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FAQ

Are F1 visa holders allowed to do 10-99 jobs as part of their OPT/CPT?
As I understand the rules for OPT and CPT, employment for CPT must be a W-2 position unless the position is an unpaid internship (in which case you will not be paid at all). However, OPT permits self-employment, and thus you can, in theory, get approval to use your OPT time for a position where you will be compensated as a independent consultant, with the business giving you an 1099, or where you are an owner of the business or venture, either by yourself or in conjunction with others.
What are the IRS mileage deduction rules in a "gig economy" job (W2 employee, not 1099 independent contractor)?
Currently, because of changes in the deductibility of itemized deductions, unreimbursed business expenses of employees (including mileage) cannot be used to offset income on your 1040 tax return. However, business mileage can be requested from your employer as a tax free reimbursement. The rate for 2021 is 54.5 cents per mile.If you are completing a 2021 or earlier tax return, business mileage can be deducted, subject to limits, on Schedule A.
Can I pay directly for a contractor's hotel and meal expense without adding it to his 1099?
NO you can not. Contrary to what everyone else is stating.Please read Independent Contractor (Self-Employed) or Employee?.One of the criteria is the potential risk of having a loss. Without this risk you are potentially risking the IRS calling your contractor and employee.Second issue. How do you justify the expenses as ordinary and necessary to your business. If the contractor is truly independent these expenses belong to them and are NOT legit expenses for the business. The deduction belongs on the contractors return and NOT yours.So now you’ve violated two of the rules for the testing of whether or not they are a true Contractor or not.
What do I do to allow my employer from taking federal withholdings to IRS from my check so I can withhold it myself?
Generally you can't. You could fill out a W-4 with a lot of exemptions, so no withholding is done. But if you don't really have those exemptions you will actually be penalized by the IRS.Also FICA - Social Security and Medicare - will still be withheld as is required by law for employers.You could ask your employer to make you a contractor, and not withhold any taxes and issue you a 1099. But there are a lot of rules that go with that, so it's unlikely. If you don't meet the qualifications for being a contractor it could come back on the employer and cost them even more money. Also it will be more difficult for you to do your taxes, and if you're having them done it will cost you more. And you'll have to pay your taxes quarterly.
Can a Delaware C corp that's operating in California pay $1 salaries to its employees?
Under California law, exempt employees (which I assume is how most of this group will be classified) must earn a mandatory minimum monthly salary, generally at least twice the minimum wage (the amount is higher for some professions). So California-based employees could not legally accept a salary of $1 as their compensation.Exempt computer professionals must be paid at least $7165.12 a month, or just under $86K per year - otherwise they are not considered to be exempt employees in California, and then they must receive at least the minimum wage plus overtime pay. See https://www.dir.ca.gov/oprl/Comp....Edit (responding to Adam Gering's comment and answer): To the best of my understanding, California does not recognize the Federal exception you mention for equity holders; the state law would still control.
Are cryptocurrencies like Bitcoin taxed? If so, how?
It’s actually rather simple. In the USA, the IRS has issued guidance that cryptocurrency is treated as an asset—just like the stocks in your brokerage account. (This treatment is for tax purposes only).*IRS Virtual Currency GuidanceFull Draft Notice, 2014–21I am an expert on Bitcoin and the evolution of cryptocurrencies, but I am not an accountant or tax adviser and I have not carefully read these guidelines. But, as a taxpayer, I can comment on the treatment of asset sales. What follows is a layperson explanation of asset treatment and it should not be misconstrued as expert advice…AcquisitionLike shares in a corporation, you typically don’t report anything at the time of acquisition (this assumes that you acquired the asset for investment purposes and not as compensation for work performed or in exzchange for something that you sold). Of coures, you should retain clear records and receipts.LiquidationYou must report the capital gain upon selling virtual currency or converting it into something else of value.In Kind Exchange (Wash transactions)But just like a Picasso painting or stock in an aerospace company, if you convert it into a substantially similar asset (or buy a substantially similar asset a short time after the sale), then you are generally not required (or allowed) to record your gain. Instead, you may be required to treat as a “wash sale”. This means that the gains can be reported another day.I suspect that converting between like values of a virtual currencies constitutes a wash. Check with your accountant or tax advisor, of course![2021 UPDATE]: The 2021 Trump tax reform explicitly eliminates the wash sale exemption s for cryptocurrency. Even a direct conversion between two currencies (e.g. Bitcoin and Bitcoin Cash) results in a taxable / reportable event on personal tax filings.* Operating an Exchange or any Money Handling BusinessTreatment as an asset is for the purpose of tax reporting only! If you exchange or hold virtual currency on behalf of other individuals or organizations—or simply offer a Bitcoin ATM to a store or bus station, FinCEN guidelines make it very clear that you are a Money Service Business (MSB), a qualified custodian, or perhaps even a currency exchange. That really changes the game. You must now comply with regulations, training and oversight. Operating an MSB entails:Business permits/licensing (both Fed & State)Training and licensing of your staff (possibly even as brokers)Report and meet cash reserve requirementsCompliance with anti-money laundering regulations (AML)Compliance with Know your Customer regulations (KYC)Compliance with the Racketeer Influenced and Corrupt Organizations Act (RICO)In some communities, you may even need to meet requirements related to your hours of operation, or you may need to offer a notary service to your community.…and, perhaps, a dozen other hurdles. Effectively, if you exchange currencies or handle money for others, you must become a bank to be legal.Ellery Davies is a frequent contributor to Quora. He is also co-chair of Cryptocurrency Standards Association and editor at A Wild Duck.
Do non-US citizens telecommuting as contractors for US companies need to pay tax?
In most cases, if the country you live in has a tax treaty with the US, that treaty will specify that work of the nature you are doing is not subject to US tax, and you do not have to pay taxes in the US on it. This income will be treated as domestic income by your home country and will be taxed as income there. You will probably need to prForm W-8BEN (or Form W-8BEN-E, if you perform your services through a separate business entity established according to the law of your country of residence) to your client to justify your claim to preferential tax treatment on the basis of a tax treaty; if you do not, they may be required to withhold 30% of your income as tax, as that is the default exit tax for US-sourced income payable to a non-US person. Some tax treaties prfor only partial relief from the US exit tax for some sorts of income, specifying a rate less than the default 30% but more than 0%.If there is no tax treaty between your country of citizenship or residence and the United States, you are liable to the US for a tax of 30% on all of your US-sourced income. It is the obligation of the agent who transfers funds derived from US-sourced income into the control of the non-US person to withhold this tax and remit it to the United States. You do not have to file a return with the US. You are, of course, obliged to pay taxes in your home country on this income according to its law, if such income is taxable in your country.You should consult with a tax professional familiar with international tax issues for advice specific to your situation.
Can members of a sales team be a 1099 freelancer, or must they be categorized as an employee?
It is possible that people could be part of a sales team and work as a 1099 contractor.The rules are clear.Read them here: Form 1099-MISC & Independent ContractorsYou might want to search for the equivalent rules for the state where you work. Some states have slightly different criteria.Understand that the decision is objective and not up to the whim of the employer or employee. The penalties for being wrong in the cheating direction are fierce. Auditors for one agency who find a problem in how a company is paying employees will talk to other auditors in other agencies, because someone who cheats on taxes might also be cheating in other areas.
What are the rules by which a company needs to hire someone as a W2 employee vs. a 1099 contract?
I've written about this on a number of occasions, and the IRS link provides a lot of useful information, but it really boils down to something that's relatively simple conceptually:If you have the right to decide or negotiate when you work, where you work, and the conditions under which you work, you are generally not an employee.If the entity to which you prservices controls when you work, where you work, and the conditions under which you work, when you have no ability to negotiate or change those, you are generally an employee.
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