HWS recently received the following question from a new nanny employer. We receive queries like this periodically and want to share our answer.
Q. We recently hired a great nanny who is undocumented. She doesn't have a tax ID number and we must remain above board on the taxes. She is afraid to apply for an Individual Tax Identification Number (ITIN) because of her immigration status. How can we help her with this?
A. Tell your nanny not to worry. An ITIN application to the Internal Revenue Service does not trigger immigration enforcement. The IRS is legally prohibited from sharing this information with the Department of Homeland Security. Think about it this way. The IRS wants all wage earners to report income and pay taxes no matter their immigration status. After all, the IRS is in the business of collecting tax revenue and that benefits everyone!
You will use your nanny's ITIN for tax reporting in the same way as a Social Security Number. Your nanny will then use the ITIN to report income to the IRS. The timing gets a bit tricky however.
An ITIN can only be applied for in conjunction with an income tax return. This means the first year she works, you will not be able to supply the government with a tax identification for her when you file your employment tax returns. She will get an ITIN by filing IRS form W-7 with her federal tax return. Once the ITIN is received, you will amend your prior tax filings to supply the ITIN to the taxing authorities, including amending her W-2 form. So it is a bit of extra work on your part, and not a risk at all to her of immigration enforcement.
The ITIN is for tax reporting and recordkeeping only - it does not change the nanny's immigration status or work authorization. You are still at risk due to hiring an individual who is not authorized to work in the U.S.
To learn more about the nanny taxes and the steps required for legal nanny payroll, we invite you to download our free HWS Guide to Household Payroll.