Active participation in the U.S. economy—a fundamental aspect to living and working in the U.S.—is accomplished largely through filing tax returns. For immigrants, even those who are undocumented, this key step to a fully integrated life in the U.S. requires obtaining an Individual Tax Identification Number (ITIN) from the Internal Revenue Service (IRS).
What is an ITIN?
An ITIN is a number issued by the IRS to identify an individual to process taxes. ITINs are issued to people who do not qualify for a social security number, such as people living in the U.S. without legal immigration status.
Why do I need an ITIN?
Documentation
For immigrants, paying taxes goes a long way in establishing strong documentation about your history in the country. Besides demonstrating compliance with federal tax laws and establishing some extent of “good moral character,” having tax returns with your ITIN on file with the IRS is an excellent form of general documentation. Because the forms document both work history and physical presence within the country, likely key components to any future immigration reform action, filing a tax return now could have immigration-status dividends in the future.
Tax Benefits
Filing returns opens up the opportunity for immigrants to formalize their role in the economy as they make tax contributions to their adopted country. What’s more, those who pay into the system also have access to system benefits. For example, immigrant taxpayers can claim crucial economic supports like the Child Tax Credit where even the refundable portion—the Additional Child Tax Credit—can be claimed.
Healthcare
Immigrant parents with U.S.-born children who are enrolled in health care coverage under the Affordable Care Act (ACA), commonly called Obamacare, need to file a tax return to claim the credits that are used to offset the cost of the insurance premiums. Individual immigrants who file their taxes with an ITIN can also use their return to show their exemption eligibility of the ACA’s individual mandate. For low-income immigrants, the inability to file for these credits could mean more poverty.
In cases where immigration status is mixed within families, those who are U.S. citizens have no way to prove eligibility in cases where no tax return with an ITIN has been filed. In cases where health insurance enrollment has occurred, the lack of an ITIN and tax return means health plan enrollment in subsequent years might be jeopardized.
Settlement Payments
Another benefit to immigrant workers holding an ITIN is in terms of withholding rates where settlement payments are concerned. Immigrant workers without an ITIN are subject to maximum tax withholding on payments made in employment-related disputes. Immigrants with a family status that’s been established through returns filed with an ITIN, however, will pay a lower withholding rate. The same withholding rules apply in cases where an immigrant receives punitive damages.
Will getting an ITIN put me or my family at risk of being deported?
Immigrants living in families where immigration status is mixed are among the most likely not to obtain an ITIN. Here, government guidance states IRS rules surrounding privacy; they protect the identity of people filing taxes, even if they are undocumented. According to the National Immigration Law Center, “The IRS has strong privacy protections in place to ensure that immigrants who report their income and file their taxes are not at risk of having their information shared.” However, they do note some exceptions, “the IRS is generally prohibited from disclosing taxpayer information, including to other federal agencies.”
How do I get an ITIN?
You can apply for an ITIN by submitting Form W7 to the IRS. To learn more about ITINs and the application process, visit the IRS website.
The track record where ITINs are concerned shows that In 2010, over 3 million federal tax returns were filed with ITINs, accounting for more than $13 billion in payroll tax payments (Social Security and Medicare) and over $870 million in income tax.
