[Teja6]

What are the taxes that a student on OPT who is working as an independent contractor is subjected to.

[smoothy]

And exactly where would this be?

[AtlantaTaxExpert]

Smoothy:

OPT stands for Optional Practical Training, a kind of paid internship where foreign students on a F-1 or J-1 visa work to get practical experience in the field under which they studied and received a degree.

Teja6:

Since the OPT period is under the F-1 visa, you are exempt from FICA (Social Security and Medicare) taxes. Because you will be working as an independent contractor while still being a non-resident alien, youwill file Form 1040NR with a Schedule C, bit NOT Schedule SE, because the FICA tax exemption also exempts you from self-employment taxes.

You ARE, however, still liable for federal AND state income taxes on the net income from the Schedule C. Since no money will be withheld from your weekly/bi-weekly/monthly paycheck, you need to set aside about 25% of each check and save it in a savings account so you HAVE the money to pay the tax when you file your 2010 tax returns sometime before 15 April 2011. In the first year of working as an independent contractor, you do NOT have to make quarterly estimated tax payments, and you will NOT be subject to any under-payment penalties under a first year "safe harbor".

Same logic for the state income tax, assuming you are working in one of the 43 states that have a state income tax.

[smoothy]

Smoothy:

OPT stands for Optional Practical Training, a kind of paid internship where foreign students on a F-1 or J-1 visa work to get practical experince in the field under which they studied and received a degree.

Thanks for That explanation for OPT... it was new to me. I should have been more clear in what I asked them as to WHERE they were located. As in Country, State and City if in the USA, as some Cities and Counties also have a wage tax that they might not be aware of in advance of filing for them if they don't pay close attention to papers they sign. They didn't indicate a location.

[AtlantaTaxExpert]

Good point; had not thought about local wage taxes.