent resident] in the future,” should a window to citizenship be opened.

The U.S. Senate is currently considering immigration reform that could open a pathway to citizenship for millions of immigrants. While some critics have referred to this condition as amnesty, Good said that it would only apply to those workers who have been consistently filing taxes with the IRS.

Workers who do not have social security numbers, such as those who are in the country illegally or on expired visas, can still pay taxes by filing a W-7 form and requesting an individual tax identification number from the IRS. Workers can then use this individual tax identification number to file federal and state taxes just as any taxpayer.

“They can’t adjust their status to get green cards unless they can prove that they have lived here … and have paid taxes,” Good said.

“Their main incentive is the future, and they want to be in good standing with the federal government as well,” said Rochac. “These people live on hope.”

“That is the biggest incentive they have, ‘Give me my green card and I’ll pay any taxes that you want me to pay,’” he said. “They pay someone $10 or $15,000 just to get here, and if they’re caught it’s at least $7,000 for the bond. Don’t you think they’d pay a measly couple thousand a year in taxes to stay?”

Good agreed.

“When you’re paying taxes on your earnings and working in the system, that is what is looked for,” when immigrants file for permanent legal status, Good said. “These are just the people that we want in this country, they’re hard workers and they pay their taxes.”

DESPITE THESE EFFORTS to pay taxes, unauthorized immigrants and those with refugee status pay the lowest share of taxes primarily because they have the lowest paying jobs, according to the Community Foundation study.

Unauthorized immigrants and immigrants with refugee status paid an average amount of $13,000 per household in taxes between 1999 and 2000, according to the study. In comparison, legal permanent residents paid more than twice as much, about $27,000 in tax payments per household.

Naturalized citizens paid an average $31,000 in taxes a year.

“Immigrants who are unauthorized, who have less than a high school education and who are limited English proficient pay lower taxes on average than other immigrant populations,” the study read. “Offering a path to legalization and increasing educational attainment would probably increase these groups’ fiscal contributions.”

THE TRUST FUNDS of the U.S. Social Security Administration also benefit from an influx of money paid by both immigrants with legal work authorization and those without legal status.

The amount of money contributed from payroll withholding each year that has not been matched correctly has increased every year from 1996 to 2003, according to Social Security Administration figures.

While unauthorized immigrants who are being paid with cash and filing taxes with ITINs are not paying money to Social Security, some immigrants who use fake or random Social Security numbers are paying money for benefits that they will never see, according to Social Security officials.

When the Social Security Administration receives reports of earnings on W-2 forms that do not match the social security database, the administration sends out a letter to try to correct the error. “What we keep is an electronic hold file that keeps track of all the wage items that do not match so that people can come back and claim those earnings once they have corrected their information,” said Dorothy Clark, a spokesperson for the Social Security Administration.

If no one claims earnings by correcting the information, all the money collected from those earnings is deposited into the two Social Security trust funds without being attributed to any particular individual number. In 2003, those contributions from payroll withholding amounted to $58 billion, up from $21 billion in 1996. The unclaimed earnings of illegal immigrants filing under false social security numbers are included in those amounts.

IMMIGRANTS WORKING under temporary protective or refugee status have been making payments throughout their working lives in the United States with Social Security numbers assigned to them by the INS upon receiving their work authorization, according to Rochac. The U.S. Congress granted refugee status to immigrants from Central America who fled civil wars and natural disasters, mostly during the 1980s.

While these immigrants are entitled to benefits as a reflection of their earnings, Rochac said that very few of the immigrants who fall under this status understand what those payments are for.

“That account is kept for them because the idea is that once they are granted citizenship … they might have access to some of the benefits,” said Rochac. “But if they leave or are deported, they’re out of luck.”

“Most of the people who came here arrived 20 years ago at most. None of them are retired, they’re still working and none of them have any idea about this bubbling gold mine of social security that they have been pouring money into,” he added. “But I can tell you that the first old man that retires and receives that social security check, it will spread like wildfire.”

FOR CESAR, PAYING taxes is just another part of life as a worker in the United States — and one that not many people realize is a part of undocumented immigrants’ lives.

“When people find out that a lot of the other workers and I are getting paid cash, but we’re paying taxes, they’re surprised, they can’t believe it,” he said. “When [employers] try to pay us a lower wage because they think we’re not paying taxes, I have to explain to them that I do … and they have to pay more money to cover that.”

“People don’t know. They think we’re out here just pocketing the money that we’re making, but we have to cover taxes, same as everyone.”