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Unable to fund SEP-IRA for undocumented employee


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Employer needs to make a SEP-IRA contribution, and an employee is unable to open an account to receive her contribution because she could be undocumented, and that's blocking custodians from opening an account for her. Any idea what the employer should do if a custodian won't open an account to receive the contribution?

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I assume the issue is a lack of a SSN.   I get an undocumented person might not feel comfortable going to the federal government to get a number but it can be done.

An undocumented alien can apply for ITIN no questions asked.

 

https://www.irs.gov/individuals/individual-taxpayer-identification-number

I quote the website:

They are issued regardless of immigration status, because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code. ITINs do not serve any purpose other than federal tax reporting.

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9 hours ago, Riley Britton said:

If she is an illegal alien how did she get hired without a SSN? 

Riley, I've been asking this for 40 years. You might look up articles on E-Verify and why it's never really been used. A really interesting story.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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22 hours ago, Luke Bailey said:

Riley, I've been asking this for 40 years. You might look up articles on E-Verify and why it's never really been used. A really interesting story.

Because it doesn't work; a family member has been hiring "known" illegals for years, but they provide the necessary documentation to have a proper I-9 on file.

 

On 3/9/2022 at 8:54 AM, Riley Britton said:

If she is an illegal alien how did she get hired without a SSN? 

Likely already has an ITIN; you don't need a SSN for employment.  In this day of id theft, it maybe wiser for anyone, even citizens, to obtain an ITIN for employment purposes; especially considering how many places an employer then broadcasts an SSN to.

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Most immigrants who reside in this country illegally are fully documented, with such documents as the I-571, I-327, I-551 and so on. They are simply in violation of the terms of the document. Only those who crossed the border without processing through any US Government authority are undocumented.

And I have no idea if holding or not holding an alien immigration document, current or expired, makes any difference in the application for an ITIN I would guess not.

If and until there are strict and enforced penalties to employers who knowingly hire those immigrants here illegally, I suspect this will continue as a common problem. I doubt the current administration has any interest in enforcing such employer-mandated  immigration laws.

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17 minutes ago, BruceM said:

Only those who crossed the border without processing through any US Government authority are undocumented.

Yep, those. Has passed a DHS audit too.  Illegal/Undocumented matters not when "valid" paperwork can be presented. 

And let's not forget that ERISA is blind to legality, if they're determined (by the Employer) to be an eligible employee, the Plan has to benefit them.  Might need to engage a different custodian for the IRA, or open an appropriately titled brokerage account.

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2 hours ago, Nate S said:

Because it doesn't work

My point is it could. Try to use a fake credit card # and see how far that gets you.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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14 hours ago, Luke Bailey said:

My point is it could. Try to use a fake credit card # and see how far that gets you.

Sorry, it doesn't work for employment verification.  It's only verifying the information that has been submitted on the worker's behalf by the non-profit immigration agency the coyote delivers the undocumented to.  That way, he can get paid once they start telegramming their paychecks back home.  So the employer gets their labor, the IRS and SSDI trust get paid by someone who will never file to collect, and a concrete company in Mexico gets paid to build their family home.  Everyone wins!! ...Until they get a girlfriend and/or find the local dive bar; then the cops are invariably involved somehow, and eventually ICE comes knocking.

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2 hours ago, Nate S said:

Sorry, it doesn't work for employment verification.

Nate S, I think you're missing my point, which is that it could work, easily.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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