I started working on OPT in July after graduating from college in May. I remained in F1 OPT status during 2006. My OPT expires in March 07, at which time I will return to my home country or to another country.

Under these circumstances, can I treat my OPT employment as an 'extended business trip' and deduct travel and meal expenses?

Thanks a lot.

Maybe.

Is the OPT in a different city and state than the college? If so, then you can probably claim the OPT as a temporary work assignment and claim your travel, meal, rent, and utilities as employee business expenses.

Thank you AtlantaTaxExpert. Yeah, school was in a different state. Also my OPT ends in March, and I will leave the United States immediately. Given that, should I be able to treat the job from July 06 to March 07 as temporary? Would my tax home be my permanent residence outside of America

Your OPT meets the strict IRS definition of a temporary work assignment, so, yes, your tax home is outside the U.S.

You may want to ask your employer to report your income via Form 1099-MISC. It makes claiming the expenses (your travel, meal, rent, and utilities) much easier. You will have to file Schedule C, but NOT Schedule SE, with Form 1040NR.

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Originally Posted by dudesneet

I started working on OPT in July after graduating from college in May. I remained in F1 OPT status during 2006. My OPT expires in March 07, at which time I will return to my home country or to another country.

Under these circumstances, can I treat my OPT employment as an 'extended business trip' and deduct travel and meal expenses?

Thanks a lot.

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This would not be deductible. See the following from the IRS:

These and many other court cases seem to confirm the principle that the tax concept of a "tax home" is inextricably bound up with the idea of the taxpayer's employment or engaging in a trade or business, or engaging in an activity for which deductions are allowed under I.R.C. § 162. The absence of such employment or trade or business or activity means that the taxpayer's tax home is not necessarily located where he resides. In the absence of such employment or trade or business or activity, the taxpayer may have no tax home at all.

The activity of being a student does not constitute a trade or business under the Internal Revenue Code, and thus, in and of itself, cannot establish a tax home

Thanks ATLANTATAXEXPERT and TAXSEARCHER for your replies. You answers are both enlightening. I did find the following on IRS website
A taxpayer's "home" for purposes of section 162(a)(2) of the Code is generally considered to be located at (1) the taxpayer's regular or principal (if more than one regular) place of business, or (2) if the taxpayer has no regular or principal place of business, then at the taxpayer's regular place of abode in a real and substantial sense. If a taxpayer comes within neither category (1) nor category (2), the taxpayer is considered to be an itinerant whose "home" is wherever the taxpayer happens to work. Rev. Rul. 73-529, 1973-2 C.B. 37, and Rev. Rul. 60-189. Travel expenses paid or incurred in connection with an indefinite or permanent work assignment are generally nondeductible.

Question: why shouldn't I come within category (2) for section 162(a) since I have a place to live in my home country, and will return to it (to seek permanent employment or to live off my parents etc.) Why wouldn't my work be treated as a 'temporary assignment' if it terminates when my OPT ends?

Finally, if I were to claim the business expense deductions, and the IRS later disallows it. What would the penalty be considering the fact that I am entitled to a refund without regard to the travel deductions?

Thanks so much.

If you read the rest of the page that you cite, you will see that the IRS considers your tax home to be where you are employed. If you had a permanent place of employment in LA and you took a temporary assignment in Chicago, then you would be able to claim the travel expenses. But you do not meet the conditions to claim travel expenses.

As for your question about intentionally breaking the law and hoping not to get caught, I'm not going to answer that. Intentional violation of the law is fraud and you may find yourself subject to penalties. This may be particularly silly if you have future plans to work in the US and will need to apply for a work visa or green card.

Dude:

When I allow my clients to claim the OPT as a temporary work assignment, one of the questions is ask is if this is their first tax return. If it is, then the OPT is considered a relocation for work, NOT a temporary work assignment, and therefore the daily expenses is NOT deductible. Further, if the OPT then becomes a permanent job under an H-1B visa, the work assignment is no longer temporary, but rather becomes a job relocation and NOT eligible for the temporary work assignment deductions.

Hence, I have to agree with TaxSearcher, and I apologize if I was not clear in my original posting. I should have asked if you had a job while on a F-1 visa as a student in order to establish your tax home.

TaxSearcher:

I agree that, if the student went to school, did NOT work and had not established a tax home, his OPT as described would not be considered a temporary work assignment.

If, however, he worked while attending school (often the case as the student needs to earn money to pay his daily living expenses, to pay for the school or to support his family), he does in fact establish a tax home at the town where the school is located, especially if the work is off-campus or the student is paid as an independent contractor off-campus. If he then accepted an OPT assignment that lasts less than a year, finished the OPT, then either returned to the school or returned to his native country, the OPT would then be considered a temporary work assignment.

Comment?

ATE,

I don't believe that there would be many cases where that would hold. If you're talking about part time student work (working at MacDonalds, working in the university library etc) and then the student goes away on OPT, then no, I don't see any way that would hold up.

If you were talking about a person who studies at Georgia Tech, then gets offered a full time position at Coca Cola in Atlanta, but he gets sent to Florida for a 3 month temporary assignment, after which he returns to Atlanta, then that might be a different story.

TS

TaxSearcher:

Many of the international students will work a full-time job (40 hours) in addition to going to school, usually to support a family. They often do this in technical violation of their visas, but I believe that it DOES establish a tax home for them. When they then go on OPT (usually leaving the family behind at the school location), they qualify for the temporary work expenses In my opinion.

However, as I have noted many times, we learn something new every day. I will apply what you have posted and be a bit less liberal in allowing clients to claim the temporary business expense.

Thanks again for your responses. I did work as a Teaching Assistant while at school in a different State. I worked part-time and was compliant with my student visa. And this is my fourth tax return, and possibly the last one as I am leaving the country in March..

I don't know. Maybe I'll just be safe and not risk having to deal with the IRS in court.

Dude:

A good decision, as I would NOT support your earlier position that you established a tax home while at school.

Not an answer - a follow up question.

1. If I was employed either 10 or 15 hours a week as a Graduate Research assistant, before accepting the OPT assignment, would it then become a temporary work assignment? If I have filed taxes at least twice for this position before, would this establish a tax home at my university town?

2. If I did enter H1 7 months down, on the same job, but quit the job 3 months later, would I be able to use this as a temporary work assignment? Even though I worked on H1 from October to December, it was still within my original intended OPT validity dates. (Feb to Feb). Would I be able to use either the period till Sep or till Dec as temp work assignment?

Thanks in advance for the answer.