Illegal immigrants & taxes

[sqweels]

Naturally, illegal immigrants don't fill out tax returns.

But are most of them paid under the table, or are they often given standard paychecks with all the withholding that they do not claim as refunds?

[racer72]

About 10 years ago my wife and I received a letter from the IRS claiming we did not include all the taxable income we received for the previous year on our tax return. I called the local IRS office and claimed innocence and that yes we did include all of the income we received. He said they had records showing my wife had worked at a restaurant in Ft. Lauderdale, Florida for 5 months that year and had worked under an assumed name. I corrected him, my wife worked for the same company all year in the state of Washington and that someone else had used her SSN. A few weeks later we got another letter and that is exactly what had happened, an illegal got a job and apparently made up an SSN for her employment, it was the same as my wife's. That is one method for them to work and avoid taxes in their name.

[Bill Door]

Originally Posted by racer72

A few weeks later we got another letter and that is exactly what had happened, an illegal got a job and apparently made up an SSN for her employment, it was the same as my wife's. That is one method for them to work and avoid taxes in their name.

So what happens to the money that the illegal paid in taxes then? Whover it was paid into your wife's social security account and income tax account. I suppose it doesn't count as "found money" to her, so the government just keeps all of it.

Workers paid under the table don't pay taxes directly, but their employers have no documentation to deduct the wages they pay the workers, and end up paying taxes on the money themselves, probably at a higher marginal rate than the illegal would have paid.

[denquixote]

Originally Posted by Bill Door

So what happens to the money that the illegal paid in taxes then? Whover it was paid into your wife's social security account and income tax account. I suppose it doesn't count as "found money" to her, so the government just keeps all of it.

Workers paid under the table don't pay taxes directly, but their employers have no documentation to deduct the wages they pay the workers, and end up paying taxes on the money themselves, probably at a higher marginal rate than the illegal would have paid.

I c an guarantee you that an employer who is knowingly employing an illegal alien in order to save money is not paying taxes on the under the table payment to said alien. If there is no other way (and I'm sure there are probably many) he will keep 2 sets of books, one of which will have no record of the money paid to the alien, either coming in or going out.

[ChicanoRojo]

Originally Posted by racer72

A few weeks later we got another letter and that is exactly what had happened, an illegal got a job and apparently made up an SSN for her employment, it was the same as my wife's. That is one method for them to work and avoid taxes in their name.

Well. Slight Nit Pick. An Undocumented Immigrant uses "fake" or real SSN in order to get a job, and not for the avoidance of taxes et al.

[Skammer]

My understanding is that most undocumented workers who are not paid under the table do use fake SSNs, in which case the government ends up keeping all the tax withholding from their paychecks (since they cannot file for a refund). So not only are these illegal workers not avoiding taxes, they are actually paying more taxes than would be otherwise due.

[ralph124c]

RE: stolen SS numbers: the alien worker will file for 10-12 dependents, meaning his witholding taxes will be rebated to him. The unlucky (real) holder of the SSN will then get a bill (years later) for amount of money rebated to the alien (who by now has a new identity). What we are talking about is the underground economy-no cost to the employer-but the social costs (hospital care for the illegal) are borne by the US taxpayer.

[ChicanoRojo]

Originally Posted by sqweels

Naturally, illegal immigrants don't fill out tax returns.

But are most of them paid under the table, or are they often given standard paychecks with all the withholding that they do not claim as refunds?

An undocumented immigrant will, in general, work in a job site that does not report his/her "under the table" wages (usually wages are paid in cash) to the government (since obviously hiring an undocumented immigrant is illegal) or uses an assumed name and SSN. In the case of the latter, the undocumented immigrant will not, in most cases, claim refunds.

[ChicanoRojo]

Originally Posted by ralph124c

RE: stolen SS numbers: the alien worker will file for 10-12 dependents, meaning his witholding taxes will be rebated to him. The unlucky (real) holder of the SSN will then get a bill (years later) for amount of money rebated to the alien (who by now has a new identity). What we are talking about is the underground economy-no cost to the employer-but the social costs (hospital care for the illegal) are borne by the US taxpayer.

And he gets this in a check or ? As a social service provider for almost 13 years along the Texas-Mexico border and having worked with undocumented immigrants (particularly farm workers), I have never run across such incident. I have seen cases of undocumented immigrants owning land, but never doing such scheme. Can you cite particular report?

Here is an interesting report from the former Texas Comptroller of Public Accounts, Strayhorn, regarding the impact of undocumented immigrants to the state economy.

[AskNott]

According to a lawyer on NPR's Talk Of The Nation, many illegals do pay income taxes. They can't get an SS number, so they have to apply for a tax number. Why would an illegal go out of his way to pay taxes, you ask? They're hoping to build a positive paper trail toward becoming a citizen. Under the current system, it won't help, but they know the laws can change.

Those who have bought a phony identity are using an SS number, either made up or copied from a real person. The made up kind are caught by the IRS in about 1-3 months. The copied kind, like in the OP, can take as long as a year.

[Bridget Burke]

Originally Posted by ChicanoRojo

And he gets this in a check or ? As a social service provider for almost 13 years along the Texas-Mexico border and having worked with undocumented immigrants (particularly farm workers), I have never run across such incident. I have seen cases of undocumented immigrants owning land, but never doing such scheme. Can you cite particular report?

Here is an interesting report from the former Texas Comptroller of Public Accounts, Strayhorn, regarding the impact of undocumented immigrants to the state economy.

But Carol Keeton Strayhorn is such a notorious Liberal!

(This is sarcasm. I'm a Texan.)

How dare you bring facts to the argument?

[ChicanoRojo]

Originally Posted by Bridget Burke

But Carol Keeton Strayhorn is such a notorious Liberal!

(This is sarcasm. I'm a Texan.)

How dare you bring facts to the argument?

....FYI for all....I just posted that just so we get a macro economic look (from a State gov pov) at what some of the states are looking at when studying the issue of undocumented immigrants and their effect in our economy.

[Skammer]

Originally Posted by ralph124c

RE: stolen SS numbers: the alien worker will file for 10-12 dependents, meaning his witholding taxes will be rebated to him. The unlucky (real) holder of the SSN will then get a bill (years later) for amount of money rebated to the alien (who by now has a new identity). What we are talking about is the underground economy-no cost to the employer-but the social costs (hospital care for the illegal) are borne by the US taxpayer.

Rebated? If you are using a fraudulent (i.e. stolen) social security number, you are not going to be filing a 1040A at the end of the year.

[scotandrsn]

Originally Posted by ChicanoRojo

And he gets this in a check or ? As a social service provider for almost 13 years along the Texas-Mexico border and having worked with undocumented immigrants (particularly farm workers), I have never run across such incident. I have seen cases of undocumented immigrants owning land, but never doing such scheme. Can you cite particular report?

Here is an interesting report from the former Texas Comptroller of Public Accounts, Strayhorn, regarding the impact of undocumented immigrants to the state economy.

Interesting, but limited in scope, and not necessarily applicable to the issue at large.

It seems to focus on income and expenditures to the state treasury. The introduction specifically mentions differing burdens taken on by local governments that do not paint as favorable a picture for them.

I'd be interested to see an analysis of the burdens borne by the average taxpayer. For example, the section of the report on Incarceration focuses only on the cost of facilities, services and salaries. I would like to see a comparison of the effect on citizens in terms of total property loss or lost income with the incarcerated illegal immigrants present and absent.

[scotandrsn]

Originally Posted by Skammer

Rebated? If you are using a fraudulent (i.e. stolen) social security number, you are not going to be filing a 1040A at the end of the year.

But you could claim 10-12 exemptions on your W-4.

[DrDeth]

Originally Posted by sqweels

Naturally, illegal immigrants don't fill out tax returns.

But are most of them paid under the table, or are they often given standard paychecks with all the withholding that they do not claim as refunds?

They do indeed file and pay income taxes, sometimes with the same invalid TINs they bought- or more often with their ITIN, which is perfectly legal. The IRS is strictly enjoined from sharing suspicions about residency status with other agencies. The "illegals" file as they usually get all of their witholding back, nad it shows a paper trail.

Around 15 years ago there was a huge project done by the IRS as 100's of thousands of Illegals were filing for more than a refund as they also wanted EITC- but usually for their kids still in Mexico. Claiming EITC for kids not here in the USA is not legal.

It appears slightly more Illegals are paid "under the table" than residents but not a lot more. Most get regular paychecks. Their employers want to make sure that they are seen to be treating their "Illegal" employees exactly the same as "legals" so that they have "plausible deniability"

dennis gallagher: "I can guarantee you that an employer who is knowingly employing an illegal alien in order to save money is not paying taxes on the under the table payment to said alien." Gee, in order to hire this illegal some employer would be willing to lose his business, everything he owns and possible prison for Tax fraud? Got a cite for this? My Bro worked a project along with the IRS. Employers of Illegals want "plausible deniabilty" and thus pay and treat their illegals just like other employees. It would be really stupid to risk everything to save a few bucks on labor. Finding a second set of book is very very damning evidence in Tax Court.

Yeah sure, the contractor who picks up a van load outside the local building supply store for a single one-time job pays in cash and only keeps paper reciepts showing "Armando Garcia" was paid $100. Which is legal, as Armando is a Contractor and Bob doesn't need an TIN for Armando as he paid him under $400.


ralph124c "RE: stolen SS numbers: the alien worker will file for 10-12 dependents, meaning his witholding taxes will be rebated to him. " Got a cite for this? The IRS computers aren't stupid you know. If Iris Brown has been filing for 40 years as Single, when Armando Garcia files with a different address, different job and 12 kids and a wife, the IRS knows full well Armando isn't Iris. They just assign him an ITIN, assign his return for audit (to make sure he really has 12 kids) and Iris never knows. Note that the only way Armando can file with 12 dependents is to have 12 SSN for said dependents.

AskNott has the facts here. Many of the rest have been listening to too much Conservative Talk Radio.

[ChicanoRojo]

Originally Posted by Skammer

Rebated? If you are using a fraudulent (i.e. stolen) social security number, you are not going to be filing a 1040A at the end of the year.

Even if they use a legitimate, but stolen SSN, which I think ralph124c is talking about, that still leaves me with a main question, in order to get EIC (file for dependents which I think ralph124c is talking about), the dependents have to have SSN s, wouldn't that mean getting more SSN's?

[ChicanoRojo]

Originally Posted by scotandrsn

But you could claim 10-12 exemptions on your W-4.

But the complete point was that this person would then in turn get his/her money rebated. How are they going to apply for EIC w/o SSN for the dependents?

[ChicanoRojo]

Originally Posted by scotandrsn

Interesting, but limited in scope, and not necessarily applicable to the issue at large.

And as I stated this pertains to the macroeconomics of the State of Texas. Take FWIW.

I would like to see a comparison of the effect on citizens in terms of total property loss or lost income with the incarcerated illegal immigrants present and absent.

[KlondikeGeoff]

Originally Posted by ChicanoRojo

Well. Slight Nit Pick. An Undocumented Immigrant u

Another slight nitpick. Calling an illegal alien an "undocumented immigrant" is akin to calling a drug dealer an unlicensed pharmacist.

[ChicanoRojo]

Originally Posted by KlondikeGeoff

Another slight nitpick. Calling an illegal alien an "undocumented immigrant" is akin to calling a drug dealer an unlicensed pharmacist.

Well. He or she is an immigrant. He or she does have the proper documents to be in this country. Therefore, he or she is an undocumented immigrant. But. Hey. If some people get their rocks off by calling undocumented immigrants -- "illegal aliens"--hey go for it. But. It doesn't change the fact that they are considered undocumented immigrants even in usage of legal terms and reports as the one I cited. So. Yes. I will use that term even if it unsettles some.

[Fear the Turtle]

If you are not a citizen (here either legally or not), and apply for, and receive, an ITIN - are you eligible for SS benefits? If not - do you pay into SS? (trying to keep this somewhat factual til it gets moved to GD).

[ChicanoRojo]

Originally Posted by Fear the Turtle

If you are not a citizen (here either legally or not), and apply for, and receive, an ITIN - are you eligible for SS benefits? If not - do you pay into SS? (trying to keep this somewhat factual til it gets moved to GD).

Partial answer, I guess:

IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA).

ITINs are issued regardless of immigration status because both resident and nonresident aliens may have U.S. tax return and payment responsibilities under the Internal Revenue Code.

[ChicanoRojo]

...and more on ITIN & SS:

From SSA :

Therefore, employers should not use the ITIN (a nine digit number beginning with the number nine) for reporting earnings on the Form W-2.
However, if you discover someone was hired in error and/or worked in error with an ITIN, you must still report the wages and request the employee provide a valid Social Security number. If the employee does not provide you with one before wages must be reported, you should complete the Social Security number field of the W-2 using all information, including the ITIN, as the employee stated on the W-4.

Exception: If the employee has applied for a Social Security number, but has not yet received it, print “Applied For” in the Social Security number block on W-2’s. (Electronic W-2 filers should enter zeroes in the Social Security number field of the file.) Make sure you prepare and submit a W-2c later to change the zeroes to the correct number when the employee receives the Social Security number.

[Giles]

Originally Posted by Fear the Turtle

If you are not a citizen (here either legally or not), and apply for, and receive, an ITIN - are you eligible for SS benefits? If not - do you pay into SS? (trying to keep this somewhat factual til it gets moved to GD).

One situation where you might need an ITIN is if you are a dependent or spouse of a non-citizen who is in the US on a temporary employment visa, and you are in the US on a derivative visa (e.g., an H-4 or O-3 visa). Under these circumstances a married couple can file jointly, and the employed parent can claim the non-citizen child as a dependent. (Yes, I've been in that situation myself). But this is all a situation where the immigrants are legal, of course.

[scotandrsn]

Originally Posted by ChicanoRojo

But the complete point was that this person would then in turn get his/her money rebated. How are they going to apply for EIC w/o SSN for the dependents?

Simple. they don't ever file a tax return.

You don't have to declare your dependents' SSN at the time you fill out your W-4 for a new job, you merely claim the number of exemptions. Less taxes are kept back from each paycheck all year for each exemption, and you're supposed to file a tax return during the first quarter of each calendar year so that any discrepancy between what you paid and what you should have paid are worked out in the form of an additional payment or a refund.

Any exemptions you claimed that you didn't qualify for won't affect you if you never file your taxes. And if you work under some other poor sap's SSN, they get the heat.

ralph124c should still provide some sort of cite for how often this occurs, but there's nothing hard to understand about the scam in its concept.

[Bill Door]

Originally Posted by dennis gallagher

I c an guarantee you that an employer who is knowingly employing an illegal alien in order to save money is not paying taxes on the under the table payment to said alien. If there is no other way (and I'm sure there are probably many) he will keep 2 sets of books, one of which will have no record of the money paid to the alien, either coming in or going out.

You misunderstand me. It has really nothing to do with the illegal. This is how it works. A business, Joe's Drywall, for example, takes in $500,000 per year. Out of this, Joe pays $60,000 for materials, $200,000 for 4 documented workers, and $80,000 for 4 undocumented workers.

When Joe pays his taxes, and it's really hard not to, men with guns will come to your house if you don't, Joe can deduct the materials and legal labor from the income, but he has no documentation for the monies paid to the illegals. Joe nets, according to the IRS, $240,000, and is taxed on that.

Joe actually nets less, more like $160,000, but he doesn't mind so much, because the taxes on the extra $80K is only around $15K, and paying the illegals saves him $140K, so he's $125K to the good. If Joe had to pay for 8 documented workers he'd net only $40,000, so it's just a just a cost of doing business.

Joe could try to just put the money in his pocket and not pay any taxes on it at all, but I assure you that the contractors paying him are keeping good records so they can deduct the money they pay him, and they'll report it to the IRS, so it's a bad business practice in the long run.

Now the IRS thinks Joe nets $65K more than he did, the $80K he actually paid to the illegals minus the $15K the IRS gets, but it's not a big problem. If you consistently spend more than you earn, all kinds of red flags pop up on the IRS computers, and someone gets invited in for a thorough audit. You do not want a bunch of highly motivated forensic accountants tap dancing through your life. Spending less than you earn is not a problem that attracts their attention, at least not yet.

OK, my point, and I have one, is that Joe paid $15K in taxes because he passed the money on to someone who can't provide him with a legitimate deduction. Had the four illegals paid taxes on their incomes, the net tax to the IRS would have been lower, because they would have been at a lower marginal tax rate thon Joe.

More simply, when you claim your child care credit, the IRS wants the social security or tax number of the recipient. If you can't provide it because they're illegal, you can't take the credit, and end up paying more taxes.

[Civil Guy]

I see that this gets pretty darned complicated - as complicated as the tax code - but I'd like to see if I understand the small portion that I think I do. Please comment.

There are apparently several available strategies for immigrants who lack legal documentation (IWLLD? - sheesh, can't even name them without debate):

o They can work all the time under-the-table. This possibly limits the work they can do, because larger employers have more to lose in hiring on such a basis. As may be, it apparently works out for many (no cites here, mate).

o They can get some kind of legitimate (?) taxpayer identification number that will let them look legal to the IRS, and will document residency of some kind, but won't (currently? ever?) confer any kind of landed status. They'll never be able to collect any Social Security benefits, because they don't have, can't have, social security numbers. What happens to the social security taxes their employers pay? Presumably, the money goes to other social security recipients. The IWLLD can (no cites for actual extent or frequency) reduce the amount withheld for taxes from each paycheck by reporting a large number of exemptions. The money is not withheld, and tax docs are never filed, so the amount that comes in to the IRS is limited. It's a slightly risky game, seems to me, because an unduly large number of exemptions may well trigger IRS curiosity, at which point the jig is up.

Reportedly, some IWLLD might try to file federal income taxes claiming an actual Earned Income Credit for Dependents (if I've got that right) to get an actual refund, but that this ever happens is disputed by posters here since the tax filer must provide social security numbers for all dependents.

o Finally, the IWLLD can use someone else's social security number, with some degree of identity theft. Everything looks plausible to the employer, more or less, and maybe to the IRS, except there's always some risk that the SSN is 'bad', and the IWLLD may report some number of exemptions at odds with those ever claimed by the real SSN holder, triggering IRS curiosity. When and if anyone checks.


Do I have any of this right? Much?

[DrDeth]

Originally Posted by scotandrsn

Simple. they don't ever file a tax return.

You don't have to declare your dependents' SSN at the time you fill out your W-4 for a new job, you merely claim the number of exemptions.

Any exemptions you claimed that you didn't qualify for won't affect you if you never file your taxes. And if you work under some other poor sap's SSN, they get the heat.
.

Well, except that the IRS looks into anyone claiming more than 9 witholding allowances. Even if you work under someone else TIN, you are not likely to use their name and address so it is pretty easy for the IRS to figure out. Finally, the IRS now knows where you work, so it is pretty easy to find you and collect.

[DrDeth]

Originally Posted by Bill Door

You misunderstand me. It has really nothing to do with the illegal. This is how it works. A business, Joe's Drywall, for example, takes in $500,000 per year. Out of this, Joe pays $60,000 for materials, $200,000 for 4 documented workers, and $80,000 for 4 undocumented workers.

When Joe pays his taxes, and it's really hard not to, men with guns will come to your house if you don't, Joe can deduct the materials and legal labor from the income, but he has no documentation for the monies paid to the illegals. Joe nets, according to the IRS, $240,000, and is taxed on that.

Joe actually nets less, more like $160,000, but he doesn't mind so much, because the taxes on the extra $80K is only around $15K, and paying the illegals saves him $140K, so he's $125K to the good. If Joe had to pay for 8 documented workers he'd net only $40,000, so it's just a just a cost of doing business.

Except when the guys getting $50K rats Joe out to the INS (as Joe won't hire their buddies, or Joe pisses them off, or fires one of them or whatever), the INS raids the place along with the IRS and not only do they find 4 "illegals" they can prove Joe knew they were illegal (he paid them under the table and less than half) and Joe also is looking at paying all the back Payroll taxes anyway- on the full $200K he would have paid (after all, Joe didn't keep records of what he did pay, now did he, and the IRS is allowed to assume the worst in this sort of case) and possibel Tax Fraud charges. Joe loses his contractor license too.

Joe is fucked and without even a reach around.

[scotandrsn]

Originally Posted by DrDeth

Well, except that the IRS looks into anyone claiming more than 9 witholding allowances. Even if you work under someone else TIN, you are not likely to use their name and address so it is pretty easy for the IRS to figure out. Finally, the IRS now knows where you work, so it is pretty easy to find you and collect.

Except that Employers are no longer required to submit large allowance W-4s to the Feds.

Originally Posted by Internal Revenue Service FAQ

Q1: In the past, as an employer, I was required to submit all Forms W-4 that claimed complete exemption from withholding (when $200 or more in weekly wages were regularly expected) or claimed more than 10 allowances. What Forms W-4 do I now have to submit to the IRS?
A1: Employers are no longer required to routinely submit Forms W-4 to the IRS. However, in certain circumstances, the IRS may direct you to submit copies of Forms W-4 for certain employees in order to ensure that the employees have adequate withholding. You are now required to submit the Forms W-4 to IRS only if directed to do so in a written notice or pursuant to specified criteria set forth in future published guidance.

Q2: If an employer no longer has to submit Forms W-4 claiming complete exemption from withholding or claiming more than 10 allowances, how does the IRS determine adequate withholding?
A2: The IRS is making more effective use of information contained in its records along with information reported on Form W-2 wage statements to ensure that employees have enough federal income tax withheld.