Melanie Krause, the acting commissioner of the IRS, is leaving her position after the tax agency reached an agreement to share immigrant tax data with Immigration and Customs Enforcement (ICE). The IRS agreed to provide information about undocumented immigrants who are facing deportation orders and under federal criminal investigation, according to court filings. Under the agreement, the IRS will verify the names and addresses of immigrants provided on tax records to ICE. It’s unclear what other information may be provided by the IRS. However, an initial lawsuit suggests it could include information about dependents and other personal information.
IRS and Immigration
The IRS had already been called upon to assist with immigration efforts earlier this year. In February, the Department of Homeland Security asked Treasury Secretary Scott Bessent to deputize IRS agents to help with efforts to crack down on immigration. A February 7 letter sent out by DHS Secretary Kristi Noem to Bessent suggested that IRS workers could assist DHS with auditing employers charged with hiring illegal immigrants as well as investigating human trafficking. Those skills appeared directed at IRS Criminal Investigation (CI) workers, and Noem repeatedly mentioned “law enforcement” personnel. But she didn’t specify CI and asks for assistance with certain functions that employees outside of the criminal division now perform, such as contract oversight, monitoring civil dockets, and conducting “financial audits of businesses suspected of employing illegal immigrants.”
Conversations that Forbes has had with existing IRS employees have suggested they would rather leave their positions than serve in immigration-related roles under the current administration. Krause seems to have taken a similar tack.
Treasury confirmed the departure in a statement, with a spokesperson saying, “Melanie Krause has been leading the IRS through a time of extraordinary change.”
Krause stepped in as acting commissioner in early March following the retirement announcement of Doug O’Donnell. O’Donnell had served in the role for just a few short weeks following former IRS Commissioner Danny Werfel’s departure on January 20, 2025 (one week before the tax season officially kicked off). O’Donnell’s departure on February 28 marked a remarkable 39-day span of rotating Commissioners. Krause becomes the fourth commissioner or acting commissioner to leave the agency in less than 80 days. This all happened during tax season—the season doesn’t end until April 15, 2025.
(Weeks after O’Donnell departed, acting IRS chief counsel William Paul was removed. Paul was reportedly demoted because he refused to cooperate with Elon Musk’s Department of Government Efficiency, as DOGE representatives allegedly sought to share taxpayer information with other federal agencies.)
With a clear nod to the changes happening at the tax agency, including indications that tax data will be shared, the statement continued, “As we focus on IT modernization and re-organize the agency to better serve the taxpayer, we are also in the midst of breaking down data silos that for too long have stood in the way of identifying waste, fraud, and abuse and bringing criminals to justice. We believe these goals are critical to a more efficient government and safer country. We wish Melanie well on her next endeavor.”
Data Privacy
Traditionally, your tax data is not easily shared or transferred—even within the federal government. Section 6103 of the tax code bars federal employees from sharing tax returns and tax return information with third parties. This is a broad prohibition–it doesn’t just include copying and sending information. It also means discussions about returns, including something as simple as whether a taxpayer has filed a tax return, are not allowed. That’s why attorneys, accountants, and other tax professionals must provide the IRS with signed taxpayer authorizations before they can discuss taxpayer issues with the IRS, as well as why your mortgage company or student lender will ask for authorization before asking the IRS to confirm financial information.
Some exceptions may apply, including disclosures to other federal agencies or law enforcement, but those are also tightly controlled—or at least they have been in the past.
In 2012, for example, IRS CI began working with law enforcement under a pilot program to fight identity theft. The program, which got its start in Florida, eventually expanded to Alabama, California, Georgia, New Jersey, New York, Oklahoma, Pennsylvania, and Texas. As part of the program, taxpayers were asked to share personal information, including tax returns, with local law enforcement to assist with the investigation and prosecution of identity theft. Since federal law prohibits sharing your tax information with third parties, taxpayers had to agree to allow the IRS to release this information to local law enforcement—that was done using a specific form and coordinated with the IRS and law enforcement.
Data Sharing
The Trump administration has been making noise about sharing tax data in various scenarios, including allowing Elon Musk’s Department of Government Efficiency complete access to the Integrated Data Retrieval System (IDRS). The IDRS is a master file that includes tax returns and other taxpayer information, including bank records. Unfettered access to that data isn’t typically granted to anyone—even the IRS Commissioner. In a recent op-ed for Bloomberg Tax, former IRS Commissioner Danny Werfel says that if he, as the former IRS commissioner, had requested access to all the data in the IRS systems, “the agency’s data security team would rightfully say “no.” I would have no compelling need, and there was no legal basis for me to demand it.”
The DOGE team reportedly wants to use IRS information to investigate potential fraud in the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps). Prior analysis at the Urban Institute focused on improving tax administration shows that even if the IRS did share the data, differences between how taxes and SNAP are administered likely make the data of limited value. Why? They don’t use the same data points.
Why Does Security Matter?
The IRS knows a lot about you. The information on your tax return doesn’t only include the basics—your name, address, and Social Security number. A glance through your tax return can tell a reader about your family, including the ages of your children and any other persons you support. Information on the return can reveal not only your annual pay but also where you work, the nature of your job, and whether you are saving for retirement. There’s something of a running tab on your financial accounts—with account numbers—if they produce interest, dividends, or other investments. A glance at your Schedule A could reveal whether you have a mortgage, how much—and in some instances, where—you give to charity, and what kinds of medical expenses you pay. Your Schedules C, E, and F can reveal information about other businesses or sources of income. Some tax returns include more information, including foreign interests, digital assets, and other investments.
It’s no wonder that in 2004, then-serving Senator Max Baucus (D-Mont.) wrote in a statement: “Our tax system depends on citizens being candid about personal and financially sensitive information. In return, the government has a clear obligation to respect and protect the personal and private nature of that information. If taxpayers are given reason to doubt that the government will respect their privacy, the integrity and efficacy of our voluntary tax system will eventually crumble.”
What Could Go Wrong?
As the information expands to include immigration efforts, tax policy experts expressed concern about the breadth of the information that’s being requested. According to attorneys Dahlia Mignouna Brandon DeBot and Chye-Ching Huang, director of the New York University Tax Law Center, the planned information sweep initially targeted 700,000 immigrants allegedly subject to final deportation orders, but the latest reporting indicates that it may now be targeting the tax data of a far broader group: 7 million immigrants. That raises concerns about how accurate and timely the data might be—and what the collateral damage could look like. Administrative errors could result in potentially disastrous consequences, as recently illustrated by the case of a Maryland man who was mistakenly deported with the government arguing that there is no way to get him back. (That case went to the Supreme Court.)
And those concerns that Baucus raised about the tax system in 2004? Those are valid concerns. Our tax system is built on voluntary compliance—typically, around 85% of individual taxpayers file and pay in full on time every year. That includes millions of immigrants, including those who are undocumented.
To become a U.S. citizen, you must prove that you’ve been filing and paying your taxes on time. According to the Institute on Taxation and Economic Policy (ITEP), undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022. Most of that amount, $59.4 billion, was paid to the federal government. More than a third of the tax dollars paid by undocumented immigrants go toward payroll taxes—that works out to $25.7 billion in Social Security taxes, $6.4 billion in Medicare taxes, and $1.8 billion in unemployment insurance taxes in 2022. By law, even if undocumented immigrants pay into those programs, they cannot access benefits from those programs—they also typically cannot benefit from federal income tax credits.
It’s not just immigrants who may balk at filing. Since the open of the tax season on January 27, 2025, the IRS has not reported a single week in which filing and processing of returns exceeded 2024 numbers. (I’ve been asked several times—including in a recent Reddit AMA hosted by Forbes—why taxpayers should bother to file in the current climate.)
What Comes Next?
Emails to the Treasury and IRS seeking confirmation about who would take over the role were not immediately returned.
A confirmation hearing for Trump’s nominee for IRS Commissioner, Billy Long, has not yet been scheduled. Werfel, who was nominated by President Biden on November 10, 2022, didn’t face the Senate until February 2023. Charles Rettig (who served before Werfel after being nominated by President Trump) waited about seven months for confirmation.
Read the full article here