Many employers have questions about payroll when hiring workers who have an Individual Taxpayer Identification Number (ITIN) instead of a Social Security number (SSN).
The good news?
ITIN holders are treated the same as employees with SSNs when it comes to payroll taxes, benefits, and compliance. Here’s what you should know.
Do Payroll Taxes Apply to ITIN Employees?
Yes. Just like employees with an SSN, ITIN employees have all required federal, state, and local payroll taxes deducted from their paychecks. At the end of the year, they receive a W-2 and are responsible for filing a tax return.
What Happens If an ITIN Holder Doesn’t File Taxes?
The IRS requires ITIN holders to file a tax return within three years of receiving their ITIN letter. If they don’t, their ITIN will expire and won’t be renewed.
To avoid complications, employers should verify that an employee’s ITIN letter is dated within three years of their hire date. If it’s older, the employee should request an updated letter from the IRS.
What If an ITIN Holder Later Gets a Social Security Number?
If an employee transitions from an ITIN to a Social Security number, payroll tax deductions will remain the same. However, they will now qualify for Social Security and Medicare benefits.
Additionally, any Social Security contributions made under their ITIN can be transferred to their new SSN, ensuring they receive full credit for their earnings.
Do ITIN Employees Qualify for Company Benefits?
Yes. ITIN employees are eligible for the same benefits as other employees, including health insurance, retirement plans, and any other company benefits your business offers.
They are also covered under your workers’ compensation policy, just like employees with an SSN.
Can ITIN Employees Receive a Tax Refund?
Yes. When ITIN holders file their taxes, they may owe money or receive a refund, just like employees with an SSN. Their refund eligibility depends on their income, deductions, and any tax credits they qualify for.
Simplifying Payroll Compliance for ITIN Employees
Managing payroll for ITIN workers requires proper compliance to avoid tax issues and penalties. At Baron Payroll, we handle ITIN payroll processing at no extra charge, making it seamless to pay your employees correctly.
Curious about the cost of adding ITIN employees to your payroll? With Baron, it costs the same as paying any other employee with a Social Security number.
Use our instant pricing calculator to get an estimate—no sales calls required.
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