In a word, yes.
If you work in the U.S., you are required to pay taxes. This is true for all immigrants, whether the United States categorizes you as a resident or nonresident alien. All are obligated by law to pay income and payroll taxes for each year of work in the U.S.
However, there are differences in how you’ll file taxes. It all depends on your residency status. This guide will help you understand how immigrants to the United States are taxed, why it’s required, and how to get help with the process.
Before we get started, let’s take a moment to appreciate the contributions of immigrants. Did you know they pay billions of dollars in taxes to the U.S. government each year?
In fact, as the American Immigration Council reports, undocumented immigrants alone contribute huge sums via income and payroll taxes.
How U.S. Immigrants Are Taxed
The United States’ tax laws refer to immigrants, foreign workers, and undocumented immigrants as resident and nonresident aliens. Generally, resident aliens are taxed the same way as U.S. citizens. Non-residents, on the other hand, are taxed based on special rules in parts of the Internal Revenue Code (IRC).
If you’re unsure whether you’re considered a resident or nonresident alien for U.S. income tax purposes, check the IRS’ Determining Alien Tax Status page. There, you can determine whether you pass the “substantial presence” test.
For instance, green card holders are considered resident aliens. To pay taxes, they need to be physically present in the U.S. for a minimum of 31 days during the current tax year and at least 183 days within the last three years (including the current calendar year). Their residency date starts the first day they’re physically present in the U.S. after receiving lawful permanent residency status.
Nonresident aliens are those who aren’t permanent residents. For instance, you have a work permit or you’re an undocumented immigrant (having entered the U.S. without authorization or with an expired legal status). You won’t need to pass a physical presence test, but you will still need to pay taxes.
Getting an ITIN or SSN
Individuals who file taxes will need to obtain either a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). These numbers will identify you as a taxpayer in the U.S., and which number you’ll use will depend on your residency status.
Resident aliens qualify for an SSN, issued by the Social Security Administration (SSA). This number is used to track an individual’s lifetime earnings, and allows them federal, state and local benefits, such as tax credits.
Nonresident aliens, on the other hand, will need to apply for an ITIN to file their taxes. This number is for the sole purpose of offering you a method of paying taxes if you can’t qualify for an SSN. Anyone can be issued an ITIN, even spouses or dependents of nonresident aliens.
When applying for an ITIN or SSN, you’ll need to do so through different means. For an ITIN, you’ll apply through the IRS using form W-7.
On the other hand, you obtain an SSN through the SSA. In this case, be required to provide supporting documentation that proves your identity and residency status.
It’s important to remember that once you apply for an SSN, that number is valid for life. For ITINs, you’ll need to renew or revalidate them every five years. If you haven’t used your ITIN for three consecutive years, the IRS will consider the number expired.
ITIN Processing Time 2021
In 2021, as of March 27, the IRS had received over 150,000 ITIN applications, and the number is expected to grow. According to the IRS official website, you should receive your ITIN within seven weeks if all the information you enter on the application is correct and complete.
However, during the peak months like January and March, your wait time may be longer. During the wait time, it is ideal to check your application status intermittently. If you haven’t heard back from IRS for over six weeks, you should contact them via a phone call.
Why Would a Nonresident Alien Pay Taxes?
Resident aliens receive the same types of federal, state and local benefits as U.S. citizens such as:
- Pell Grants and student loans;
- Refundable tax credits;
- Unemployment insurance;
- Supplemental Security Income (SSI);
- Social Security benefits;
- Medicaid and/or Medicare;
- Children’s Health Insurance Program (CHIP); and
- Supplemental Nutrition Assistance Program (SNAP).
Taxes help to fund these benefits, so as a resident alien taxpayer, you’ll be eligible to receive them.
Nonresident aliens, unfortunately, won’t have access to all of these benefits. For instance, taxpayers with an ITIN are ineligible for most tax credits.
Plus, they cannot receive all of the benefits listed above except for emergency services through Medicaid and some CHIP benefits, depending on the state.
Given the lack of perceived benefits from paying taxes, why would a nonresident alien pay them?
For one, many immigrants (especially undocumented ones) pay taxes in the hopes that it might help them gain legal status and become citizens in the future, according to the Bipartisan Policy Center.
Filing tax returns is a way to indicate when someone entered into the U.S. and the length of time they’ve contributed to the government. It may also help immigrants to prove their income for federal benefits they may qualify for (though most tend to ask for an SSN).
What If the IRS Gives Information About my Immigration Status?
It’s natural for the undocumented to feel nervous about taxes. The truth is that the ITIN is issued for the purposes of federal tax reporting alone.
What this means is that you likely don’t need to worry that your tax information will be shared. That’s because the IRS is barred from disclosing taxpayer information even to other federal agencies.
However, the IRS may be required to do so if your information is subpoenaed as part of a criminal investigation by federal courts.
What If I Need Help Filing my Taxes?
There are many ways to file taxes as a U.S. resident or nonresident alien.
To start, you’ll need to collect all relevant documents so that you can provide accurate information. This includes your SSN or ITIN, and forms showing your income, such as a 1099 and W-2.
As for where to file your taxes, you can try to do it yourself. There are plenty of online services from major companies. These programs will help you calculate what you may owe or get refunded based on the information you provide.
If you feel intimidated, you can head to an in-person tax preparation clinic or speak with an accountant who can file taxes on your behalf.
If you need translation or find these tax services too expensive, you can get help. Take advantage of the IRS’s Volunteer Income Tax Assistance (VITA) program. Volunteers are certified by the IRS to provide individuals free basic income tax preparation services.
If you’re interested, head to the IRS’ website to locate a VITA site. You can also look at IRS Publication 3676-B (also available in Spanish) to verify which services are provided.
Before going, make sure you have all required information and documents so that volunteers can help you apply for an ITIN (if you need one) and prepare your tax return.
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