I am on F-1 OPT working for a startup. My employer wants to pay me as a 1099 contractor instead of W-2. Is that even allowed on OPT, and does it change my tax filing?
If you are on standard 12-month OPT, you can work as an independent contractor (1099), provided the work relates to your major and you work at least 20 hours a week. If you are on a STEM OPT extension, 1099 arrangements may not meet the requirements because you must maintain a bona fide employer-employee relationship. In either case, as a nonresident alien, a 1099 arrangement changes the tax forms you give your employer.
You do not need to worry about violating your visa by accepting 1099 work if you are on standard OPT. The immigration rules explicitly allow "work for hire" and self-employment.
The rules for contract work depend on which type of OPT you have.
**If you are on standard 12-month OPT:** You are allowed to engage in "work for hire," which means performing a service based on a contractual relationship rather than an employment relationship. You can also be a self-employed business owner. The work must be directly related to your major field of study, and you must work a minimum of 20 hours per week. If requested by the Department of Homeland Security, you must be prepared to provide evidence showing the duration of the contract period and the name and address of the contracting company.
**If you are on a STEM OPT extension:** Working as a 1099 contractor is much more restricted. USCIS states that arrangements like sole proprietorships or consulting firm arrangements that provide labor for hire "may not be able to demonstrate a bona fide employer-employee relationship and, therefore, may not meet the requirements of the STEM OPT extension."
**Reporting the change:** 8 CFR Part 214 (governing federal student regulations) states: "Students with an approved 24-month OPT extension... must report to the student's DSO a change of... employer name... within 10 days of the change." Purdue ISSS (governing its own university students) states: "Once your OPT begins, all employment related changes must be reported through myISS within 10 calendar days of the change." Because federal regulations explicitly mandate this timeline for STEM OPT extensions, but individual universities often apply it to standard OPT, you must check your own school's specific reporting deadline.
If your arrangement is permitted and you transition to a 1099 contractor, your employer will likely ask you to fill out a tax form. Because F-1 students are generally considered nonresident aliens for tax purposes during their first five calendar years, you must use the correct form for your status.
You should complete Form W-8BEN, not Form W-9. Form W-9 is used for U.S. tax residents. Form W-8BEN tells your payer that you are not a U.S. tax resident, that you are subject to nonresident tax rules, and that tax treaty benefits may apply.
Working as a 1099 contractor means you are engaged in a U.S. trade or business. You must file Form 1040-NR for your annual tax return.
Your contractor income is considered "Effectively Connected Income." After allowable deductions, this income is taxed at the same graduated rates that apply to U.S. citizens.
As a nonresident alien on an F-1 visa, your services are generally exempt from Social Security and Medicare taxes, provided the work carries out the purpose for which you were admitted.
