Undocumented immigrants work in the US mainly in three ways: as independent contractors who file taxes using an IRS-issued identification number, as cash laborers in jobs that generate no paperwork, and, in some cases, as traditional employees who pass employment verification using false or borrowed documents. An estimated 8 million or more unauthorized workers are in the national labor force, concentrated in construction, agriculture, food service, and domestic work. Federal law bars employers from knowingly hiring workers who lack authorization, but the tax system runs on a separate track: the IRS collects from anyone who earns income, immigration status aside, and gives them a tool to do it.
The IRS Number That Makes Formal Work Possible
The Individual Taxpayer Identification Number, or ITIN, is a nine-digit number the IRS issues to people who need to file federal taxes but don’t qualify for a Social Security number.1Internal Revenue Service. About Form W-7, Application for IRS Individual Taxpayer Identification Number It is the backbone of how undocumented workers interact with the federal government financially. An ITIN does not grant work authorization, change immigration status, or create eligibility for Social Security benefits. It exists so the IRS can track earnings and collect tax.
You apply on Form W-7, usually filed with a tax return.2Internal Revenue Service. Form W-7 – Application for IRS Individual Taxpayer Identification Number The form asks for your legal name, date of birth, and foreign address, and you must prove both identity and foreign status. A valid passport covers both in one document. Without one, you submit two documents from the IRS’s accepted list, which includes national ID cards, birth certificates, foreign driver’s licenses, and foreign voter registration cards.3Internal Revenue Service. Revised Application Standards for ITINs
An ITIN that goes unused on a federal tax return for three consecutive years expires on December 31 of that third year.4Internal Revenue Service. How to Renew an ITIN Filing every year keeps it active.
Independent Contracting
Independent contracting is the most common formal work arrangement for undocumented immigrants who want to stay inside the tax system. Instead of being hired as an employee, which triggers I-9 verification, the worker provides services as a self-employed individual. The classification is legally distinct: independent contractors control how and when they work, use their own tools, and typically serve multiple clients.
A business that hires a contractor generally requests a completed Form W-9 to collect tax identification information.5Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification The worker enters an ITIN in the space asking for a Social Security number. If the business pays the contractor $2,000 or more for services performed in 2026, it must issue a Form 1099-NEC reporting that income to the IRS.6Internal Revenue Service. Form 1099 NEC and Independent Contractors That threshold rose from $600 to $2,000 for payments made after December 31, 2025, so smaller jobs may no longer produce a paper trail with the IRS.
Self-Employment Tax
Contractors pay both sides of Social Security and Medicare, since no employer is covering the employer share. The combined self-employment tax rate is 15.3%, split into 12.4% for Social Security and 2.9% for Medicare.7Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion applies only up to the annual wage base, which is $176,100 for 2025. The burden catches many first-time contractors off guard. On $40,000 in net earnings, self-employment tax alone runs over $6,000, before any income tax.
Because no one withholds anything from a contractor’s check, self-employed workers who expect to owe $1,000 or more when they file must send quarterly estimated payments using Form 1040-ES.8Internal Revenue Service. Estimated Taxes Missing a quarterly deadline triggers a penalty even if the full amount is paid at year-end. The IRS charges interest on the late installments regardless.
Cash Work Off the Books
A large share of undocumented work happens entirely outside formal paperwork. Day labor in construction, landscaping, house cleaning, childcare, and agricultural harvesting is typically paid in cash with no forms exchanged. No W-9, no 1099, no withholding. Agricultural work during peak harvest leans especially hard on this arrangement.
Cash income is still taxable. The IRS does not exempt earnings because no one reported them. Workers who want to stay compliant have to track their own income. The IRS expects records showing amounts and sources of all earnings, which can be as simple as a notebook logging each job, date, client, and amount.9Internal Revenue Service. What Kind of Records Should I Keep Deposit slips, invoices, and receipt books all count as supporting documentation, and expense records should show payee, amount, date, and what was purchased.
Most cash labor goes unreported. Some workers file anyway because a history of tax compliance can help later if they seek to adjust immigration status. Filed returns on cash income create a paper trail of good faith that can matter in immigration proceedings.
Why Traditional Employment Is Closed Off
Federal law has required employers to verify identity and work authorization for every new hire since the Immigration Reform and Control Act of 1986.10Office of the Law Revision Counsel. 8 US Code 1324a – Unlawful Employment of Aliens Verification runs through Form I-9, completed by both employer and employee.11U.S. Citizenship and Immigration Services. USCIS Policy Manual Volume 10 Part A Chapter 1 – Purpose and Background The I-9 is the primary legal barrier between undocumented workers and W-2 employment.
New hires present originals from government-approved lists. List A documents establish both identity and work authorization in one item, such as a US passport or a permanent resident card. A worker without a List A document must present one from List B for identity, like a driver’s license, together with one from List C for work authorization, like an unrestricted Social Security card.12U.S. Citizenship and Immigration Services. Form I-9 Acceptable Documents Undocumented workers generally cannot produce valid List A or List C documents, which is why traditional employment requires either false documents or an employer willing to look away. Many employers also run I-9 data through E-Verify, an online system that checks it against government databases.
The Criminal Risk of False Documents
This is the piece workers most often underestimate. Using someone else’s Social Security number or fabricated identification to pass I-9 verification is a federal crime, and the penalties stack.
Using a false identification document to satisfy I-9 requirements is punishable by up to five years in federal prison.13Office of the Law Revision Counsel. 18 US Code 1546 – Fraud and Misuse of Visas, Permits, and Other Documents Separately, using another person’s Social Security number with intent to deceive is a felony under the Social Security Act, also carrying up to five years.14Office of the Law Revision Counsel. 42 USC 408 – Penalties If prosecutors can show the worker knowingly used a real person’s identity during another felony, aggravated identity theft adds a mandatory two-year consecutive sentence.15Office of the Law Revision Counsel. 18 USC 1028A – Aggravated Identity Theft That two years cannot be reduced, run concurrently, or be replaced with probation.
In practice these charges are often filed together. A worker caught using a stolen Social Security number on an I-9 can face document fraud, Social Security fraud, and aggravated identity theft at once. Enforcement priorities shift between administrations, but the statutes stay the same, and the exposure exists whether or not it is being actively prosecuted.
Wage and Safety Rights Still Apply
Federal labor protections cover undocumented workers, which surprises people on both sides of the employment relationship. The Fair Labor Standards Act defines “employee” as any individual employed by an employer, without reference to immigration status.16Office of the Law Revision Counsel. 29 US Code 203 – Definitions Courts have consistently read that definition to include undocumented workers, meaning they are entitled to the federal minimum wage and overtime. An employer who withholds wages cannot use the worker’s status as a defense.
The Occupational Safety and Health Act likewise covers all workers. The Department of Labor has stated that OSHA’s protections extend to workers “regardless of their immigration status,” and the agency has expanded its enforcement tools to encourage immigrant workers to report unsafe conditions without fear of retaliation.17U.S. Department of Labor. US Department of Labor Expands OSHA’s Ability to Protect Workers Fear of immigration consequences keeps many workers from filing, which is part of why some employers prefer undocumented labor in hazardous industries.
Workers’ compensation is different. It is a state-level system, and eligibility for undocumented workers varies widely. Independent contractors, the classification most undocumented workers fall into, are generally excluded from workers’ compensation regardless of status. Some employers misclassify workers as contractors specifically to avoid these obligations.
Filing Taxes and the Credits You Can’t Claim
Undocumented workers file federal income tax on Form 1040, entering the ITIN where the form asks for a Social Security number.18Internal Revenue Service. About Form 1040, US Individual Income Tax Return All income gets reported, both amounts on 1099s and cash payments that never made it onto any form. The IRS processes ITIN returns like any other and has a longstanding policy of not sharing taxpayer information with immigration enforcement.
Self-employed workers also file Schedule SE to calculate the 15.3% self-employment tax and Schedule C to report business income and deductible expenses like tools, supplies, vehicle costs, and phone bills. Those deductions reduce taxable income, which is why organized records through the year pay off at filing time.
ITIN filers hit restrictions on credits that Social Security holders take for granted. The Child Tax Credit requires a valid Social Security number for both taxpayer and qualifying child, so ITIN holders cannot claim it. ITIN filers with dependents may qualify for the Credit for Other Dependents, worth up to $500 per dependent. The Earned Income Tax Credit also requires a Social Security number, so it is out of reach. Undocumented workers who file often pay a higher effective rate than documented workers at the same income, contributing to the system while shut out of the credits meant to soften lower-income tax bills.