Other Income

[Gary]

I have a client from India that meets the presence test. she is here on an F1 Visa (student). Most people like her get a W-2 with no Social Security and Medicare withheld. She received a 1099-misc. Should I just put this on line 21 not subject to social security? If I use a schedule C, I see no way of eliminating the social security and medicare.

Thanks.

Gary

[Gary2]

Are you sure about the presence test? A student who has substantially complied with an F-1 visa is an exempt individual. Also check the treaty provisions, as I believe the India tax treaty provisions for students are generous.

Finally, if it's really scholarship income, either it belongs on a W-2 or doesn't get reported by the payer at all (though may still be taxable to the recipient).

[Gary]

Programmer

She is working as a programmer. She has been in the country more than a year. Do treaty provisions require that she files a 1040-NR?

[Gary2]

It's not the treaty provisions that require it, it's the rule that exempts most students from qualifying under the presence test. See the discussion of students as exempt individuals starting on page 6 of Pub. 519. Also, such a person must file form 8843.

The India-specific treaty provisions allow that a student from India filing a 1040NR can claim the standard deduction (assuming the spouse doesn't also file and itemize), and also, in unusual cases, claim exemptions for a spouse or children. There may be more; I suggest downloading Pub. 901, reading all the sections pertaining to India, and, if necessary, reading the treaty provisions (which I think can be found from citations in the tables in the back).

Note that the Pub. 519 discussion takes the attitude that being exempt is an advantage, presumably because it means that only US income is taxed (which might benefit diplomats and athletes, but probably not students from India). Hence someone who violates the restrictions of their visa (or is here for five years and can't prove they intend to return) loses their exemption, and can then satisfy the substantial presence test.

I'm not an expert on this. I've never done a 1040NR, nor have to deal with the presence test for someone with an F visa. I just know, third hand, of cases where a) a 1040 had to be amended into a 1040NR because of the general F visa rules; and b) where India took extra effort because of uncommon treaty provisions.