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Taxes for Those Working in Optional Practical Training (OPT)

This article addresses the tax issues for those who are working in Optional Practical Training (OPT).

You entered the United States as a student on a F-1 visa to pursue a degree at a higher learning institution. You succeeded in getting your degree and decided to get experience by working an Optional Practical Training (OPT) assignment. While in the middle of the OPT, the tax year ends and you need to decide how to file your tax return.

Even though you are working on OPT and drawing a paycheck, you are still on a F-1 visa and are considered a non-resident alien. This means you should file Form 1040NR or 1040NR-EZ. In most cases, the taxpayer cannot claim the Standard Deduction and cannot file jointly with her/her spouse, though he/she may be able to claim his/her children as dependents. If he/she is from India, he/she can also claim his/her spouse as a dependent, and can claim the Standard Deduction. He/she cannot claim the Head of Household filing status, and cannot claim either the Earned Income Credit, any education credits/deductions or the credit for the elderly or disabled.

As noted above, if you are not from India, you cannot claim the Standard Deduction on Form 1040NR. You can claim itemized deductions, which include state and local income taxes paid, charitable donations (both cash and non-cash), and miscellaneous deductions to the extent that they exceed 2% of your adjusted gross income.

You should check to see if your country has a tax treaty with the United States. If so, some of your income may be exempt from income taxes. You can determine if this is the case by checking IRS Pub 901 (U.S. Tax Treaties).

If you convert from a F-1 to a H-1B visa, you have a variety of tax issues to deal with. A separate article has been written and posted to this website that addresses those issues.

Finally, you should look carefully at your pay stubs while you were on the OPT. It is possible that you were exempt from Social Security and Medicare taxes, but your employer withheld these taxes anyway. By filing Form 843, you can claim a refund of these withheld taxes as long as you file either as a non-resident alien or as a dual-status alien. You should refer to IRS Pub 519, pages 45-47, for details. Understand that each taxpayer's situation is unique. The exemption from Social Security and Medicare taxes is not universal and there may be legitimate reasons why you must pay these taxes. You should discuss the matter thoroughly with your employer. If you still disagree, be sure to get the refusal to refund the Social Security and Medicare taxes in writing, as you will need it when you file the Form 843. The IRS may not grant your request for the refund, but there is no penalty for filing. All that can happen is that they say NO!

I hope you have found this brief article informative. It is the one of many we will post to this forum to serve our guests. If you have any questions, as them in the GENERAL QUESTIONS, CONCERNS, ETC. section of the Taxes for F1 Students and those on OPT Section and let's discuss it.