How to Pay an Employee Without a Social Security Number
In the United States, employers are required by law to report their employees’ earnings to the Social Security Administration (SSA) and to withhold taxes. However, what happens when an employee does not have a Social Security Number (SSN)? This situation can arise for various reasons, such as individuals being in the country on a temporary visa or not being eligible for an SSN. In this article, we will discuss the steps employers can take to pay an employee without a Social Security Number while remaining compliant with the law.
1. Obtain an ITIN or EIN
If an employee does not have a Social Security Number, the employer can request an Individual Taxpayer Identification Number (ITIN) from the IRS. An ITIN is a tax identification number that allows individuals who are not eligible for an SSN to file taxes and receive tax refunds. The employer should provide the employee with Form W-7, Application for ITIN, which the employee must complete and submit to the IRS.
Alternatively, if the employee is a business entity, such as a sole proprietorship or partnership, the employer can obtain an Employer Identification Number (EIN) from the IRS. An EIN is a nine-digit number that serves as a tax identification number for businesses. The employer should provide the employee with Form SS-4, Application for Employer Identification Number, which the employee must complete and submit to the IRS.
2. Withhold and report taxes
Once the employee has obtained an ITIN or EIN, the employer must withhold and report taxes as they would with any other employee. This includes withholding federal income tax, Social Security tax, and Medicare tax. The employer should use the appropriate tax forms, such as Form W-4, Employee’s Withholding Certificate, to determine the correct amount of tax to withhold from the employee’s wages.
The employer must also file Form W-2, Wage and Tax Statement, with the SSA by January 31 of the following year. If the employee is a non-resident alien, the employer may need to file Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, instead of Form W-2.
3. Report to the IRS
Employers must report their employees’ wages and tax withholdings to the IRS using Form 941, Employer’s Quarterly Tax Return. The form must be filed by the last day of the month following the end of each quarter. Employers must also report their tax liabilities and make any necessary payments using Form 941-V, Voluntary Payment Voucher.
4. Keep accurate records
It is crucial for employers to maintain accurate records of their employees’ ITINs or EINs, as well as any other relevant information, such as tax withholdings and reported wages. These records should be kept for at least four years to comply with IRS regulations.
In conclusion, paying an employee without a Social Security Number is possible by obtaining an ITIN or EIN and following the appropriate tax withholding and reporting procedures. Employers must ensure they remain compliant with the law to avoid any penalties or legal issues.
