Illegal immigrants & taxes

Factual Questions
21

[QUOTE=KlondikeGeoff]
Another slight nitpick. Calling an illegal alien an “undocumented immigrant” is akin to calling a drug dealer an unlicensed pharmacist.
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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.

22

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).

23

[QUOTE=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).
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Partial answer, I guess:

24

…and more on ITIN & SS:

From SSA :

25

[QUOTE=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).
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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.

26

[QUOTE=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? :confused:
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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.

27

[QUOTE=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.
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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.

28

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?

29

[QUOTE=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.
.
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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.

30

[QUOTE=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.

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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.

31

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

[QUOTE=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.

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