Taxes for Immigrants: The Truth Behind the Myths

by
Sarah York, EA
Updated 
November 16, 2022
November 2, 2022
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Reviewed by
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Reviewed by

Taxes for Immigrants: The Truth Behind the Myths
by
Sarah York, EA
Updated 
November 16, 2022
November 2, 2022
Icon check
Reviewed by

Three million baby boomers retired in 2020, with even more expected over the next decade. Their departure leaves a huge labor gap. Luckily — much like in the 19th and 20th centuries — it seems that immigrants are stepping in.  

As the fastest growing segment of the American workforce, immigrants are projected to drive growth through 2034. But wherever there are jobs, there are taxes.

If you’re an immigrant working in the United States, this article is for you. I’m going to explain how your immigration status affects your taxes and where to find help. 

Contents

Do you have to pay taxes in the US? 

Yes, you have to pay taxes. Anyone who lives in the US — or has income from US sources — is required to file a tax return. Immigrants are no exception.

2021 data suggests immigrants actually pay more taxes than other people in the US, relative to how much of the population they make up. Only 13.5% of the US population are immigrants, but those immigrants pay close to 20% our individual income tax revenue.

I’ll explain why in just a minute. But first, let’s look at the numbers behind that fact.

How much have immigrants paid in taxes?

In 2019, immigrants paid $331 billion in federal taxes alone. When you factor in taxes paid to state and local governments, that number rises to $492 billion.

Even if we ignore all other economic benefits created by immigrants, that tax contribution can’t be overlooked.  

Do undocumented immigrants pay taxes? 

Yes. In 2019, they paid close to $24 billion in federal taxes. Of that amount, $16 billion went directly to Social Security and Medicare — programs undocumented people aren’t able to use. 

Undocumented workers have high tax compliance rates. Many want to earn legal status, and staying on top of their taxes is an important step in that process.

There’s a common myth that undocumented immigrants intentionally live outside the law. That’s not only incorrect, it turns a blind eye to the actual problem: a broken immigration system that keeps families apart and makes it tough for businesses to hire the workers they need.

This false narrative generates hostility towards people who create value in our country and pay more than their fair share in taxes. 

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What unique tax challenges do immigrant workers face?

Why do immigrants pay so much more on their tax bills? Here are two main factors:  

  • Language barriers 
  • Tax filing anxiety

Let’s talk about these more.  

Language barriers limit access to tax help  

Immigrants often lack access to tax support available in their native languages. IRS jargon is hard enough for English speakers, let alone for people who speak English as a second or third language (or not at all). 

Accountants don’t often serve ESL customers

The US tax system is notoriously complex. But at least most native-born Americans can seek help from an accountant, who can explain things in plain language. This option won’t often work for non-English speakers.

Dr. Subodh Simon Karmarkar, CEO and founder of RefundWiz, a tax filing app geared towards immigrant filers, says, “As a former manager at a major tax filing company, I witnessed how many times receptionists were saying ‘No Hablo Espanol,’ then hanging up on the caller.”

Unable to lean on tax professionals for help, many immigrants are left to figure out the tax code alone. It’s not surprising that they regularly overpay by accident.

Tax forms are rarely accessible to non-English speakers

To compound the problem, the Internal Revenue Service only recently began translating their forms to more languages than just English.

Spanish — the second most commonly spoken language in the US — was only made available in 2021. 

Tax anxiety creates cautious filers

Immigrants have a high-risk, high-reward relationship with taxes.

On the one hand, filing taxes makes it possible to get  — and keep — legal residency in the US. That’ss why tax compliance rates are so high in immigrant communities.

On the other hand, getting in trouble with the IRS could mean your citizenship application is rejected, or you’re can’t reenter the US (even with a green card).

Taxes are stressful for all Americans. But for immigrants — who already face a lot of scrutiny — the high stakes involved involved in filing a return bring the tension to a a fever pitch.

What tax filing anxiety means for immigrants

“As an immigrant,” Dr. Karmakar says, “I remember my dad having tremendous anxiety during tax filing season in fear of doing the taxes incorrectly and receiving a letter from the IRS… He finally found [an] Indian tax preparer and he felt immediate trust with someone that looked like him and spoke like him. He would be on the train to downtown Chicago for 50 minutes for his tax appointments.”  

The anxiety around taxes makes immigrants much less likely to claim the tax write-offs they’re legally entitled to, fearing it could put them on the IRS’s radar.

The truth is, immigrants shouldn’t be afraid to take these write-offs. But without access to good tax advice in their native languages, it’s not surprising that they’re anxious about it.

How does your immigration status affect your taxes?

All immigrants can – and should – file taxes. But how you file depends on your documentation, whether that’s:

  • A green card
  • A work visa
  • A non-work visa
  • No documentation at all

Green card and work visa holders will follow one process. Other immigrants will follow a slightly different process.

For immigrants with green cards or work visas

If you’re a US resident with a green card or work visa, your tax filing process will be the same as what US citizens do.

To learn more, read my in-depth guide to taxes for green card holders and resident immigrants — including what you’re taxed on and what tips you can use to save. But for now, here’s a quick summary.

When to file your taxes

You’ll file your annual income tax return on a Form 1040, which will be due April 15th unless you apply for an extension

How to save on your taxes 

Your immigration status allows you to apply for a Social Security Number (SSN). This means you can claim all the same deductions and credits as citizens, including the Earned Income Tax Credit for low-income workers and the Lifetime Learning Credit for students.

This also includes business write-offs. If you have any self-employment income – whether it’s from doing Uber, selling on eBay, or running your own business — you’re allowed to write off your work expenses. That means anything you spend to do your work, including things like the business use of your car and your home office deduction

For peace of mind through this process, consider trying the Keeper app. It scans your bank and credit card statements to find your write-offs throughout the year. Not only does this save you from having to figure out what counts on your own, but the app also creates expense records in case you ever have to provide proof of what you claimed. 

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For undocumented residents and other ITIN holders

Undocumented immigrants — meaning anyone living in the US without a green card or work visa — are treated as “US residents” for tax purposes.

There are a few nuances to think about. To learn more, take a look at my detailed guide to taxes for undocumented people.

In summary, though, you’ll need to:

  • File your taxes on a Form 1040 like everyone else
  • Report your worldwide income — what you earned from US sources and from sources in other countries 

But a couple of things that are different for undocumented taxpayers. 

How to file your taxes with an ITIN

You won’t be eligible for a Social Security numbers. Instead, you’ll need an Individual Tax Identification Number (ITIN). Learn more about the application process — and what you can and can’t do with this type of tax ID number — in my article on ITINs.

For now, though, know that you can get one by attaching a Form W-7 to the first US tax return you file.

Note: ITINs are issued directly by the IRS, and their only purpose is to file taxes. That means that they aren’t shared across other government agencies, such as ICE, so you can trust that your information is safe, and filing your taxes won’t get you in trouble with law enforcement.

Unlike with SSNs, you can’t use your ITIN to apply for jobs, track your credit, or qualify for government programs.  

The tax breaks you can and can’t claim

You won’t be able to claim the following tax credits: 

  • Earned Income Tax Credit
  • Child Tax Credit (unless your child has a SSN) 

Beyond that, you can do everything a US citizen or green card holder can — including claiming business write-offs if you’re self-employed. In fact, you should be claiming your write-offs or you will grossly overpay in taxes.

Doing so won’t trigger an audit or put you on the IRS radar. The IRS expects to see business income be offset by business expenses. No legitimate trade is 100% expense-free. 

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Important resources for immigrant taxpayers

While there aren’t as many as there should be, I want to leave you with the best tax resources currently available for immigrant filers. 

Certifying Acceptance Agents

A Certified Acceptance Agent (CAA) is a tax professional specially trained to help people apply for ITIN numbers. 

Applying for your initial ITIN number is by far the hardest part of filing taxes as an uncodumented immigrant. There are several challenging steps to this process, and getting it wrong is a headache nobody wants. Luckily, the IRS started an Acceptance Agent program in 2015 designed to assist with this very process. To find a CAA in your area, use this database.

As an added bonus, CAAs can send notarized copies of your identification to the IRS. Without one of them helping you, you’d have to send your original documents through the mail. 

Volunteer Income Tax Assistance 

Another great tool for immigrant filers is the Volunteer Income Tax Assistance (VITA) program. This program helps taxpayers prepare and file their taxes for free. There are translators available for people who speak limited (or no) English. 

Another great aspect of the VITA program: many of the tax professionals on staff are also certified assistance agents. 

Who is eligible for the VITA program?

The only requirement to be eligible for the program is that you usually have to earn less than $58,000 a year.

To find a VITA provider near you, use this database. Make sure to bring all the documents you need to your appointment, including:

  • A photo ID
  • A Social Security card or ITIN assignment letter
  • Tax forms from all your income sources
  • Proof of your bank account and routing numbers, so you can pay your bill or get your refund
  • Last year’s tax returns, if you have them 

The Keeper app 

Last but certainly not least, download the Keeper app! Keeper was founded by an immigrant and a child of immigrants, and the people on our team come from all over. We’re continually looking for opportunities to serve other immigrants.

We can file taxes for ITIN holders (though we don’t support  ITIN applications — yet!). Even better, you can do your taxes directly through the Keeper app, with tax assistants available to help you the whole time. 

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And if you have self-employment income, our app is the easiest way to track your business write-offs throughout the year. Not only will you save money, you’ll also have peace of mind knowing that Keeper is maintaining IRS-ready records on your behalf.

Sarah York, EA

Sarah York, EA

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Sarah is a staff writer at Keeper and has her Enrolled Agent license with the IRS. In 2022, she was named one of CPA Practice Advisor’s 20 Under 40 Top Influencers in the field of accounting. Her work has been featured in Business Insider, Money Under 30, Best Life, GOBankingRates, and Shopify. Sarah has nearly a decade of public accounting experience, and has worked with clients in a wide range of industries, including oil and gas, manufacturing, real estate, wholesale and retail, finance, and ecommerce. Sarah has extensive experience offering strategic tax planning at the state and federal level. During her time in industry, she handled tax returns for C corps, S corps, partnerships, nonprofits, and sole proprietorships. Sarah is a member of the National Association of Enrolled Agents (NAEA) and maintains her continuing education requirements by completing over 30 hours of tax training every year. In her spare time, she is a devoted cat mom and enjoys hiking, painting, and overwatering her houseplants.

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