Several Internal Revenue Service officials, including representatives, are preparing to leave after the Trump administration pushed the agency to use protected tax records to use protected tax records.
The agreement between the IRS and immigration and customs enforcement, disclosed in a court filing Monday, is a fundamental departure from decades of practice in tax collectors, seeking to maintain information submitted secretly by undocumented immigrants. Under the terms of the contract, a partially edited version was filed in the case under that terms, so ICE officials can ask the IRS for information about those ordered to leave the United States or otherwise being investigated. The two agencies have not yet shared information, the submission said.
Federal law provides strict control over taxpayer information and protects home addresses, revenues and other data from disclosure to other government agencies. IRS officials have been concerned for weeks about the Trump administration's plan to use agencies to help deport, warning that it may be illegal in negotiations over the agreement.
The deal fueled even more disruption at the top of the institution, already rocked by massive layoffs and several leadership changes, during the busiest time when millions of Americans filed taxes. Among those leaving is Melanie Krause, the IRS' proxy leader, according to five people familiar with her plans.
People said Klaus' planned resignation, who took over the agency two months ago after another interim leader resigned, surprised IRS employees. People said once someone was seen as in line with Elon Musk's government efficiency, she concluded she was offensive in the direction of the IRS under the Trump administration. The Washington Post previously reported her planned departure.
Several other Top IRS officials, including the Chief Financial Officer, Chief of Staff and Chief Risk Officer, have also left or left the agency in recent days, said three people familiar with the move.
Privacy Director Kathleen Walters has also received an offer to resign after providing a statement in court about an agreement to share information with ICE, people said. Previously, top IRS lawyers were demoted as the agreement was put together and replaced by a former Trump candidate.
On Tuesday night, several current and former IRS officials were not sure they would next lead the tax agency. President Trump has appointed former Republican Congressman Billy Long, who has little tax background, to lead IRS Long.
The Trump administration has driven several deep changes in the IRS, but its desire to challenge decades-old protection of taxpayer information, which has put many people most vigilant at the agency.
“That's unprecedented,” Nina Olson, executive director of the Center for Taxpayer Rights and a former IRS official, said of the Trump administration's plans.
There are narrow exceptions to the ban on sharing tax information, and the agreement shows that the Trump administration allows it to be used in criminal investigations and relies on indentations. The contract repeatedly refers to laws that punish immigrants who have received judicial orders but have not left the United States.
A Treasury spokesman said the agreement was “established in long-standing authorities granted by Congress, which helps protect the privacy of law-abiding Americans while streamlining their ability to pursue criminals.” The spokesman did not respond to requests for comment on the deviations between Klaus and other top IRS employees.
Many undocumented workers pay taxes and improve the financial outlook for federal programs such as Social Security. Immigration activists and tax attorneys said they had long trusted the IRS to protect the confidentiality of immigrants' tax information. Advocacy groups have sought to block information sharing, and the Trump administration has disclosed the agreement in response to the lawsuit.
Even the possibility that the federal government is using tax information to deport it has already sparked concern among undocumented immigrants. While accurate data ices from the IRS have been compiled in court filings while requested, previous draft deals show that ICE officials are seeking confirmation of immigrants' home addresses.
Audrey Casilas, who helps low-income residents in the Los Angeles area file taxes, said fewer people will file this year because they don't want to be deported.
“Fear is real,” said Casilas, who works on economic development efforts at the Korea Town Youth and Community Centre. “There aren't a lot of shows, our clients are asking us.
Often, undocumented immigrants can get traditional jobs rather than hiring them under a table that pays only in cash, using fake Social Security numbers such as the number of someone else, a composed sequence of numbers, numbers from previous work approvals. These immigrants have taxes withheld from their employer's pay, while others may earn self-reported income earned from other forms of work.
The report estimates that unauthorized migrant workers paid $66 billion in federal taxes in 2023, of which approximately $43 billion is in the form of payroll taxes funding Social Security and Medicare.
To complete the tax return in the spring, the IRS allowed undocumented workers to file returns using another nine-digit code called individual taxpayer identification numbers. Immigrants can also use these numbers to obtain a driver's license or a loan. In the 2022 tax year, around 3.8 million returns were filed with the IRS with at least one individual taxpayer identification number, but not all holders are undocumented immigrants, according to agency data.
Unauthorized immigrants are not eligible for many tax benefits, but if their employer refrains from taxes throughout the year, they may receive a refund in the spring. Francine Lipman, a law professor at the University of Nevada in Las Vegas, said she advised fraudulent immigrants working to delay tax filing, even if it meant postponing or assuming a refund.
“We are considering the opportunity to propose a suspension and submit an extension,” she said. “Because this population is generally low wages, some people are still filing because tax refunds are an important part of their cash flow needs.”
But economists expect fewer immigrants to want to do table-over-the-table work if they are afraid of using tax information to deport them. This ultimately reduces revenue, and Yale Budget Lab estimates that the losses from immigrants that undocumented immigrants pay taxes could reach $313 billion over a decade.
It is unclear how many undocumented immigrants are involved in the IRS-ICE partnership. The agreement says immigrants with orders to leave the country will be the main target. An ICE official recently told IRS counterparts they hope to use tax information to help deport as many as 7 million people, according to four people familiar with the statement.
The outlook for the reversal was difficult for those who encouraged undocumented workers to trust that the IRS would not banish them.
“We told people to rely on this, so a lot of people feel a lot of guilt,” said Angela Divalis, an attorney with bigger legal services in Boston. “And it's personally very difficult to know that I'm in these spaces.
