Tax laws are confusing, especially for immigrants.
Fortunately, the same rule applies to everyone in the United States: we’re all expected to pay our taxes on time. This year, the deadline is May 17 (extended a month due to COVID-19).
Whether you’re a natural-born citizen, a green card holder, or an undocumented immigrant, the Internal Revenue Service (IRS) expects to collect your tax dollars once every year.
Read this quick overview to verify your immigration status, to download the right forms, and to handle tax season with confidence.
(Note: the term “alien” has a long history of usage in U.S. tax laws and refers to anyone who is not considered a U.S. citizen. Because the Biden administration has recently announced their intent to replace the term with “noncitizen,” we will use noncitizen throughout this blog.)
1. Residents & Nonresidents: Verifying Your Immigration Status
Residents are taxed similarly to U.S. citizens. Like American citizens, residents will be expected to report all earned income (regardless of the country in which it’s earned) on annual tax returns.
While you will be expected to report all worldwide income, however, you may not necessarily be taxed on it. Still, be sure to report everything, as incomplete filings can negatively affect your immigration status.
The IRS relies on two tests to determine if you are a resident: the “Green Card Test” and the “Substantial Presence Test.”
Green Card Test: If you lawfully resided in the U.S. at any time during the year, you will be considered a resident for tax purposes. In other words, if you have a green card, you will be considered a resident and must file a U.S. tax return Form 1040 each year.
Substantial Presence Test: If you don’t have a green card, you must be physically present in the U.S. under the following conditions to be considered a resident:
- You lived in the U.S. for 31 days of the tax year in question (January 1 – December 31, 2020)
- You lived in the U.S. for 183 days during a three-year period (2020, 2019, and 2018). This number can be met by counting the following:
- All the days you were present in 2020, and
- 1/3rd of the days you were present in 2018
- 1/6th of the days you were present in 2019
The math may seem a bit confusing, so here’s a brief overview of an example as provided by the IRS.
Say you were in the United States for 120 days in each of the years 2018, 2019, and 2020. The days counted would be as follows: 120 days in 2020, 40 days in 2019 (1/3rd of the total days present), and 20 days in 2018 (1/6th of the total days present). In this instance, the total number would put you at 180 days, just below the 183-day requirement to pass the Substantial Presence test.
If you do not pass these tests, you will be considered a nonresident, and will still be expected to file taxes with IRS Form 1040-NR.
Click here to access the IRS’ “Determining Alien Tax Status” page and view both tests.
2. Filing Taxes As An Undocumented Worker
Undocumented immigrants are also legally obligated to file taxes. While it may seem like there isn’t much incentive to do so, paying taxes can help undocumented immigrants prove they have “good moral character” when they apply for citizenship.
According to the United States Citizenship and Immigration Services (USCIS), good moral character is defined as that which “measures up to the standards of average citizens of the community.”
Paying taxes is a great way for immigrants to demonstrate the number of years they’ve contributed to the government.
Millions of undocumented workers pay taxes every year, many of whom do so as a show of good faith on their path to citizenship. According to the Institute on Taxation & Economic Policy, undocumented workers paid nearly $12 billion in state and local taxes in 2014.
If you don’t have a Social Security number, however, how can you pay your taxes?
You must first get an ITIN.
3. Getting Your ITIN
While most non-citizens aren’t eligible to receive a Social Security number (SSN), they can still use an Individual Taxpayer Identification Number (ITIN) to pay taxes.
Created by the IRS in 1996, the ITIN provides undocumented workers (and legally-present non-citizens) a way to pay taxes without a SSN.
ITINs are frequently used and accounted for over 3 million federal tax returns in 2010.
To apply, click here to download Form W-7. You can apply for an ITIN by mail or in person (both in the U.S. and in many countries around the world).
To find the IRS office nearest you, click here.
Note: Don’t worry! Using an ITIN won’t jeopardize your living situation in the U.S. or draw unwanted attention to your immigration status. There are two reasons for this: first, because the IRS can’t legally disclose taxpayer information to other federal agencies, and second, the ITIN is a purely tax-related form.
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