Many employers wonder how payroll works when hiring someone with an ITIN instead of a Social Security number (SSN).
The good news?
ITIN holders are treated the same as SSN holders when it comes to payroll taxes, benefits, and compliance. Here’s what you need to know.
Are Payroll Taxes Withheld from an ITIN Employee’s Paycheck?
Yes. Employees with an ITIN are subject to the same tax withholding as employees with an SSN. All required federal, state, and local payroll taxes are deducted from their paychecks. At the end of the year, they receive a W-2 and must file a tax return.
What Happens If an ITIN Holder Doesn’t File Their Taxes?
ITIN holders must file a tax return within three (3) years of receiving their ITIN letter. If they fail to do so, the IRS will not renew their ITIN.
To prevent issues, employers should check that the ITIN letter is dated within three years of the hire date. If the letter is older, ask the employee to request an updated letter from the IRS.
What Happens If an ITIN Holder Gets a Social Security Number?
If an ITIN holder later obtains a Social Security number, their payroll taxes will continue as normal, but they will now be eligible for Social Security and Medicare benefits.
Additionally, any Social Security contributions they made while working under their ITIN can be transferred to their new SSN. This ensures they don’t lose out on benefits they’ve already earned.
Are ITIN Employees Entitled to Company Benefits?
Yes. An employee with an ITIN is entitled to the same benefits as employees with an SSN. This includes eligibility for health insurance, retirement plans, and other company benefits, depending on your policies.
ITIN employees are also covered under your workers’ compensation policy, just like any other employee on your payroll.
Can an ITIN Employee Receive a Tax Refund?
Yes. When ITIN holders file their taxes, they will either owe money or be entitled to a refund—just like employees with an SSN. Their tax situation will depend on their income, deductions, and credits, just as it does for any other taxpayer.
How to Make Payroll Compliance Easy for ITIN Employees
Ensuring payroll compliance for ITIN workers is critical to avoid penalties and tax issues. At Baron Payroll, we handle ITIN payroll processing at no additional cost, making it easy to stay compliant while paying your employees correctly.
Wondering how much it costs to add your ITIN workers to your payroll? With Baron, it's the same as doing payroll for a regular employee with a Social Security Number.
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