F-1 student FICA exemption and LLC self-employment

F-1 students who are nonresident aliens for tax purposes (generally during their first 5 calendar years in the U.S.) are exempt from FICA taxes (Social Security and Medicare) on wages earned from employment. This is why your W-2 employer correctly does not withhold FICA. This exemption applies to services performed by nonresident alien students under the terms of their student visa.

Self-employment tax and FICA tax fund the same programs (Social Security and Medicare) but are governed by different provisions of the tax code. FICA applies to wages paid by an employer, while self-employment tax applies to net earnings from self-employment. The exemption for F-1 students in Section 3121(b)(19) of the Internal Revenue Code specifically addresses services performed in the employ of a school, college, or university. Self-employment income from an LLC is treated under a separate framework.

Generally, nonresident aliens are not subject to U.S. self-employment tax unless a totalization agreement (social security agreement) between the U.S. and their home country applies. If you are from a country without a totalization agreement with the U.S., you are typically not required to pay self-employment tax on your LLC income while you are a nonresident alien. However, if you are from a country with a totalization agreement, the agreement's terms determine which country's social security system covers you.

Once you exceed five calendar years in the U.S. on F-1 status, you lose your exempt individual status and your days begin counting toward the substantial presence test. If you become a resident alien, you are generally subject to self-employment tax on LLC income, just like U.S. citizens. The transition from nonresident to resident status significantly changes your self-employment tax obligations.

As a nonresident alien F-1 student, file Form 1040-NR to report your LLC income. Include Schedule C for the business income and expenses. File Form 8843 to document your exempt individual status. If you are not subject to self-employment tax, you do not need to file Schedule SE. Keep thorough records of your days in the U.S. and your visa status history to support your nonresident alien classification.