Undocumented immigrants are legally obligated to file U.S. tax returns and pay taxes, even when they’re paid “under the table” in cash. Many do so, because they intend to apply for U.S. citizenship at some point, and they hope that a history of making tax payments could be helpful. But complying with the legal obligation to pay taxes can be complicated. Here’s what to know about paying taxes if you're an undocumented immigrant.
Who Is an Undocumented Immigrant?
“Alien” is the IRS term for a non-U.S. citizen or undocumented immigrant. A few categories of people are identified as aliens.
A resident alien is someone with a green card or a “substantial presence in the U.S.,” according to the IRS. This is defined as being physically present in the U.S. for at least 31 days out of the tax year and for at least 183 days during the current year and the preceding two tax years. Resident aliens are taxed like U.S. citizens.
A nonresident alien is someone who hasn’t yet passed their green card test or the substantial presence test. Nonresident aliens file IRS Form 1040-NR when they earn income from engaging in business or a trade in the U.S., and under several other specific circumstances as well.
The IRS says that an undocumented alien is someone who has entered the U.S. illegally without the proper authorization and documents, or who entered legally but has since violated the terms of their visa. Undocumented aliens, also called "undocumented workers," are only required to report income derived from U.S. sources.
Filing Taxes Without a Social Security Number
The 2020 Form 1040 requires that a taxpayer enter their Social Security number (SSN) at the top of the tax return. This obviously poses a problem for undocumented workers who are required to file returns but are seemingly prohibited from doing so because they aren’t eligible for SSNs.
Some noncitizens can apply for and receive Social Security numbers, however. Noncitizens might be temporarily authorized to work through Deferred Action for Childhood Arrivals (DACA) or Temporary Protected Status (TPS). Noncitizens might also have access to work visas.
These SSNs are only valid for a limited authorized time, but this technically means the noncitizens are not “undocumented.”
What Are Individual Taxpayer Identification Numbers?
Undocumented workers have another option—the Individual Taxpayer Identification Number (ITIN). An ITIN can be used in place of an SSN. The IRS created the it back in 1996 to encourage those ineligible for an SSN to file returns and pay taxes.
An ITIN is not an authorization to work in the U.S., however. Receiving one doesn’t mean that you’re a documented alien or resident. It simply allows you to file a tax return and pay taxes.
How Can I Get an ITIN?
Fill out the ITIN application, IRS Form W-7, which is pretty basic, compared to other tax forms. You don’t have to reapply every year after you're assigned an ITIN number, but you can no longer use the number if you eventually do receive an SSN. You must use your ITIN on a federal tax return at least once in three years.
Here’s how to get an ITIN:
- Fill out the form with your name, your addresses—both in the U.S. and elsewhere—and information about your place and date of birth.
- Explain why you’re applying, using the various checkboxes that are available. They include indicating whether you’re a nonresident alien or U.S. resident alien.
Undocumented workers would generally use the U.S. resident alien box if they've passed the substantial presence test.
- Submit proof of your identity. Acceptable documents include original or certified copies of your passport, foreign military ID, birth certificate, or medical records. The form doesn’t ask whether you’re in the country legally, but it does ask for your date of entry into the country.
- Send Form W-7 form the IRS along with your completed tax return. Don't send it ahead of time, before you file your return.
The IRS indicates that processing the W-7 form will take anywhere from seven to 11 weeks.
The IRS provides a list of available certified acceptance agents in each state if you’re feeling challenged by the requirements and need help completing your Form W-7.
How to Fill Out IRS Form I-9
Your potential U.S. employer might ask you to complete Form I-9, a required form for employees who are on the payroll. The form requests your SSN and documentation that proves that you’re authorized to work in the U.S.
You need only provide your SSN if your employer participates in E-Verify, a voluntary program. The employer isn't permitted to ask you for specific documents. It’s your choice as to which among the approved documents you want to provide.
It’s illegal to write in a random SSN. You’d then have to file a tax return under that number, which would alert the IRS to fraud if the number belongs to someone else, and that individual also files a return. The instructions on Form I-9 state that “falsely attesting to U.S. citizenship may subject employees to penalties, removal proceedings and may adversely affect an employee’s ability to seek future immigration benefits.”
Can Undocumented Workers Claim Tax Credits?
Undocumented workers aren't eligible for tax breaks except under very limited circumstances.
You're not eligible for the Earned Income Tax Credit (EITC) if you worked with an ITIN and you're undocumented. Undocumented workers and ITIN workers can still claim the Child Tax Credit and Additional Child Tax Credit for their children under age 17, however, if the children are documented and have valid SSNs.
Undocumented workers are eligible for the American Opportunity Tax Credit (AOTC), provided that they've applied for, or were issued, an ITIN before the due date of the tax return.
The Bottom Line
Filing a tax return isn't only required by law in many situations, but it can also help workers eventually become citizens. Paying taxes demonstrates a good faith effort toward “good moral character.”