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thevisaguy · Apr 17, 2008, 05:53 PM

Hello,

In 2007, I worked on OPT for the first 5 months of the year. My OPT however expired before my H1B started which put me out of status. So my company took me off the payroll and put me on a project in china and continuedd paying me as an external consultant. I was getting paid directly to my account in the US. At the time of leaving to china, we had signed a contract for a consultant and it was mentioned that I would be paying taxes with a 1099 when I get back. What I did not realise at that time was that paying taxes would make me a person who worked in the US although I did not have the work authorization to work in the US. So now that I am back in US in 2008, I have received a W2 for the first 5 months of pay and a 1099MISC for the rest of the time. Here ae my questions:
1. When working on OPT what form should I be using to pay my taxes? 1040 or 1040NR?
2. Will paying my 1099 MISC have any legal complications for me?
3. If I file my taxes with 1040 NR then I do not have to pay the self employment tax right?
4. Is filing taxes for the entire year as a non-resident, the best way to deal with this?

I would be grateful for your answers

Thank you

MukatA · Apr 17, 2008, 07:25 PM

Till what date you were on F1/OPT in 2007? When did you get H1-B? For visits to U.S. in 2007 (from... to... ).

If you left the U.S. after 5 minutes and were never in the U.S. then you will file nonresident tax return. Claim deduction as per treaty. Read about nonresident filing: Your U.S. Tax Return: U.S. Tax Filing Requirements for Non-Residents

1099-Misc income is reported on schedule C (Form 1040). You can deduct your business related expenses. This income is subject to SE tax of 15.3%. If you were only on F1/OPT, then you don't pay SE tax.
How you will treat the 1099-Misc income, read: Your U.S. Tax Return: W2 or 1099: Employee or Independent Contractor.

thevisaguy · Apr 17, 2008, 07:37 PM

I was on F1/OPT till May 31 2007.
I left to china afterwards and came back to US only in Jan 2008. So I do not have to pay the 15.3% SE tax right?

AtlantaTaxExpert · Apr 18, 2008, 10:43 AM

If you H-1 did NOT become effective anytime in 2007, then you ae NOT liable for the 15.3% self-employment tax.

If it DID become effective in 2007 (probablu on 1 October 2007), then the 1099 income earned from 1 October 2007 onward IS subject to self-employment taxes.

This unfortunate circumstance will REQUIRE that you file as a dual-status alien, because you CANNOT report self-employment taxes using Schedule SE on Form 1040NR; you MUST have a Form 1040 in the mix, and a dual-status return is the ONLY way to do that, because, unless you are married, you CANNOt ile as a resident alien.

Your situation SCREAMS for professional tax help. Contact us at the email below if you want our help!

MukatA · Apr 18, 2008, 05:40 PM

Originally Posted by thevisaguy

i was on F1/OPT till May 31 2007.
I left to china afterwards and came back to US only in Jan 2008. So i do not have to pay the 15.3% SE tax right?

Yes, you will file nonresident tax return and will not pay SE tax.

The Texas Tax Expert · Apr 19, 2008, 12:45 PM

I don't believe that the answers that you have been given above are correct.

The income you earned while in China is not US source income. Since you are a non-resident, you have no US tax responsibility on the non-US source income.

You do have a US tax liability for the W2 income you earned while on OPT.

File a 1040NR.

thevisaguy · Apr 21, 2008, 04:20 AM

Hello Texas Tax Expert,

This is exactly what I have been thinking. Since I am a non-resident, and was not even physically present in the US and did not even have work authorization in US for the entire time I earned in US, I also agree that I should not be liable to any kind of taxes. The problem however is that, my company has issued a 1099 MISC now and I do not know what I should be doing. The period for which I received the W2 is straight forward and I do not have problems with that. So my questions finally boil down to these:
1. Do I have to pay taxes from June 07 -Dec 07 when I was not in physically present in the US nor did I have work authorizarion but I have a 1099 MISC form?
2. How do I explain the 1099 MISC?

Thanks so much

MukatA · Apr 21, 2008, 05:05 AM

thevisaguy:
Your income is U.S. sourced income. Now since you have received 1099-Misc, you must report it. I don't think that you have a choice. You can try to see if your employer cancels 1099-Misc and treats it as a payment to a foreign person in foreign country.

You can deduct your expenses to travel to China and for living expenses on schedule C (Form 1040).

You should click Texas Tax Expert and send him a personal message or this link so that you get a reply from him. His opinion certainly carries weight.