[nitinr1]

Hi,
I worked as an Independent Contractor for a few months and received a 1099 Misc for the same. As I was going through the instructions for Schedule C-EZ, it said I need to fill the form if I am continuing the business.. which I am not. So should I include the amount in 1099 MISC in Other Income section of 1040 NR. And if yes, what should be the activity that I must specify?
Thanks in advance.
Nitin

[AtlantaTaxExpert]

nitinr1:

Do not use the "Other Income" (Line 21 on Form 1040NR) for the Form 1099-MISC income if the income is listed in Block 7 (Nonemployee Compensation) of the Form 1099-MISC. If Block 7 is used, you must list the income on a Schedule C/C-EZ.

You can list it in "Other Income" only if the income is listed in Block 3 (Other Income ) of the Form 1099-MISC.

[rabihm7]

But, he is Non Resident alien. Is he required to report the 1099-MISC Nonemployee Compensations for tax purposes?
Please refer to " F1 to H1B Dual Status Alien Tax Question" thread.

Robbie,

[AtlantaTaxExpert]

Robbie:

I understand that he is a nonresident alien. Income earned as an independent contractor has to be reported on Schedule C/C-EZ whether he is a resident alien, nonresident alien or U.S. citizen.

The Schedule C/C-EZ is used to report self-employment income. It also allows the taxpayer to claim certain expenses to reduce the taxable income reported on the Schedule C.

The bottom-line results of the Schedule C/C-EZ would be reported on Form 1040NR on line 13. If he is liable for self-employment taxes, the results would also be transferred to Schedule SE to allow for computation of self-employment taxes.

[rabihm7]

Thank you for your quick reply.

I quote from Pub 533.
"Special Rules and Exceptions
Aliens. Resident aliens are generally subject to the same rules that apply to U.S. citizens. Nonresident aliens are not subject to SE tax. Residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa, however, are subject to the tax. For SE tax purposes, they are not nonresident aliens. For more information on aliens, see Publication 519, U.S. Tax Guide for Aliens. "
Link : http://www.irs.gov/publications/p533/ar02.html#d0e488
What do you think?

R

[AtlantaTaxExpert]

Robbie:

I do not think you are getting my point. Just because you fill out the Schedule C does not mean you will pay self-employment taxes; these taxes are calculated separately on Schedule SE.

The reason you fill out the Schedule C is to allow you to deduct legitimate expenses incurred while earning the income reported on Form 1099-MISC. However, only income reported in Block 7 of Form 1099-MISC should generate a Schedule C.

Income reported in Block 3 of Form 1099-MISC may be other types of income which did NOT result from self-employment activities (like jury duty pay or special taxable government grants). This income has to be reported as taxable income, but not on Schedule C, because it was not self-employment income and therefore is not eligible for deductions for expenses and not liable for self-employment tax consideration.

If Nitinr1 is a nonresident alien and files his tax return as a nonresident alien, he is exempt from self-employment taxes. Even so, he still has to file the Form Schedule C/C-EZ.

[nitinr1]

Hi,
Thanks for your replies. I was on OPT when I was working as a Independent Contractor. My itemized deductions are less than Standard and hence am using the Standard.
I have heard, correct me if I am wrong, that usually you are not charged for working on OPT i.e it is non-taxable.
Is this true?

If yes what part of the form signifies this?/
Thanks
Nitin

[AtlantaTaxExpert]

Nitinr1:

You misunderstood.

While on F-1 status, you do not pay Social Security or Medicare taxes.

You do pay income taxes, both federal and to the state you live in (unless your state does not have an income tax).

[bluestocking]

I am also an NR, and I understood that I need to fill out C/C EZ but will not be subject to SE tax. But note that I also read that NR's are NOT eligible to take the standard deduction.
I have also been on OPT and bought tools of the trade while doing that. Does anyone know if I have to depreciate those, considering that I will not be paying US tax next year? Can I claim the full amount?

[AtlantaTaxExpert]

You can depreciate it, but you can also deduct the full amount under Section 179 on Form 4562.

If you have not done your taxes yet, get professional help. Section 179 deductions can be tricky for a layman.