Important notice: due to Covid-19, the tax deadline has been extended and you must file taxes before 15 July 2020. Go to the official IRS website for more information.
Paying taxes can turn your American dream into reality. By complying with the rules, you’ll send off a strong signal to the government that you’re a law-abiding citizen.
It’s the duty of all US workers to pay taxes, regardless of their immigration status. However, the rules are often changing and there are lots of nuances to be aware of.
This article will guide you through the processes of filing your taxes, obtaining your ITIN, and the challenges you could face as an undocumented immigrant.
If you still have any doubts, don’t hesitate to contact us. You can call us on +1 (704) 243-6333, contact us, or visit us directly at 4801 E Independence Blvd, Charlotte, NC 28212 for legal and professional tax debt advice.
- Filing your taxes
- Your ITIN
- Reasons to pay taxes
- The risk of deportation
- The economic impact of migrants
Filing your taxes
Let’s start off with some basic information about taxes. Many immigrants end up not paying taxes simply because they don’t understand how to, or they don’t even realize they’re obligated to do so.
Or perhaps you’re worried about being deported because your tax form will reveal your illegal status. Don’t worry — the IRS won’t share information with other government agencies unless it’s related to a serious crime.
Don’t get yourself into a sticky situation — learn how to pay your taxes.
Which form to file
Depending on whether you’re a contractor, business owner, or an employee, you’ll fill in a different tax form. As an undocumented migrant, this is slightly more complicated.
If you provided a fake social security number to your employer, they will withhold taxes like they would with any other employee (assuming they’re law-abiding). The employer will file a Form W-2 for you and you will file a Form 1040-ES for the IRS. Although in theory this could be investigated, it’s relatively unlikely and not something you need to worry about.
If your employer pays you cash in hand, you might need to file a Form 1099-MISC — usually designed for contractors — instead.
To learn more about the various tax forms, you can find a more in-depth guide in our article about relevant information for taxpayers.
How to file taxes
Okay, so you know which papers you need to fill in. How do you actually send off your return?
You can pay electronically, by check, or by phone — but it’s best to use the electronic option if possible.
The deadline for tax returns each year is April 15. However, the IRS requires most people to pay quarterly taxes if they owe $1,000 a year or more in taxes. This means you’ll be paying estimated taxes — but don’t panic. If your income is unpredictable, you can make up for over- or underestimations in subsequent periods.
Again, you can read more about this in our guide to taxes.
You also shouldn’t worry if you don’t have the money to pay your taxes. The penalty for not filing your tax return is ten times higher than the penalty for not paying.
You might be wondering how you can fill in your tax form without a Social Security Number: this is one of the prime requirements. Luckily, there’s a clear solution — applying for an Individual Taxpayer Identification Number (ITIN).
Regardless of your profession, if you’re an undocumented migrant, you need ITIN to file your taxes. You must apply for it along with filing your tax return.
Let’s take a deeper look at what an ITIN is and the process and requirements for obtaining one.
What is an ITIN?
Undocumented migrants use an ITIN (Individual Taxpayer Identification Number) to file taxes instead of a Social Security Number (SSN), which identifies legal residents of a country.
The IRS introduced the ITIN back in 1996 to earn tax revenue from undocumented migrants as well as legal residents.
Every year, the IRS receives about three million returns that use ITIN, most of which are believed to be from undocumented migrants. There may be even more people that use fake SSNs.
The ITIN number contains nine digits starting with the number 9. The fourth and fifth digits determine when the number expires — middle digits below 87 will expire at the end of this year.
Obtaining an ITIN unfortunately doesn’t make you eligible for an SSN, although it might help you get citizenship eventually, which would in turn give you an SSN.
What are the requirements for an ITIN?
An ITIN is only for those who fall into the following categories:
- Nonresident alien filing tax return
- US resident alien filing tax return
- Dependent or spouse of a US citizen or resident alien
- Dependent or spouse of a nonresident alien visa holder
- Nonresident alien claiming a tax treaty benefit
- Nonresident alien student, professor, or researcher
Don’t be thrown off by the term “alien” — that’s just the legal name for a non-US citizen or undocumented resident.
Alternatively, a Social Security Number is used by:
- Permanent residents
- Anyone with a work visa for the USA
- American nationals
- People with political asylum.
Undocumented immigrants don’t fall into these categories and can’t obtain an SSN, so they must use an ITIN.
How can I apply for an ITIN?
To apply for an ITIN, you must fill in the Form W-7SP. It takes approximately six to seven weeks to arrive once you apply for it, so don’t wait until the last minute to apply.
As part of the application process, you’ll need to give in details about any dependents, like a partner or children.
You’ll also be asked for your passport — and those of your dependents if applicable. These must be the original documents rather than copies to verify your nationality accurately. In special cases or if you don’t have a passport, you may be able to give alternative forms of identification, like an ID card or consular registration.
If you have dependents in another country, but you provide for them, you still need to include them on the Form W-7. There are some extra steps you’ll need to take to declare them as your dependents.
Reasons to pay your taxes
As we’ve mentioned already, it’s always best to pay your taxes. The USA is a strict country and requires everyone to contribute, regardless of their migration status.
Besides, there are a few clear advantages to fulfilling your civic duties.
Becoming a legal resident
If you ever decide to apply for legal citizenship, you’ll be grateful you’ve paid your taxes in previous years. Proving to authorities you’re a law-abiding citizen and not a public burden can swing the outcome of your application in your favor.
You should also bear in mind that immigration laws could change at any time. Having a good record with the IRS can only act in your favor in case restrictions are made even more punitive in the future.
Defending yourself in court
If you ever have to go to immigration court and defend yourself against deportation, it’s useful to have a record as a responsible citizen who pays taxes. The court will take into account all the information available to them — positive or negative — to reach their final decision on your migration status.
It speaks volumes if you’ve paid your taxes even though you could have evaded them so easily. The judge will recognize your honesty and integrity as a worker, lessening your chance of deportation.
Of course, there’s never a guarantee, but the odds will be in your favor.
Laws could change
Laws change constantly, especially immigration laws. You never know what the future will hold, so it’s best to play it safe. If new immigration reform is passed, having a good track record will ensure you have nothing to worry about, even if the laws become stricter.
For example, past migratory reform focused on analyzing accurate data about the stay of US migrants and ensuring they have copies of tax returns on hand.
As you should already know, there are calls for Congress to consider including tax payment history information as a requirement for obtaining legal status.
So, as well as fulfilling your moral duty as a citizen, you’ll be helping yourself out by paying taxes.
According to the Institute of Fiscal and Economic Policy (ITEP), nearly half of workers with immigrant status pay their taxes in the US. Being inside that 50% gives you a clear advantage over anyone outside it.
A final reason is to pay taxes is avoiding deportation, which we’ll investigate in more detail now.
The risk of deportation
It’s time to tackle the elephant in the room. We’ve talked already about the responsibilities of citizens residing in the United States to pay taxes, whether they have legal papers or not. Yet we’ve not touched on the sensitive issue of whether you could be deported.
It’s an open wound in the country involving many social controversies and hasn’t always been handled delicately. Let’s take a look at where the situation stands currently and how it could affect you.
A few months ago, caravans of immigrants coming from Central America made their way into the US in search of a better life, risking their lives. They touched the hearts of some and served as an annoyance to others.
The administration struggled to solve the problem, even threatening to close the border with Mexico repeatedly. This caused great concern to people on both sides of the border and resulted in financial losses for traders that come and between the countries.
This situation showed us the importance of maintaining ties for both sides. The US and Mexico are mutually dependent neighbors and it’s best for everyone to have a friendly relationship. Luckily, the borders never closed.
No one leaves their home for the sake of it. Sometimes the need for a better life makes the prospect of losing everything worth it. Yet even for the migrants who are successful, when they arrive in the US, they carry the shame of being undocumented and the fear of deportation.
Changes in regulation
Immigration laws are constantly changing, making it increasingly difficult to obtain permanent residency.
After all the fuss about caravans and mass immigration, President Donald Trump proposed introducing merit-based immigration. This would use the skills and abilities of applicants to determine their residency, similarly to the Australian point-based system.
This would give priority to more skilled immigrants who speak English and can successfully pass the civic exam. These people would probably be wealthier, too.
The system would be point-based, with scores depending on categories like age, skills, having a job offer, a high level of education, and offering a business venture that could hire locals.
Problems with the proposal
Congress has said the measure wouldn’t close the doors to the immigrants, but simply create a fairer exchange; human capital in return for the right of residency.
However, the proposal certainly divides opinions. Some believe the plan would close the doors to the majority of immigrants, with only a select few being able to take advantage: those who are better off financially.
Excluding the least privileged people is also a clear violation of human rights, and it would also ignore the plight of asylum seekers.
Reasons for deportation
Even if you have permanent residency or a green card, you still risk deportation if you break the law or violate the terms of your stay.
According to the American Immigration Act, the government has the right to do this.
Once you become a US citizen, you’re safe from the act, as long as you haven’t obtained your citizenship fraudulently.
Some causes of deportation are:
- Conviction for domestic violence or child neglect
- Involvement in espionage or sabotage, violence, or other illegal means of overthrowing the government American
- A presence in the country that implies diplomatic problems
- If you register for benefits and don’t prove your eligibility
- Involvement in human trafficking
- Conviction for crime related to drug possession
- Conviction for another very serious crime committed in American territory
Possible future changes
It’s also important that you register a change of address within ten days of moving and don’t commit fraud or omit important information from your documents. These could also lead to deportation, although you’ll almost always get a right of appeal.
In March this year, the Supreme Court allowed the ICE to arrest legal residents with criminal records — even if they’d already served their sentences. For many people in the immigrant community, it felt like a witch hunt.
Immigrant rights advocates described the process as unfair as the vast majority of immigrants arrested had already paid for what they’d done. The arrests were also carried out without rights to a hearing to agree bail.
The proposal still isn’t completely clear. For instance, will it apply to those who have made use of public benefits in previous years?
Regardless, you can’t afford to let your guard down. Immigration is a priority for the administration since the presidential campaign was based around the issue.
The Economic Impact of Migrants
Many people unfairly judge immigrants — especially undocumented immigrants.
One of the principal reasons for this is the misled belief that they don’t pay taxes. In fact, according to a report by the ITEP in 2017, immigrants living in the US pay about $11.74 billion annually in state and local taxes. The numbers are likely to be similar at the federal level.
In fact, undocumented immigrants contribute a greater percentage of their income to state and local taxes. They pay 8% of their income on average, whereas the richest 1% in the US contribute just 5% of their income to lower taxes.
Large companies are even worse and sometimes don’t pay taxes at all, as the ITEP revealed in April 2019.
According to the ITEP, the government would receive even more if they worked legally as their annual contributions would increase by more than $2 billion.
The money collected is used to finance the services all American citizens are entitled to, like public health, schools, and road improvement.
Despite being reliable taxpayers, undocumented migrants can’t access most of the benefits the rest of the population can access, like social security.
To avoid trouble, you must always keep one step ahead of the current regulations. Stay out of trouble and prove that you’re a valuable citizen — paying taxes is one of the best ways to do this.
Alternatively, call us on +1 (704) 243-6333 to learn more about how we can help you fulfill your tax duties, or contact us through our website.