IRS: Significant Increase in Tax Filings by Immigrants

Illegal immigrants, motivated by the promise of legal status, are lining up to pay their income taxes according to several news reports. This includes non-documented domestics, employed as maids, housekeepers and nannies, who in the past have worked off the books for cash wages.

The IRS reports a significant increase in the number of Individual Taxpayer Identification Numbers (ITINs) issued in 2006. ITINs are used by individuals inelligible for Social Security Numbers for the filing and tracking of tax payments. The various immigration reform proposals under consideration by Congress all include some type of amnesty linked to payment of taxes. Immigrant workers, anxious for legal status and the ability to freely travel between the US and homelands, are voluntarily stepping forward to pay income taxes in record numbers. HomeWork Solutions' Payroll Tax Practice experienced a steady flow over the last year of employers registering to pay the "nanny taxes" who open the dialogue with statements such as "My housekeeper wants to file taxes this year." Employers typically find that paying their worker's on the books increases their costs by 10%. In the past, nanny tax compliance was largely driven by the employer, who many times had to pay both employer and employee taxes to retain their workers. Today, much more compliance is driven by the workers themselves. These workers, anxious to normalize their status, are willing to take a cut in take home pay in order to eventually qualify for legal immigration status.

My nanny (housekeeper) is not a legal resident. What should I do about employment taxes?