Filing Taxes as an Undocumented Worker
Undocumented workers must pay taxes, too
Undocumented workers are legally obligated to file tax returns and pay taxes, even when they’re paid in cash “under the table.” And many do so because they intend to apply for U.S. citizenship at some point, and hope that a history of tax payments could be helpful. But complying with the legal obligation to pay taxes can be complicated. Here’s what to know about paying undocumented immigrant taxes.
Who Is an Undocumented Immigrant?
An “alien” is the current IRS wording for a non-U.S. citizen or an undocumented immigrant. Here are the types of people identified as “aliens.”
This 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, according to the IRS.
This is someone who hasn’t yet passed their green card test or “substantial presence test.” Nonresident aliens file IRS Form 1040-NR when engaged in business or trade in the U.S., and in several other specific circumstances.
The IRS says that an undocumented alien is someone who “entered the United States illegally without the proper authorization and documents, or who entered the United States legally and has since violated the terms of his or her visa or overstayed the time limit.” Undocumented aliens (also called undocumented workers) are only required to report income derived from U.S. sources.
How Can I File Taxes Without a Social Security Number?
The 2019 tax Form 1040 requires a taxpayer’s Social Security number (SSN) at the form’s top. This obviously poses a problem for undocumented workers, who are required to file returns, but seemingly prohibited from doing so—because they aren’t eligible for SSNs.
However, some noncitizens can apply for and receive Social Security numbers. 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. Technically, this means the noncitizens are not “undocumented.”
What Are Individual Taxpayer Identification Numbers?
Undocumented workers have another option, too—the Individual Taxpayer Identification Number (ITIN), which can be used in an SSN’s place. The IRS created the ITIN back in 1996 to encourage those ineligible for an SSN to file returns and pay taxes.
However, an ITIN is not an authorization to work in the U.S. Receiving one doesn’t mean that you’re now a documented alien or resident. It simply allows you to stay on the government’s good side by filing a tax return and paying 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. After you’re assigned an ITIN number, you don’t have to reapply every year. But you can no longer use it if you eventually receive an SSN, and you must use it 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, such as whether you’re a nonresident alien or U.S. resident alien. Undocumented workers would generally use the U.S. resident alien box if they passed the Substantial Presence Test.
- Submit proof of your identity. Acceptable documents proving your identity include original or certified copies of your passport, foreign military ID, birth certificate, or medical records. Note: The form doesn’t ask whether you’re in the country legally, though it does ask for your date of entry into the country.
- Send the W-7 form to the IRS with your completed tax return, not before tax time.
- The IRS indicates that processing the W-7 form takes anywhere from seven to 11 weeks.
If you’re feeling challenged by requirements and need help completing your Form W-7, visit a certified acceptance agent. The IRS provides a list of available agents in each state.
How to Fill Out IRS Form I-9 if You Don’t Have an SSN
Your new or potential U.S. employer might ask you to complete Form I-9, a required form for employees on the payroll. It requests your SSN and documentation proving that you’re authorized to work in the U.S.
However, you need only provide your SSN if your employer participates in E-Verify, a voluntary program. The employer is also not 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 SSN 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 do not get tax breaks, except in very limited circumstances.
Worked with an ITIN and those who are undocumented are not eligible for the Earned Income Tax Credit (EITC).
Undocumented workers and ITIN workers can still claim the Child Tax Credit and Additional Child Tax Credit for their children under age 17, but only if the children are documented and have valid SSNs.
Undocumented workers are eligible for the American Opportunity Tax Credit (AOTC), provided that they have applied for or were issued an ITIN before the due date of the tax return.
The Bottom Line
Filing a tax return is not 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.”
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