F1 OPT (5th year in the US) salary + independent contractor 2-job mix

[Pilgrim]

Hi.

I studied in the US from Jan. 2005 to Dec. 2008 on F1 visa as a foreign student from POLAND. I went for one semester to the school in Alabama, then the rest of the time I studied in Texas.

After I graduated in December 2008, I stayed in Texas for one more year (until December 2009) to take advantage of the OPT possibility.

I worked two jobs. In one I was an employee, in another - an independent contractor.

In the first job I was paid $10/hour. At first they were deducting the MC and SS tax, but I told them they shouldn't have and I was returned all the money they had previously deducted. However, when I look at my pay slips now, I don't see any FIT deductions, and it says I was under two different exemptions.

In the second job I was an independent contractor, namely I was a tennis instructor working for a tennis school. At this job there were no taxes deducted from my paycheck.

I have returned to Poland. Yesterday my boss from the second job sent me an email saying he's got my 1099 form and asking what he should do with it. To be honest, I am not sure what to tell him.

1) Is a 1099 form something that my boss needs to file in my name? If I asked him not to file it and he didn't, would that allow me not to worry about the tax for that job at all?

2) What forms do I have to file to the IRS - are they the 1040NR and 8843?

3) Will I get a refund of that tax?

4) I have a computer I used to work. I bought it one month before I started working, if I have the receipt for it, can I use it as a proof of incurring a cost of doing business in that second job?

5) If I don't have the receipts for gas I used in my car, is there a way I could still use the expenses for it as my cost of doing business in that second job? Would the bank statement be a sufficient proof of purchase?

Thanks a lot!

[Atlanta Tax Guru]

Pilgrim:

You are legally obligated to file a tax return, which would be Form 1040NR with Form 8843 plus a Schedule C, plus a Alabama state tax return for any income earned in Alabama.

Texas has NO state income tax.

If no income taxes were withheld from either the W-2 or 1099 job, you will PAY when you file the return.

You can deduct part of the cost of the computer on Form 1099, plus claim a mileage rate of 55 cents per mile for mileage accrued on the 1099 job.

Now, because you are NOT going to get a refund, you MAY be tempted to NOT file the 2009 return.

That is NOT a good idea, because there IS a tax treaty between Poland and the United States which will have a reciprocity agreement. This allows the IRS to ask the Polish government to help them track you down to collect these taxes.

[Pilgrim]

Thank you so much for replying so quick.

I am planning on filing both of the forms. I figured I do not want to mess with the IRS either in the US or in Poland

1) Is it true I can deduct 2000 per the treaty between those two countries?
2) Why can't I get the refund of the tax?
3) If I had no income in Alabama, do I need to file anything? In fact, during the years 2005-2008 I didn't work at all in the US, do I need to file anything for that period of time?

Thank you very much for your help.

[Atlanta Tax Guru]

1) Yes, I think $2,000 IS the treaty exemption amount.

2) Because you EARNED the money within the U.S., that money is subject to U.S. income taxes. The same principle applies to U.S. citizens working in Poland.

3) If NO income was earned in Alabama, then no Alabama return is required.

[Pilgrim]

Ok, I understand.

So if I made roughly $5,000 in the W-2 job (no taxes withheld so far) and roughly $10,000 in the 1099 job, what are my taxes? Just the federal income tax? How high is it?

Thanks!

[Atlanta Tax Guru]

Okay, let's do the math:

$15,000 in income.

Subtract the $2,500 treaty exemption and the $3,650 personal exemption.

That leaves $8,850. Tax on $8,850 is $906.

It should be smaller, because you will have expenses on the Schedule C that will reduce the net income.

Expect to pay between $700-$800.

[Pilgrim]

Atlanta TAX Guru,

Thanks a lot for your help. I see that the fed tax on $15,000 income is about 10,23% then.

1. What exactly can I put on schedule C as my expenses? I worked as a tennis instructor in both (W-2 and 1099) places.

2. Deductions only concern the W-2 part of my earnings, right?

3. You mentioned I could use a part of the computer cost as my expense - what is the amount? I paid about $2,600 for the computer in late 2008 - I started working in 2009 - how much of the $2,600 can I deduct?

4. I commuted a lot to/from work. Can I use the money I spent on gas as an expense? How could I prove it if I don't have neither the receipts for the gas I bought nor the car anymore?

Thanks!

[Atlanta Tax Guru]

Put your instructor expenses, such as rackets, balls, tennis uniforms, etc.

If you travel between the various tennis courts, claim the mileage on your car at about 50 cents per mile.

You can claim these expenses ONLY for the income earned while under the Form 1099.

The computer has to be depreciated over five years.

Commuting costs are NOT deductible under either the W-2 or the 1099.

[Pilgrim]

Thanks again for your input.

1. How do I depreciate the computer? MACRS, right (5 year)?
2. And how do I find out the basis of depretiation for it (I bought it in 2008, in December)
2a. Would it be first or second year of use (20 or 32%?)
3. If I don't have the receipts for certain goods that I bought, can I still use those purchases as my expenses?
4. Do I need to file Form 4562?

Thanks!

[Pilgrim]

Oh, and where can I find some info on the $3,650 personal exemption you mentioned?