Self-Employed on H-1B or OPT? Here’s What Indian Freelancers Need to Know About U.S. Taxes

Many Indian nationals on H-1B or OPT status working in the U.S. start freelancing or consulting to earn side income. What they don’t realize is that this could violate immigration laws and trigger significant tax and legal complications. Most CPAs and tax preparers fail to understand the cross-section between immigration rules and U.S. tax codes-leaving Indian freelancers exposed to IRS scrutiny and even visa issues.

At Kewal Krishan & Co, we assist Indian-origin clients in the U.S. to navigate this tricky area, ensuring tax savings and legal compliance. Our optimized tax strategies have helped self-employed Indian professionals save over $50,000, compounded into $1M+ across a decade.

IRC & Legal Basis

• IRC §1402 governs self-employment income and associated tax obligations.
• IRC §6012 mandates tax return filing for any self-employed person with net earnings of $400 or more.
• IRS Publication 519 explains the rules for non-resident aliens and resident aliens.
• IRS Form 1040 Schedule C is used to report income or loss from a business.
• IRS Form SE calculates self-employment taxes.

Note: USCIS and IRS operate separately. While the IRS allows self-employment income to be reported, doing so while on OPT or H-1B could be a violation of immigration status unless authorized.

Example

Scenario:
An Indian student on OPT earns $35,000 through freelance software development on Upwork.

• IRS Side: She must file Form 1040 with Schedule C, and pay ~15.3% self-employment tax on net income.
• Immigration Side: If the freelance activity wasn’t pre-authorized (e.g., not part of OPT/CPT employer list), this could violate USCIS rules and impact future visa renewals or green card filings.

Step-by-Step Tax Compliance for Freelancers on H-1B or OPT

1. Determine Residency Status
   • Use the Substantial Presence Test under IRC §7701(b) to check if you’re a resident or nonresident for tax purposes.
2. Track All Income
   • Maintain invoices, 1099-NEC forms, PayPal/Stripe logs, and bank records for freelance income.
3. Prepare Expense Ledger
   • Deduct eligible business expenses such as software, home office, phone bills, and internet under IRC §162.
4. File Required Tax Forms
   • Resident: File Form 1040 with Schedule C and Form SE.
   • Nonresident: File Form 1040-NR (no Schedule C allowed unless treaty benefits apply).
5. Check Tax Treaty
   • The U.S.-India tax treaty may allow some relief for nonresidents, but does not exempt self-employment income.
6. Pay Estimated Taxes
   • If you owe over $1,000 in tax, file Form 1040-ES and pay quarterly taxes to avoid penalties.

Conclusion

If you’re on an H-1B or OPT and earning income from freelancing, consulting, or side gigs, it’s essential to align both your tax and immigration compliance. The IRS expects full reporting of self-employed income, and non-compliance can lead to interest, penalties, or even visa-related consequences.

Call to Action

Anshul Goyal, CPA EA FCA is a licensed Certified Public Accountant in the United States, an IRS Enrolled Agent authorized to represent clients in tax disputes, and a cross-border tax expert assisting Indian and American clients with complex tax filings.

Speak to our CPA Anshul Goyal to evaluate your freelance income risks and plan your U.S. tax filings properly.

About Our CPA

Anshul Goyal is a U.S. CPA, EA, and FCA with a deep understanding of U.S.-India cross-border tax laws. He specializes in helping Indian nationals and U.S. founders with IRS and international tax compliance, including FBAR, PFIC, 1040-NR, 5472, and more.

Disclaimer

This blog is for informational purposes only and does not constitute legal or immigration advice. Freelancing on OPT or H-1B without authorization may violate your visa status. Always consult both a tax professional and an immigration attorney to evaluate your specific situation.

Top 5 FAQs

1. Can I do freelance work on OPT?
Only if your DSO and USCIS authorize it under your OPT terms.

2. What tax forms should I file for freelance income?
Form 1040 with Schedule C and Form SE if you are a tax resident.

3. Will the IRS inform USCIS about my freelance income?
Not directly, but discrepancies during visa renewals may raise red flags.

4. Can I claim expenses as a freelancer?
Yes, under IRC §162, for ordinary and necessary business expenses.

5. Should I create an LLC as a freelancer?
Possibly, but only if allowed under your visa status. Many on OPT cannot operate a U.S. business.