Hi there,

I completed my MS on July 17, 2009 and got my EAD authorization for OPT on 23rd July, 2009. I have started working for a company from 23rd July, 2009.
My employer wants to hire me on a 1099 contractor basis. I have a few questions related to the same:

1- Can I work as a 1099 contractor while I am on a OPT visa? My employer provided me with a W-9 form to sign. But as far as I know, I am supposed to sign the W-8BEN right?

2- My employer has also applied for an H1-B visa on my behalf. Will working as a 1099 contractor create any complications for this?

3- Until now I used to get a tax form once a year and I used to fill and send it to the IRS when I was on F-1. Now it seems to me that on 1099, my tax won't be deducted from my paycheck and I am supposed to pay my tax all by myself. It is true?

4- After reading through the 1099 tax documents, I saw that I am supposed to pay taxes on a quarterly basis. Is it necessary or can I pay it once a year as I used to do it during my F-1 status?

5- Could you guide me on how to estimate my taxes on a quarterly basis?

6- If my H1-B visa gets approved, what would be the necessary changes to be taken related to my employment? My employer has no knowledge about the H1-B visa employment requirements (and even me).

Thanks,
~Amit

1) Technically, no, but the violation is NOT yours, but rather the employer's. It has NO effect tax-wise on you, since you are NOT liable for FICA taxes, or the self-employment tax (the equivalent tax paid by self-employed persons). The W-9 Is the correct form for you.

2) No.

3) That is true for state and federal INCOME taxes. You will have to file Form 1040NR with a Schedule C.

4) Yes, for the FIRST year only. A "safe harbor" provided to you allows you to ignore the quarterly estimated tax payment and pay the tax without penalty or interest all at once when you file your annual tax return.

5) Yes; download IRS Form 1040-ES and follow the instructions.

6) One you convert to H-1B, you MUST convert to a W-2 form of employment where you pay half of the FICA taxes and the employer pays the other half.

Thanks a lot for all your replies 'AtlantaTaxExpert'. I have a few more queries based on your answers. I have numbered the following questions based on my original questions. Hope that won't be very inconvenient to you.

1) My employer is completely flexible about this 1099 issue. So, what should I tell him in order to avoid me working as a 1099 contractor? Could you please guide me through exactly what type of employee he needs to hire me as and how to proceed with the same?

3) So, I will be filing my taxes using the 1040NR form if I am on 1099 right?

4) So you mean to say that only for the FIRST year, I have to pay the tax on a quarterly basis and then from the 2nd year onwards I will pay it on a yearly basis. Is this correct?


Regards,
~Amit

1) Assuming you will be working for him after the OPT period is over, it is best long-term for you to be hired as a W-2 employee while being exempt from FICA (Social Security and Medicare) taxes during your OPT. The date your H-1B visa becomes effective is the date he should start withholding FICA taxes. This way, federal and state income taxes can be withheld from your salary and you avoid the need to file a Schedule C with your Form 1040NR.

3) Correct, along with a Schedule C. If you are hired as a W-2 employee, you may be able to file the shorter and easier Form 1040NR-EZ.

4) The other way around. In the FIRST year, you pay on a yearly basis and for every successive year, you must pay quarterly estimated taxes. But, again, if you are hired as a W-2 employee, your employeee will withhold the required state and federal income taxes and thus relieve you of making the quarterly estimated tax payments.

Hi AtlantaTaxExpert,

Thanks a lot for all your queries. You guys are awesome. Thanks again.

Regards,
~Amit

Glad to help!