Undocumented Entrepreneurs: No Social Security Number, Owning a Business
Question: I am an undocumented immigrant with an ITIN number. I do cleaning work as a contractor. The payor asked for a W9. I filled out the W9 with my ITIN and files a 1040 and schedule C and pays SE tax every year.
Purely from a tax perspective, is this the right way to go?
Answer: As far as reporting the income and paying the appropriate tax, it is appropriate to use Schedule C and form 1040, assuming you meet the substantial presence test and qualifies as a US person or resident alien for tax purposes.
According to this IRS information page, foreign workers who are illegal aliens (undocumented aliens) are subject to U.S. taxes in spite of their illegal status. U.S. employers or payers who hire illegal aliens (undocumented aliens) may be subject to various fines, penalties, and sanctions imposed by the U.S. Department of Homeland Security.
If such employers or payers choose to hire illegal aliens (undocumented aliens), the payments made to those aliens are subject to the same tax withholding and reporting obligations that apply to other classes of aliens.
***Disclaimer: This communication is not intended as tax advice, and no tax accountant -client relationship results**