As a payroll company that specializes in adding ITIN workers to payroll, we get this question all the time, "Is it legal to add ITIN Workers to payroll?"
The first thing to know about us is that Baron Payroll isn't a law firm, so we can't offer legal advice, but this is what we've seen and what we know to be true...
For over 20 years, Baron Payroll has successfully added ITIN (Individual Taxpayer Identification Number) workers to our clients' payrolls. This topic often raises questions about legality and compliance, so let me share what we know about adding ITIN workers to your payroll.
Understanding ITINs
An ITIN is a tax processing number issued by the Internal Revenue Service (IRS) to individuals who are not eligible for a Social Security Number (SSN). ITINs are used primarily for tax purposes and allow individuals to comply with U.S. tax laws.
However, they do not provide legal authorization to work in the United States.
Here's an article for more on what an ITIN is.
What are Some Misconceptions About ITIN Workers?
Because the IRS has the following on their website... many business owners think adding ITIN workers to payroll is illegal.
The truth is, while ITINs alone do not authorize employment, workers with ITINs can still be employed if they provide the necessary documentation to complete the I-9 form.
It’s not about the ITIN itself, but all workers (those with ITINs and Social Security numbers) must have enough legal documentation to complete the I-9 Form as required by the Department of Homeland Security.
What's the Role of the I-9 Form?
One of the key points here is the I-9 form.
The I-9 form, issued by the Department of Homeland Security, verifies an employee's identity and employment authorization.
Workers must present acceptable documents from the I-9 form’s lists of acceptable documents to establish their eligibility to work in the U.S. An ITIN alone isn’t enough; workers need to complete the I-9 form and have the right documentation to show they are legally able to work in the U.S.
Here's a step-by-step guide on how to fill out the I-9 Form.
How Do You Add ITIN Workers to Your Payroll?
The answer: Find a payroll company that will do it for you.
Some payroll companies might tell you that you can't add ITIN workers to your payroll.
Often, this is because adding ITIN workers requires manual effort. Big companies want everything automated and might not want to do the manual work.
At Baron Payroll, we handle these manual processes and ensure that ITIN workers are reported correctly and that you’re in compliance.
Use our instant pricing calculator to see how much it costs to add your ITIN workers to your payroll.
Federal and State Regulations
Compliance with federal and state regulations is crucial. The IRS requires that taxes, including Social Security and Medicare, be withheld and reported for all employees, including those with ITINs. This means that ITIN workers must have their earnings reported and taxed just like employees with SSNs.
It's important to note that while the federal government accepts ITINs for tax purposes, some states might have different requirements. Most states comply with federal regulations, but it's always a good idea to stay informed about any state-specific rules.
Risks of Not Adding ITIN Workers to Payroll
Not adding ITIN workers to your payroll can pose significant financial and compliance risks:
- Department of Labor Violations: Both the U.S. Department of Labor and state labor departments require accurate payroll reporting.
- Workers' Compensation Issues: Employees not on payroll may not be covered by workers' compensation insurance.
- Employee Morale: Employees not on payroll may face difficulties accessing benefits like health insurance and retirement plans, leading to decreased morale.
Solutions and Best Practices
The solution is straightforward: work with a payroll company that is willing to add ITIN workers to your payroll. At Baron Payroll, we ensure that ITIN workers are added to payrolls as W-2 employees, compliant with all relevant regulations.
And that's it!
Adding ITIN workers to your payroll is not only possible but also beneficial for compliance and employee satisfaction. By understanding the role of the I-9 form and choosing the right payroll provider, businesses can navigate the complexities of employing ITIN workers legally and effectively.
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