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linda2006 · Feb 23, 2006, 10:09 AM

I got H1B in 2004. In 2005 I helped one professor with a project. At that time I didn't know it is not legal to work for someone who is not your H1B sponsor. In 2006 I received both W2 from my current employer and 1099 from the professor. The amount he paid me (about $10,000) was listed in #7 nonemployee compensation. My questions are:

1. Is it possible to ask him to cancel 1099? I would rather return the money than getting in trouble.

2. If I HAVE TO file for tax, what form do I need fill? Any changes I need to make on form 1040NR?

Thank you so much!

AtlantaTaxExpert · Feb 23, 2006, 10:24 AM

Linda:

1) Cancelling the Form 1099-MISC is not really an option. Try to do so will only raise questions at the IRS. That said, I would not worry too much about the legal ramifications. The IRS does not get overly excited about these things unless the amount of money earned is very substantial. In my opinion, $10K does not meet the definition of very substantial.

2) You do have to report it on Schedule C and Schedule SE. You should document any and all expenses associated with working on this project on the Schedule C. In addition to the normal income taxes, you are subject to a 15.3% self-employment tax on the net income from Schedule C.

Contact me at [email protected] if you have further questions.

linda2006 · Feb 23, 2006, 12:16 PM

Thanks a lot for your answer. I appreciate it.

I looked through 1040NR and realized that I can attach Schedule C for line 13 Business income or (loss). I am not sure which line should Schedule SE attach for. Is it line 27? But it didn't say attach Schedule SE. Or, Schedule SE needs to be filed separately from 1040NR?

Thanks again!

AtlantaTaxExpert · Feb 23, 2006, 03:09 PM

Linda:

Since you converted to H-1B in 2004, you are no longer eligible to file Form 1040NR.

You must file Form 1040.

I realize I did not make that clear in my original answer.

linda2006 · Feb 25, 2006, 10:33 AM

Great. Thanks!!

linda2006 · Feb 25, 2006, 10:51 AM

I have another question if you don't mind.

I have an underpayment penalty for $78. I tried to file electronically and it says: "Entering the information below from your 2004 federal tax return may reduce or eliminate any underpayment penalty on this year's return. Tax shown on your 2004 return is:". Is that the tax return I got back on my bank account? I didn't keep any record of that and remember it was a few hundred. Is it okay to enter just $100? I tried to enter different numbers and the results keep the same.

Thank you so much for your help!

AtlantaTaxExpert · Feb 25, 2006, 06:02 PM

No, the amount you got in the bank was your refund.

The amount of tax you paid is on Line #40 of Form 1040NR or Line #15 of Form 1040NR-EZ.

How much did you make in 2004?

linda2006 · Mar 6, 2006, 04:42 PM

Many thanks!!

AtlantaTaxExpert · Mar 6, 2006, 10:07 PM

Glad to help!

vgooje · Mar 7, 2006, 08:20 AM

Hi- I'm on h1-b status right now (indian national). Last year a friend of mine asked me to help him in energy analysis, who owns an engineering company. Not knowing that it was not legal to do it while I'm on h1-b with my present employer, I helped him and he compensated me with $1000.00. Now I have both w-2 and 1099 (nonemployee compensation). I'm little worried if it's going to be of any problem now. Is there anyway to correct it and how do I file my taxes? Please help me.
Vamshi

AtlantaTaxExpert · Mar 7, 2006, 10:09 AM

Vamshi:

You are correct; it was not legal. However, it is a minor violation and, if I were you, I would not worry too much about it.

Now, failing to properly report and pay taxes on that income, that could be a major problem in the eyes of the IRS.

You must complete Schedules C and SE, as well as Form 1040, to report and pay taxes on this income. You can do this using any commercial tax preparation site. Personnaly, I recommend www.taxact.com.

If you want professional help, I am available! Contact me at [email protected] if you are interested.

vgooje · Mar 8, 2006, 03:06 PM

Thank you for assurance atlantataxepert! I will see that I pay the taxes on that correctly.
Vamshi

AtlantaTaxExpert · Mar 8, 2006, 05:00 PM

Glad to help!

dost1947 · Sep 13, 2009, 01:09 PM

Hi Atlanta Tax Expert,

I have same kind of scenario... I have earned some amount on paypal and my status here in US is H1B, Should I report that income in this year tax filing.. Also let me know was that legal to earn online.. while on H1B?

As I have lot of projects going on and my understanding is that online jobs are not area specific they give you project depending on your skills.

Dost

MukatA · Sep 14, 2009, 04:17 AM

Originally Posted by dost1947

Hi Atlanta Tax Expert,

I have same kind of scenario... i have earned some amount on paypal and my status here in US is H1B, Should i report that income in this year tax filing..? Also let me know was that legal to earn online.. while on H1B?

As i have lot of projects going on and my understanding is that online jobs are not area specific they give you project depending on your skills.
Dost

Yes, you must report PayPal income. It is self employed income and is reported on schedule C or C-EZ (Form 1040). Net income on C is also subject to SE tax at 15.3%.