[chwalzxm]

I worked for only one employer in 2009. From Apr.-Sep. I was on OPT, and from OCT-DEC I was on H1b. Therefore, I received both 1099-misc for the OPT period and W2 for the H1b period from the same company.
1.How shall I file my 2009 tax refuns? Which form/forms should I use?
2. Can I also use f843 to refund my Social Security and Medicare Tax during OPT period?
3. Since I have H1b, can I file as Resident of the state I work in, or I am still file for the last year as a non-resident alien?

Appreciate for your kind help.'
Best Regards

[MukatA]

If you are not married and did not complete 5-years on F1/OPT, you will file nonresident tax return. 1099-misc income is reported on schedule C or C-EZ (Form 1040). In your case, it is not subject to SE tax at 15.3% (unless you filed resident return for 2008). You will also complete Form 8843.

2. You got 1099-misc during OPT. You did not pay any FICA taxes during OPT.

[chwalzxm]

Thank you very much for your answer. Appreciate it.

If you are not married and did not complete 5-years on F1/OPT, you will file nonresident tax return. 1099-misc income is reported on schedule C or C-EZ (Form 1040). In your case, it is not subject to SE tax at 15.3% (unless you filed resident return for 2008). You will also complete Form 8843.

2. You got 1099-misc during OPT. You did not pay FICA taxes.

[chwalzxm]

If I report my 1099-misc income on Schedule C, which form should I report for my W2 income?

I just also heard that there is $5000 treaty between China and America. So how can I exempt this $5000, through 1042-S or some other forms?

Appreciate your help!

[AtlantaTaxExpert]

The amount listed in Box #1 of the W-2 is listed on Line #8 of Form 1040NR.

[chwalzxm]

Thanks. But I read the instruction of 1040-NR and it says report the income (usually W2) on line 8 but exclude the amount that can exempt based on treaty. Since I have both 1099-misc income got on my F1/OPT visa and W2 income got on H1B visa, I can have $5000 treaty exemption only applied on 1099-misc income. Then my question is which amount should I put on line 8 of 1040NR? Should it be my W2 income minus the 5000 treaty exemption?

For example, if my 1099-misc income is $6000, W2 income is $8000. In 1040NR, I put $3000 ($8000 w2 income - $5000 Treaty exemption ) on line 8; then I should put $6000 (1099 income) on line 21; and therefore got to line 23 the total effective connected income $9000. Is this correct?

Thanks a again!

[AtlantaTaxExpert]

Apply the exemption to the Form W-2 income on Line #8. That is where the IRS expects the exemption to be applied, so it is best to do what is expected. Causes less problems that way.

Since you will have to complete a Schedule C, but NOT a Schedule SE, it will not make any difference tax-wise.

[chwalzxm]

Thank you so much AtlantaTax.

[AtlantaTaxExpert]

Glad to help!

[vaya]

Atlanta, I don't think that's right. Tax treaty benefits do not apply to periods while on H1B & to business income (only wages). Thus I think chwalzxm gets no exclusion :(

[chwalzxm]

Hi vaya, thanks for your reminder. However, I think I can apply the tax treaty exemption on my 1099 income which I earned during my opt period, is it correct? And line #8 is the only place I can apply the exemption. Thanks again and waiting for your confirmation.

[AtlantaTaxExpert]

The exclusion DOES apply because he is filing as a non-resident alien AND he earned at least as much as the exclusion amount while on OPT.

The fact that he was paid under Form 1099 is irrelevent; he was STILL an employee while on OPT. Being paid under Form 1099 while on OPT is a violation of the rules governing the OPT process, but it is NOT a violation on the part of chwalzxm, but rather on the part of the employer.

Neither the IRS nor USCIS will penalize the employer for this violation, because it has no effect on the amount of income and FICA taxes owed, but neither will they penalize the F-1 visa holder by disallowing the treaty exemption. I have discussed this in detail with the IRS over the past several years, and this is their guidance on this matter.