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helpwithtax · Sep 13, 2011, 12:23 PM

Hi,

I lived in USA as a resident alien for 2010 and filed returns as 1040. For 2011, I am not a resident and planning to file 1040NR. Do I have to pay SS and Medicare taxes though I am not a resident. Currently I work as a contractor on 1099 for US employer. Please advise me!

Thanks!

AtlantaTaxExpert · Sep 13, 2011, 03:43 PM

The critical issue is WHERE did you live and work in 2011. That dictates whether you owe U.S. income and/or self-employment taxes.

I await your response!

helpwithtax · Sep 14, 2011, 06:19 AM

Hi,

For 2011, I live and work in India. Do I owe SS and ME or any type of tax to USA since the employer is planning to do 1099 MISC for 2011.

Thanks

AtlantaTaxExpert · Sep 14, 2011, 06:47 AM

HelpWithTax:

If you both live and work in India, under both U.S. tax law and under provisions of the U.S.-India Tax Treaty, you owe ZERO taxes to the United States. In short, you have NO U.S. tax liability whatsoever, in either income, self-employment or FICA (Social Security and Medicare) taxes.

Further, your employer is in fact NOT your employer, but rather a business client, and he should NOT originate a Form 1099-MISC for the work you do for him. The requirement to originate Form 1099-MISC for annual payment that exceed $600 applies ONLY to contractors who reside or work WITHIN the borders of the United States. Make sure your "employer" understands this and does NOT originate that Form 1099-MISC.
Your only tax liability is to India, and you will need to contact an Indian tax consultant to determine how to pay those taxes.

helpwithtax · Sep 14, 2011, 07:45 AM

Hi ATE,

Thanks so much for your response. Is it legal for the company to NOT issue a 1099 MISC. How would they account for the non employee compensation they provide me in the form of pay checks.

Awaiting your reply!

AtlantaTaxExpert · Sep 14, 2011, 08:30 AM

Yes, it is perfectly legal.

The check they are sending you is NOT a paycheck. It is a check to pay for services rendered, from client to contractor, similar to what you pay a plumber to fix your broken toilet.

helpwithtax · Sep 14, 2011, 10:12 PM

Thanks ATE. I will check with the contractor.

MukatA · Sep 15, 2011, 02:49 AM

The U.S. employer will issue 1099-misc only to residents and U.S. citizens. U.S. residents and citizens complete form W-9 and submit it to the employer.
Since you are not a U.S. citizen or resident, complete Form W-8BEN and submit it to your employer. The income you earned as nonresident and who was not present in the U.S. to work, is not taxable in U.S.

You filed resident return in 2010. It appears that you left U.S. in 2010 itself. In that case you should have filed dual status tax return so that in IRS records you are a nonresident.