Are You Afraid of Adding ITIN Workers to Your Payroll?

Are You Afraid of Adding ITIN Workers to Your Payroll?

If you're a business owner who's afraid of adding ITIN workers to your payroll, you're not alone.

As a payroll company that specializes in adding ITIN workers to payroll; we hear this all the time.

Business owners feel uneasy about:

  • Potential legal implications
  • Staying compliant with labor laws
  • Tax obligations

Hopefully, the following will put your mind at ease. 

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. 

Let's get into it. 

What are ITINs?

An Individual Taxpayer Identification Number (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) but need a taxpayer identification number for federal tax purposes.

What are the Common Concerns and Misconceptions?

1. Legal Compliance

Concern: Employers wonder, "Is adding ITIN workers to my payroll even legal?"

Reality: While ITINs are used for tax purposes, they do not provide work authorization. Employers must still verify employment eligibility using Form I-9. This means an ITIN cannot replace the need for proper work authorization documents.

2. Tax Reporting

Concern: Managing payroll taxes for ITIN workers seems complex.

Reality: Employers must withhold federal income taxes, Social Security, and Medicare taxes for ITIN workers, just as they would for employees with SSNs. Proper tax reporting and compliance are crucial, and using payroll software or services can help streamline this process.

3. State and Local Regulations

Concern: Different states have varying rules for ITIN workers.

Reality: It's important to stay informed about your state and local regulations. Some states have specific guidelines for hiring and tax reporting for ITIN workers. Consulting with a legal expert or a knowledgeable payroll service can help you navigate these rules.

What are the Benefits of Hiring ITIN Workers?

There are four big benefits for your workers to get  an ITIN number and for you to add them to your payroll:

1. Payroll Tax Compliance

Having workers with ITIN numbers allows you to pay them on payroll and comply with all the payroll tax regulations—which helps you minimize your financial risk related to potential audits from all the federal and state government agencies. 

2. Department of Labor ("DOL") Compliance

Additionally, paying your workers on-the-books as ITIN employees rather than off-the-books,  also helps you minimize your financial and compliance risk related to potential investigations from both the federal DOL and your state DOL. 3. 

3. Workers Compensation Compliance

Another important benefit to you is if your worker is injured while on the job, they’ll have insurance coverage from your workers compensation policy. Otherwise, you’d be stuck and have to pay for these medical costs out-of-pocket. 

Additionally, you will be in compliance with the workers' comp laws and avoid stiff fines and penalties (up to $1000 per day). 

4. Cash Is Not King Anymore

And last but not least, most employers don’t have enough cash on hand every week to pay their workers off-the-books. This is a real problem these days and most employers would prefer not having to pay their workers with cash.

What are the Best Practices for Employers?

To ensure smooth and compliant hiring of ITIN workers, follow these best practices:

1. Complete Form I-9

Ensure that all employees, including those with ITINs, complete Form I-9. This verifies their identity and employment authorization in the U.S. Remember, an ITIN alone does not prove work authorization.

2. Use Reliable Payroll Systems

Implementing a reliable payroll system can help manage tax withholdings and reporting for ITIN workers accurately. Consider using payroll services like Baron Payroll that specialize in handling these complexities.

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3. Stay Informed

Employment and tax laws are subject to change. Stay updated on any legal developments related to hiring ITIN workers. Regularly consult with legal or payroll experts to ensure ongoing compliance.

Overcoming Fear: A Step-by-Step Approach

  1. Educate Yourself: Understand what ITINs are and their limitations concerning work authorization. Here's our Guide for ITIN: Everything You Need to Know As An Employer. 
  2. Verify Eligibility: Always use Form I-9 to verify employment eligibility, regardless of whether an employee has an ITIN or SSN. Here's our Step-by-Step Guide on How to Fill out the Form I-9. 
  3. Consult Experts: Seek advice from legal and payroll professionals to navigate state and local regulations effectively.
  4. Implement Strong Payroll Systems: Use reliable payroll software or services to manage tax withholdings and reporting accurately. Use our instant pricing calculator to see how much it costs to work with us. 

And that's it!

While the idea of adding ITIN workers to your payroll might initially seem daunting...

By understanding the legal requirements, utilizing a reliable payroll system, and staying informed about regulatory changes, you can move forward with confidence. 

Wondering how much it costs to add your ITIN workers to your payroll?

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