Hello AtlantaTaxExpert

Thanks in advance for your time.

I came to the US in Jul 2001 on an F-1 Visa. My OPT started in OCT 2005 and ends in OCT 2006. I started working for my current employer on 3rd Jan 2006. He knows my status is OPT and said that he wouldn't generate a W-2 for me and at the end of my contract period (30 Sep 2006) would give me a copy of 1099 and that paying taxes was my responsibility. He hasn't been withholding any tax money from my salary. I intend to leave the country after my OPT runs out. My earnings after the end of my contract would be around $35K. I am a citizen of India.

After I read the threads here I understand that I should file my taxes for 2006 earnings as a resident alien.

My questions are

1)DO I have to pay Social Security and Medicare Tax because of the resident alien status?

2)How much tax do I owe for my income?

Thanks much!

Aprreciate your help

You are correct that you have to file as a resident alien because you entered the country in 2001 and, on 1 Jan 2006, you exceeded FIVE years on the F-1 visa.

With NO Schedule C deductions, based on a $35K salary, your tax liability will be about $8,500. You must also consider the state tax implications.

However, what is the nature of your work? Did you move from the school where you attended classes to another town to accept this OPT?

It is possible that you could deduct a LOT of your living expenses, such as rent and utilities, if you had to move to accept the OPT position.

Send me the details so I can advise you further.

ATE,

I work as a Software Developer, a 8.00 - 5.00 Job.
Yes, I had to move from the school town where I attended classes to a different town (both in the state of Illinois) to accept this position.

1) You said no Schedule C Deductions, is that because I don't own any business, so no deductions?(just making sure, if that's what schedule C deductions mean)

2) rent and utilities deductibles... Do I have to prove that I incured these expenses?( don't have copies of bills ) Or the fact that I had to move?

3) If I were a W-2 employee wouldn't my tax liability be far less?

4) Is it too late or can I ask my employer to generate a W-2 instead of 1099?

Appreciate your help

It REALLY makes no difference whether you get paid on Form 1099 or W-2, because you are NOT liable for Medicare and Social Security taxes.

Yes, you should have receipts for your rent and utilities; you can ask the landlord for receipt and the utility companies for copies of their bills. These expenses would be reported on the Schedule C.

Your moving expenses are reported on Form 3903.

It is LIKELY your tax liability will be LESS using Schedule C than if you filed as a W-2 employee.

Thank you very much! For your help

Glad to help, but I made a mistake.

In fact, you ARE liable for Medicare and Social Security taxes because you are filing as a resident alien. For this reason, you WANT to be paid as a W-2 employee, not on Form 1099-MISC. If you are a W-2 employee, the employer pays 7.65% and you pay 7.65%. If you get paid on Form 1099-MISC, you must pay 15.3% under Schedule SE.

Sorry for the error!

At the end of my contract period, is my employer required to send me a form 1099 declaring the money he paid me as salary?
My employer says he will report in his tax filings the money he paid me, but he won't be giving me any forms.


Thank YOu.

Yes, he is supposed to give you a Form 1099-MISC to document the payments to you IF the payments exceed $600. If his total payments were less than $600, then the Form 1099-MISC is not required.

Regardless of whether you got the Form 1099 or not, you are still required to report the contract income on Schedule C.

Hey ATE,

My employer has agreed to generate a w-2. I have a few questions about form w-4 page 2.

1) What Itemized deductions can I claim?
2) What miscellaneous deductions can I claim?
3) Can I claim any (India - US) treaty benefits?
4) Can I claim the tuition that I paid last year as education credits?

Thanks a lot for all your help

1) Generally, you cannot itemize unless the total itemized deductions exceed your Standard Deduction of $5,200. Most people do not have enough itemize deductions unless they are paying a mortgage on a house. Based on what you have told me, you cannot itemize.

2) None, because miscellaneous deductions are also itemized deductions, and, as I noted above, you cannot itemize.

3) No, not if you file as a resident alien.

4) Yes.

Hi ATE,

Filing as a resident alien, single, head of household what would be my total tax liability on an income of $35,000 at the end of the year? I guess what I am asking is how much should my employer be deducting from my salary on the w-2? Can you please break it down as follows:

1) Federal incone tax withheld:
2)Social Security Tax withheld:
3)Medicare Tax Withheld:
4)(For the state of illinois)State income tax:

Or
The percentage of income withheld in each case.

Thanks a lot.
Your help is much appreciated.

How can you be head of household when you are single?

The W-4 form said:

Head of household. Generally, you may claim head of household filing status on your tax return only if you are unmarried and pay more than 50% of the costs of keeping up a home for yourself and your dependent(s) or other qualifying individuals.

I guess I didn't pay much attention after unmarried...
I can't file as Head of Household.

Thanks for catching that.

Okay.

1) Federal income tax liability: $3,659.
2) Social Security Tax liability (6.2%): $2,170
3) Medicare Tax liability (1.45%): $507.50
4) (For the state of illinois) State income tax: $990