Question: Albert owns a small business and has two employees, Tim and Sam, who only have Individual Taxpayer Identification Numbers (ITIN) but no Social Security number (SSN). Tim and Sam have been living and working in the U.S. and are treated as U.S. residents for tax purposes. Are they subject to FICA taxes?
Answer: If Tim and Sam are U.S. residents, they are subject to FICA (Social Security and Medicare tax) They should also have SSNs if they are legally present in the U.S. If they are unlawfully authorized in the U.S., even with the ITIN, Albert should not hire them. He should also not hire anyone who does not have an SSN.
An ITIN is issued only for tax purposes but not for identification intent or immigration status. If taxpayers are eligible to obtain an SSN, the IRS will not issue them an ITIN unless they can document that the Social Security Administration denied their request for an SSN.
Technically, ITIN taxpayers should not be issued a Form W-2 and pay FICA taxes. Only those taxpayers with SSNs should receive Form W-2 and pay FICA taxes. If Tim and Sam are U.S. residents, they should have an SSN and withheld Social Security and Medicare taxes. They should not need an ITIN. Albert is advised to be cautious about their legal status and reconsider their employment.
By law, non-student U.S. citizens, lawful permanent residents and U.S. resident aliens are subject to FICA taxes on salary and wages earned as an employee. Legally, employers should not hire someone who does not have an SSN, and they should not have someone acting as an employee but being treated as a Form 1099 independent contractor either.
According to the Social Security Administration, SSNs are used to report a person’s wages to the government and to determine that person’s eligibility for Social Security benefits. Taxpayers need an SSN to work, collect Social Security benefits and receive other government services. For taxpayers have ITINs but no SSNs, they will not likely receive Socials Security benefits until they obtain their SSNs.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.