[janevois]

Hello,

I am on F-1 OPT and would like to work self-employed in the field I studied. More specifically, as an individual engineering consultant. Please help me with the following questions.

(1) Is this legal?
(2) Are there special procedures I need to go through? (e.g. register business)
(3) How do I pay tax?
(4) How do I file tax?

Thank you!

[AtlantaTaxExpert]

Janevois:

(1) Tax-wise, it is perfectly legal. However, OPT status inplies that you are being trained by a sponsor company. If the self-employed consulting work is in addition to working for the sponsor company, there should be no problem. However, if the self-employed consulting work replaces the work for the sponsoring company, you probably not longer qualify as being on OPT unless the self-employed consulting work is for the sponsoring company. If you lose your F-1 status (converting to a H-1 visa), you become liable for Social Security and Medicare taxes.

(2) For consulting work, business registration (which is done at the local city/county level) is not required unless you start the business storefront that is open to the general public.

(3) Your tax liability is computed and paid quarterly to both the IRS and the state government (assuming you live in a state that has an income tax). You can do this yourself, but you may find it easier to hire a tax professional to help you in this matter. There are significant penalties if you do not pay your taxes on a quarterly basis.

(4) From 1 January to 15 April, you prepare and file an annual tax return for both the federal and state governments, at which time you settle your tax bill for the previous year. Again, the use of a tax professional is advised.