Taxes

Income Taxes

Local, State, and Federal income taxes are taxes that are removed from your paycheck by the government based on the total income that an individual makes in a given year. Not all local or state governments impose income taxes, but the state of Michigan does.  

Tax returns are documents where an individual reports how much they have earned in income for the previous tax year and how much they paid in taxes that year. When reporting, individuals may:

• Owe the government more taxes;
• Be owed a tax refund from the government; or
• Not owe or be owed anything.

If you owe the government taxes, that may mean you did not deduct enough taxes in your previous year. If you are owed a tax refund by the government, more taxes than what you should have paid were taken out of your income. If you do not owe anything nor receive a refund, the appropriate amount of taxes was deducted the previous year. There is a possibility that you may have different results from each respective government (i.e. an individual owes the state government taxes but received a refund from the federal government).

Please visit the IRS website for more information on federal tax rates

Filing Taxes in the United States

All workers, including H-2A visa workers, are responsible for ensuring that all owed income tax is paid for their work in the United States. Therefore, most workers must file a federal tax return in the U.S. even if they are not authorized to work in the U.S. Likewise, most states, including Michigan, require workers to also file a state tax return. Also, some cities and some cities (like Grand Rapids) require individuals who live and/or work in the city to file city taxes.  

Even if you are not required to file a federal tax return, you still may want to file and you still may be required to file a state or city tax return. You might receive a refund if your employer withheld taxes from your pay. Also, reporting your taxes could be helpful if you or your family file an immigration petition in the future.

Individuals who do not live year-round in the U.S., such as H-2A workers, must determine whether they meet the “substantial presence” test to determine whether they are a resident for tax purposes. If you have questions about this, you can call our office or visit the IRS Website for more information on the substantial presence test.

Making Less Than the Required Amount to File Taxes

Individuals may still choose to file taxes even if they make less than the required amount to file tax. You may receive money back if federal income tax was withheld from your paycheck, you paid taxes, or you qualify for a refundable tax credit. Visit the IRS Website for more information on income requirements.  

How to File Taxes

Free tax preparation is available to people who generally make $67,000 or less per year, persons with disabilities, limited English-speaking taxpayers, or are 60 years of age and older through the he Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) programs.1 To find a VITA/TCE site near you, call 800-906-9887 or visit irs.treasury.gov/freetaxprep/.

CAUTION: Beware of “Rapid Refund” and “Instant Refund”, or Other Scams

Generally, these “refunds” are high‑interest loans from a tax preparer. They are not actually refunds!  

When your refund arrives from the IRS, your preparer will keep a large percentage of it to pay for the loan. 

Did You Receive a Letter From the IRS?

Notices and Letters from the Internal Revenue Service (IRS) may require a response in a short time frame; however, sometimes scammers seek to steal important information by pretending to be the IRS. It is very unlikely that the IRS will contact you by phone.  

If you are contacted by someone claiming to be the IRS, talk to a trusted tax expert such as the MSU Tax Law Clinic or call the IRS directly at 1-800-829-1040 to verify. Do not call the number on the letter or provide your personal information without verifying that the information is actually being requested by the IRS. Please visit Consumer Scams and Identity Theft for more information.

ITINs  

An ITIN, or an Individual Taxpayer Identification Number (ITIN), is the number the IRS uses to identify taxpayers if they are not eligible for a social security number (SSN). Taxpayers and their spouse/children must apply for an ITIN if they have a filing obligation or are ineligible for a SSN.  

You can apply for an ITIN directly with the IRS by filing a W-7, contacting an IRS-authorized certifying acceptance agent, or through a taxpayer assistance center. Relatives abroad can also apply for an ITIN and be listed as a spouse or dependent on your return. If your ITIN expired, you must renew it before using it on your tax return. Your ITIN may have expired on December 31, 2023, if:  

• it was not included on a federal tax return in 2020, 2021, and 2022,  
• the middle digits (the fourth and fifth positions) include number 70 through number 88, or  
• It was assigned before 2013, and the middle digits include number 90 through number 99.  

Tax Credits

Tax credits can reduce a taxpayer’s tax bill and could result in the taxpayer getting money back. Some tax credits that are most common for farmworkers include:  

• The Earned Income Tax Credit is for working individuals with families to lower their income tax liability and reduce the amount of taxes they may owe. To receive it, you must have a valid SSN, not an ITIN. Also, your spouse and children who you use to claim the credit must have SSNs that are valid for work. To claim your children, they must have lived with you in the United States for at least six months of the previous tax year.
• The Child and Dependent Care Credit is available to eligible taxpayers who paid someone to care for your child or other qualifying dependent so you (and your spouse if filing jointly) could work or look for work and you (or your spouse if filing jointly) lived in the U.S. for more than half the year.
• The Child Tax Credit can be claimed for each qualifying child who has a SSN valid for employment in the United States. You (and your spouse if filing jointly) must have an SSN or ITIN or be issued an ITIN as a result of an application filed along with your return.

Please visit the IRS Website for more information on tax credits.

Income Taxes for H-2A Visa Workers  

H-2A workers may still owe income taxes and be required to file a tax return, even if you and your employer agreed not to withhold taxes from your paychecks. Your employer cannot waive your tax liability; they only can choose not to withhold taxes from your paycheck.    

H-2A workers who earn income in the U.S. may owe federal and state income taxes. The amount of taxes an H-2A worker may owe depends on several factors including:  

• Whether the worker is a resident for tax purposes (which is different from citizenship status – see below for more information); and  
• Total relevant income (nonresidents should report income only earned in the U.S., while residents should include worldwide income) during the calendar year that the income in the U.S. was earned.  

While H-2A workers are exempt from certain types of taxes, such as Social Security and Medicare taxes, and while H-2A workers can agree to not have their employers automatically deduct taxes from their paycheck (further described below), many H-2A workers may still owe taxes and may benefit from paying taxes in a timely manner.  

How Do H-2A Workers Know If They Are a Resident for Tax Purposes?  

The IRS defines a resident (for tax purposes only) as a person who is “substantially present” in the U.S.  

A person meets the substantial presence test if:  

• The person was in the U.S. for a total of 183 days or more during the current year; Or:  
• If the person was not in the U.S. for at least 183 days in the current year, they may still qualify as a resident if:
  • They were present in the U.S. for 31 full days in the current calendar year; and
  • They were present in the U.S. for 183 days or more during a period that includes the current year and the prior 2 calendar years.  

To calculate whether a person can qualify as a resident under this rule, add the total of:

• All of the days the person was in the U.S. in the current year plus 1/3 of the days present in the U.S. the prior year plus 1/6 of the days present in the U.S. during 2 years before the current year.  
• If the total number of days equals or exceeds 183 days, the person is likely a resident for tax purposes for that year.  

If the total number of days is less than 183, the person is likely a nonresident for tax purposes.  

What Is Income Tax Withholding?  

Same as above, income tax withholding is when an employer deducts part of a worker’s pay to hold for income tax. This money is sent directly by the employer to the U.S. government’s Internal Revenue Service (“IRS”). These deductions are estimates of taxes owed, and the IRS may later refund some of these payments or seek additional money if these estimates are not accurate.  

• Each individual is responsible for ensuring that all owed income tax is paid.  If a worker chooses not to have taxes withheld from their pay or the employer chooses to not withhold taxes, the worker may still owe taxes and be required to calculate the amount of taxes they owe and pay them on time.  

Employers of H-2A workers are exempt from automatic federal income tax withholding, so no taxes are typically deducted or sent by an employer to the IRS unless the worker and the employer agree to have it withheld. To have taxes withheld, an H-2A worker should:  

• Provide their employer with a completed IRS Form W-4.  
• If a worker wishes to pay taxes but the employer does not withhold them, the worker can still pay their calculated taxes directly to the IRS. The worker can file an IRS Form 1040-ES. Advice from a trusted tax advisor could be helpful in accurately calculating and paying the appropriate amount of taxes.  

What Forms Do H-2A Visa Workers Need to File?  

• Form 1040 if the worker is a resident for tax purposes, or Form 1040NR if the worker is a nonresident for tax purposes. Additional forms may be necessary as well.  
• Some H-2A workers may have more complicated tax filings. For example, H-2A workers from Mexico or Canada may be able to list family members as dependents and then pay less taxes.  
• H-2A workers should consider talking to a qualified tax professional before filing (more information below).  

Why Should H-2A Visa Workers Report and Pay Income Taxes?  

• Avoid the IRS taking future wages to pay unpaid tax debts.  
• Avoid the IRS imposing additional fines and interest for late or unpaid taxes.  
• Some immigration applications and actions may consider past tax payments and deficiencies.  
• If an H-2A worker agrees to have tax withholdings withheld from their pay, the worker will likely have a smaller income tax bill at the end of the year or potentially be eligible to receive a refund.  

Filing Taxes as an H-2A Visa Worker with a Social Security Number  

Since H-2A workers are eligible for Social Security Numbers, they must file their tax returns with a social security number, rather than an Individual Taxpayer Identification Number (ITIN).  

To obtain a Social Security Number, an H-2A worker should complete SSA Form SS-5, available online in English and in Spanish and take it to a nearby Social Security Administration (“SSA”) Office with a current passport and H-2A visa. If the SSA accepts the application, they will mail a Social Security card to the worker’s local address within a few weeks. If they deny the application, the worker can ask for the denial in writing and contact the Farmworker and Immigrant Worker Hotline (800-968-4046) or other legal service for advice.  

Individuals should keep their Social Security card and number private and only share it directly with an employer or with other trusted contacts as necessary, such as with certified tax professionals.  

H-2A Visa Workers May be Eligible for Free or Low-cost Tax Preparation & Advice  

Low-Income Tax Filing Assistance: The IRS’s Volunteer Income Tax Assistance (“VITA”) program offers free tax return preparation to people who make $674,000 or less as well as for people who need special assistance, such as people with disabilities or who have limited English-speaking capabilities. VITA sites are located at community centers, libraries, schools, shopping malls, and among other locations. Sites can be found through the online VITA locator tool or call (800) 906-9887. A VITA site may require specific documents to be able to provide assistance such as the individual’s Social Security number, W-2 tax form provided by the employer, paystubs, and passport. Tax returns are due in April of the following year.  

Low-Income Tax Legal Advice: There are also legal centers that provide individual tax and legal advice. Legal tax advice may be essential if complex issues arise such as overdue tax burdens or if the IRS contacts an individual directly with specific tax reporting issues. The Michigan State University Low-Income Taxpayer Clinic, depending on their capacity and individual eligibility, can potentially assist H-2A workers and other agricultural workers with legal tax issues, such as difficulties paying taxes or tax debt. The Michigan State University Tax Clinic can be reached at (517) 432-6880 or taxclinic@law.msu.edu and can provide assistance in Spanish and other languages.