[tarunkp]

I recently started my OPT with my employer. But, I am an engineering contractor with the organization. How should I file my taxes and what forms should I request my employer? Will my tax percentage be 15% or 7.5% ?

[AtlantaTaxExpert]

If you are working as a contractor, you will file Form 1040NR with a Schedule C to report the contract income.

Your "employer" should generate a Form 1099-MISC for you in January 2011 for the 2010 tax year.

Since you are on OPT, you are NOT subject to self-employment taxes, so working as a contractor will have NO adverse effects tax-wise.

In fact, you will actually come out a bit ahead because you can deduct items on the SChedule C (business use of your cell phone, cost of business cards, office expenses) that could not be easily deducted if you worked as a W-2 employee.

[tarunkp]

Thank you for your reply. Could you let me know what is schedule C? Is this a separate form needed to be attached with form 1040NR. Also, what all business costs can I deduct on my payment? Is there any limit to it?

Thank you,
Tarun

[AtlantaTaxExpert]

Tarun:

The limits on what expenses can and cannot be claimed are too numerous to discuss here. Entire books have been written about this subject.

You can download Schedule C from Internal Revenue Service, which IS a separate form that is attached to the Form 1040NR.

[tarunkp]

I realize that my question was a little vague about the expenses I can include. Since I will not be charged taxes or rather be refunded, do I need to use any other form also for claiming refunds?

[AtlantaTaxExpert]

Tarun:

To be clear: you will not be charged self-employment taxes; you WILL be charged for federal and state income taxes.

The only forms that need to be filed are Forms 1040NR and 8843, plus the Schedule C, plus the appropriate state income tax forms.