How Undocumented Immigrants Can Overcome The Barriers To Earning Money In The United States

United States employers are required to ask for proof of legal status because it is illegal for any employer to hire a person knowing that the individual is not lawfully authorized to work in the U.S. Therefore, most undocumented immigrants face significant barriers to gaining employment in the U.S. Nonetheless, there are some legal ways for undocumented immigrants to earn money in the United States.

Independent Contractor

Undocumented immigrants may work as independent contractors, and file and pay taxes without having to disclose legal status. An independent contractor is a self-employed person, also known as a freelancer. Who has control is what makes the difference between an employee and an independent contractor. An independent contractor has control of what and how the work will be done. An individual or business pays the independent contractor for their services and controls only the result of the work. 

Independent contractors normally do business in their name using an individual tax identification number (ITIN) obtained from the Internal Revenue Service (IRS) using a W-7 form, to operate. A person's immigration status does not affect their ability to obtain an ITIN. ITIN is used to pay self-employment tax and income tax instead of a social security number (SSN). An individual or business client seeking to gain an independent contractor's services is NOT required to obtain Form I-9, or otherwise inquire about immigration status. Instead of an I-9 form, independent contractors should submit a W-9 Form to each client at the beginning of providing services.  

Parties may sign a contract to justify the working relationship, outline services, fees, and duration of the contract, and protect intellectual property. The independent contractor may be paid an hourly rate or a flat fee. The client is required to file a 1099 Form for each independent contractor paid $600 or more. A copy of the 1099 is mailed to the independent contractor at the end of the year and he or she becomes responsible for paying taxes thereafter.

Regulation and Effects

However, be aware that Federal Statute 8 U.S. Code 1324a(a)(4) prohibits an individual or entity from knowingly engaging an unauthorized individual to provide services as a contractor. Individuals who fail to comply with Form I-9, or knowingly hire or contract undocumented individuals may face civil fines, criminal penalties, or debarment from government contracts. Additionally, engaging in unauthorized employment (which USCIS has interpreted to include unauthorized self-employment) may adversely impact the ability of the individual to adjust his or her immigration status at a later time. Note that unauthorized employment is automatically waived for those who are adjusting status as an immediate relative of a U.S. citizen. 

DACA Recipients 

For Deferred Action for Childhood Arrivals (DACA) beneficiaries who have lost their work permit, their former employer would not be able to contract with them. In the case of DACA getting revoked, a DACA beneficiary could pursue independent contract work or start a business using his or her assigned SSN, as long as he or she contracts with any other entity other than the one that is aware of the expired work authorization. The assigned SSN will remain the DACA beneficiary's even if the individual’s work authorization terminates.

Business Ownership

Some people work as independent contractors for a while before establishing a business. One can establish a formal or informal business. A formal business structure means that the company has a legal existence separate from its owners. The most common formal business structures are corporations and limited liability companies (LLCs). An informal business structure does not have a separate legal existence from its owners. The most common type of informal business is a sole proprietorship, which is owned and operated by one person. 

Making the Right Choice for You

Be sure to consult an experienced immigration attorney before starting to earn an income as an undocumented immigrant. Know if working without authorization will affect your immigration case. If you decide to establish a business, consult an experienced business attorney as well to ensure that the type of business structure you choose is appropriate for the business category and complies with government regulations. It's important to weigh the pros and cons of each type of organization before making a decision.

Disclaimer: This information is intended for general knowledge and informational purposes only, and does not constitute legal advice. It's essential to consult with an attorney for personalized guidance on your specific situation.

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