By Richard Rubin and Michelle Hackman

WASHINGTON -- The Internal Revenue Service and immigration officials are nearing an agreement under which the tax agency would share limited taxpayer data with border-security authorities, according to people familiar with the discussions.

Under the potential agreement, the top officials of Immigration and Customs Enforcement or the Department of Homeland Security could provide the IRS with names and addresses of people suspected of criminal violations, ask whether that matches tax records and get a yes-or-no answer.

Such broad and routine data sharing could fit inside one of the exceptions in taxpayer-privacy laws, which lets the IRS provide information for criminal investigations outside the tax system after receiving detailed requests. In 2023, the IRS made more than 30,000 disclosures under that authority, according to the congressional Joint Committee on Taxation.

Still, frequent data sharing between IRS and ICE would be a significant shift in how tax authorities treat immigrants in the country illegally and could reduce their tax compliance. For decades, the IRS has encouraged people to comply with the tax laws even if they are in the country unlawfully, issuing individual taxpayer identification numbers often used on returns for people who lack Social Security numbers. At the end of 2022, there were 5.8 million active ID numbers, according to the Treasury Inspector General for Tax Administration.

The idea has been to prod people to pay the taxes they owe, generating revenue and creating a pattern of compliance, particularly for people who eventually become legal residents or citizens.

"This is going to discourage people from filing taxes -- including U.S. citizens married to undocumented people," said Deborah Fleischaker, a former ICE official under the Biden administration.

Failing to depart the country after a final removal order is a crime, and in such cases, immigrants are more likely to move in attempts to evade immigration authorities, Fleischaker said. That means having a verified, updated address can be a boon for investigators.

IRS data could also help ICE agents confirm whether an immigrant is working illegally, allowing them to build cases against work sites, said Jason Houser, another former Biden administration official.

Tax officials have reassured filers for years that they didn't share information with immigration authorities.

"Our responsibility is to make sure they pay their taxes," John Koskinen, who was then IRS commissioner, told a House committee in 2016. "We have Social Security and immigration authorities and others who enforce that part of the law, and if we start looking behind the system and doing their job for them, we are going to discourage a lot of people from paying the taxes they owe."

Immigrants-rights groups recently sued the Trump administration to block sharing of taxpayer data for immigration enforcement. The government told the court that it would follow taxpayer-privacy law, and Judge Dabney Friedrich declined to stop any data transfers.

"The Court cannot presume that the government is poised to violate the law," she wrote.

The emerging IRS-ICE agreement is part of the Trump administration's broader efforts to break down some of the walls that separate government data sets created for specific purposes and use them for administration priorities.

It is also part of the continued changes at the IRS, which has shed thousands of workers and reduced tax enforcement since President Trump took office in January. DHS has already asked for IRS criminal investigators to help with immigration enforcement.

The IRS has had three commissioners and three chief counsels this year. For each of those jobs, an appointee of President Joe Biden resigned and the acting replacement was then replaced.

The Washington Post earlier reported the progress toward the IRS-ICE agreement.

Write to Richard Rubin at richard.rubin@wsj.com and Michelle Hackman at michelle.hackman@wsj.com

(END) Dow Jones Newswires

March 22, 2025 19:19 ET (23:19 GMT)

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