‘No Hope for Someone Like Me’: Immigrants in California Pull Back From Filing Taxes

A bell chimes every time a new customer enters Martha Valencia’s tax shop in Sonoma County. The space is filled with knickknacks, gifts from customers and photos of family. During tax season, it’s usually filled with customers too.

But this year has been slower than normal.

The bell used to be ringing off the hook, says Valencia, with lines out the door. She and her son would fit walk-ins between appointments, trying to keep wait times under an hour. But today, “it’s empty,” Valencia says. “They have to wait nothing.”

Valencia, who has been doing immigration and tax services for over 20 years, says around 80% of her clients file with an Individual Taxpayer Identification Number, the tax number used by people — like undocumented immigrants — who don’t qualify for a Social Security number.

This year, business isn’t just slow; it’s the worst she’s ever seen. Valencia says she’s seeing a 60% drop in clients.

“Not even in the pandemic I had a drop like this,” she says.

Valencia believes the drop is linked to larger governmental changes and fear in the current political climate. This year, H.R. 1, also known as the One Big Beautiful Bill Act, tightened restrictions on ITIN filers.

One of the biggest changes for undocumented taxpayers as a result of H.R. 1’s passage includes restrictions on the Additional Child Tax Credit, which previously allowed many mixed‑status families to receive thousands of dollars back. That means ITIN filers can expect much smaller refunds, Valencia says.

Many of Valencia’s clients are long-term customers. The tax business is built on trust, she says. This year, before accepting any work, Valencia feels an ethical obligation to tell clients the bad news that their refunds will be smaller, and maybe nonexistent.

A mixed-status household could, in a normal year, expect to receive around $2,000 in the Additional Child Tax Credit. But this year, they’re lucky to get $500, she says.

Valencia says the reaction to this information has been immediate. Prospective customers tell her: “You know what? I’m not going to file because I’m not getting any refund. So what’s the point of doing taxes?”

As an undocumented immigrant, having proof of taxes is important. It builds a paper trail, so if the day comes to receive legal status, it shows work history, engagement with the system and U.S. presence.

But Valencia says customers are coming in worn-down, without a vision for future immigration relief. They tell her their faith in the system is dropping.

In the Southern California city of Pomona, tax preparer Hayde Vigil says her business is also seeing about half its usual filings this year.

[Photo]

Yet the steep drop looks different in Southern California, she explains. Most of her clients are documented, Vigil says in Spanish, but status doesn’t seem to be the issue.

“They’re afraid to leave their homes because there are so many raids, and they’re scared they’ll be detained and deported,” she says.

Immigration enforcement agents have been active in that region, and her customers are afraid they’ll be picked up because they’re Latino, even if they are here legally.

“They weren’t going out at all before, and now they only go out for the bare minimum,” says Vigil, which doesn’t seem to include leaving the house to file taxes this year.

‘There’s nothing for you’

Claudia, an undocumented immigrant from Mexico, sits wringing her hands in her lap. As names are called out in the Northern California day labor hall where she sits in, she waits for the sound of her own, hoping to pick up some work for the day.

Claudia, who did not want her full name to be used because her immigration status puts her at risk of deportation, has been living in California for over 20 years. In these decades, her work has ebbed and flowed, sometimes working multiple jobs at once. These days, Claudia is lucky to have her name called a few times a week. Regardless of workflow, she files her taxes every year.

Yet it’s not just around tax season that she pays, Claudia explains in Spanish. “You pay taxes on what you earn, on what you buy, on everything you consume in this country,” Claudia says. “But you can’t get anything back from it.”

Claudia keeps filing year after year in the hope that one day she’ll have a pathway to documentation that would let her visit her family in Mexico, find work more easily and live with no fear about status.

“You hold onto the hope that, in the future, you’ll be able to do things the right way,” she says.

But after over 20 years of filing, her hope toward legalization only seems to be dwindling. “In the end, there’s nothing there for you, is there?” she asks.

Claudia still sees no pathway to legal status and receives no Social Security benefits, no MediCal — and this year, for the first time, she was told she’ll receive no credits back for her son, who is a U.S. citizen.

Her voice grows soft. “So, what’s the point in paying?” she asks. “There’s no hope for someone like me.”

Claudia says she went back and forth in her head, deciding if this would be the year she broke her commitment to a stable future here. In the end, she filed, but her doubt continues to grow, both in the system and her future in the United States.

Yet for others, the doubt has already reached a tipping point.

At the Northern California day labor facility, Velasco waits to hear his own name called.

“Why should I pay taxes?” he asks in Spanish. “When you realize you’re paying in but not receiving anything in return, there’s no point anymore.”

Velasco, who also asked for his full name not to be shared out of fear of deportation, has lived in Northern California for 24 years. For the majority of that time, he worked at a lumber company and filed his taxes consistently. Filing always felt like a no‑brainer, he says — part of his civic responsibility, even without legal status.

He always considered himself a rule follower. “After all, that’s how the country keeps running,” he says. “But lately, I’ve changed my tune.”

Like many undocumented immigrants across the state, Velasco fears being seen in public, afraid he’ll be picked up and deported. He says he feels at odds with the federal government and has begun questioning why he should contribute to a system he believes wants him gone.

“It doesn’t exactly give you the desire to comply,” he says. “Yet when it comes to collecting taxes, [the government] certainly want to do that, don’t they?”

Velasco no longer files. Now, he picks up odd jobs doing house maintenance and gets paid in cash, under the table.

Undocumented taxpayers are ‘extremely important’ to economy

It’s a common belief that immigrants don’t pay taxes, says Abby Raisz, vice president of research at the Bay Area Council Economic Institute. But it’s not true. “Undocumented immigrants maintain very high effective tax rates,” Raisz says — averaging 7.1% in state and local taxes, higher than the rate paid by the top 1% of earners nationally, according to the nonpartisan Institute on Taxation and Economic Policy.

Raisz’s team estimates undocumented Californians contribute about 9% of the state’s GDP, or roughly $278 billion, a figure on the order of the entire GDP of Nevada or Oregon.

They also pay more than $10.6 billion in state and local taxes and $13 billion in federal taxes, despite being excluded from most federal benefits.

Josh Stehlik, policy director for the California Immigrant Policy Center, says those contributions are essential to the state’s fiscal health.

“Undocumented taxpayers are extremely important to the national economy and to California’s economy,” Stehlik says.

But both Raisz and Stehlik say trust in the tax system is quickly eroding.

Last year, the IRS was directed by the Trump administration to share taxpayer information with the Department of Homeland Security, a move that immigrant rights groups called unprecedented.

Federal courts have since blocked the IRS‑DHS data‑sharing agreement, but the episode has already shaken confidence in the system.

Raisz says, after speaking with tax providers throughout the state, the implications for an already fragile trust could be long‑lasting.

“If this taxpayer information does in fact get related to other departments, ITIN is going to lose all of the trust that it currently has,” she says, and warned it probably won’t ever gain it back.

Stehlik says new federal policy changes have only deepened the fear.

“Immigrant taxpayers are afraid to file because of the Trump administration’s repeated attacks on immigrant taxpayer confidentiality,” he says.

Experts warn that if undocumented immigrants disengage from the tax system, the consequences would be severe.

“We could be looking at an $8.5 billion loss in revenue,” Stehlik says, referencing the amount that ITEP says undocumented Californians paid in state and local tax contributions in 2022.

Raisz agrees that the long‑term implications would be enormous.

Undocumented immigrants contribute billions in sales tax revenue, and their consumer spending powers local businesses already struggling with post‑pandemic declines.

“The larger concern seems to be the loss of trust and disengagement from the tax system,” Raisz says.

She adds that undocumented taxpayers are often economically engaged, starting businesses, buying homes, and supporting local economies. If they continue to disengage, she says, the economic fallout “would be massive.”

Shandra Back covers immigration for Northern California Public Media through the California Local News Fellowship. This story was edited with help from The California Newsroom.