Have you considered just paying a CPA to handle this for you? With the complexity you're describing (especially with the accounting method change), it might be worth the money. My tax situation got similarly complicated last year and I bit the bullet and hired someone. Cost me about $800 but saved me thousands in deductions I would have missed and countless hours of stress.

One thing nobody's mentioned yet - if you file for an extension and pay what you think you'll owe, you'll avoid the late filing penalty (which is much higher than the late payment penalty). The late filing penalty is 5% of unpaid taxes for each month your return is late, while the late payment penalty is just 0.5% per month.

I'm going through the exact same thing right now! Second year in a row of ID verification and it's been driving me crazy wondering if this is just my life now. Reading through all these responses has been so reassuring though - sounds like most people eventually get out of this cycle. What really stands out to me is how many different factors can trigger this. I've been racking my brain trying to figure out what changed in my situation, but now I'm realizing it could be anything from my zip code to the specific combination of credits I claim. The proactive ID.me verification tip from @Chloe Anderson sounds brilliant - I'm definitely going to set that up before I file next year. And @Omar Zaki's strategy about calling to get a verification history note added is something I never would have thought of but makes total sense. It's frustrating that the IRS is so opaque about their selection process, but at least knowing that other people have made it through gives me hope. Thanks everyone for sharing your experiences - this thread has been more helpful than anything I could find on the official IRS website!

This thread has been incredibly enlightening! I'm currently dealing with my first ID verification requirement and was terrified this would become a permanent thing. Reading everyone's experiences - especially @Omar Zaki's success story and @Chloe Anderson's proactive ID.me strategy - gives me so much hope. What strikes me most is how the IRS system seems to create these feedback loops that trap legitimate taxpayers, but there ARE ways to break out of the cycle. The combination of proactive verification through ID.me, keeping detailed records, and potentially calling to add verification history notes to your account sounds like a solid game plan. I'm definitely going to set up my ID.me account before filing next year and document everything about this current verification process. It's frustrating that we have to become tax strategy experts just to file our returns, but at least now I feel armed with actual actionable steps instead of just hoping for the best. Thanks to everyone who shared their experiences - this community knowledge is worth its weight in gold when dealing with these opaque IRS processes! 🙏

Has anyone actually gone through the process of amending a return for this specific issue? I'm in a similar situation but wondering if the hassle of amending is worth it. How long did it take to get your refund for the overpaid NIIT?

I went through this exact same situation a couple years ago! My tax preparer had been classifying my S-Corp income as passive for THREE years before I caught it. Like you, I'm the sole owner-employee doing all the work - there was nothing passive about it. The material participation tests that Connor mentioned are key here. Since you're the only employee, you almost certainly qualify under multiple tests, especially the "substantially all the work" test (#2) and likely the 500+ hours test (#1) as well. I ended up filing amended returns for all three years I was eligible to amend (you have 3 years from the original filing date). The total NIIT refund was substantial - over $12,000 combined. Each amended return took about 4-5 months to process, but it was absolutely worth it. One tip: when you meet with your EA about this, bring documentation showing your hours worked and level of involvement in the business. Even though it should be obvious that you materially participate, having records helps support the classification change. Also, make sure they understand this affects both your Schedule E AND your Form 8960 calculation. Don't let them brush this off as "not important" - the NIIT savings alone make it worth correcting, and you want to make sure it's done right going forward.

This happened to a relative of mine in 2023. The IRS actually has a specific procedure for this. If you google "IRS erroneous refund procedures" you'll find their official guidance. Main thing is documenting everything and not spending the money. Is there any chance someone could have filed a tax return using your personal info? Might be worth checking your credit report just to make sure there's no other funny business going on. Identity theft with tax refunds has been increasing lately.

Actually, it's totally possible for someone to use your bank account info with a different SSN - this is more common than you'd think. Tax scammers sometimes get banking information through data breaches or phishing schemes, then file fraudulent returns using stolen SSNs but legitimate bank accounts for the refunds. The fact that there are two separate deposits ($7,250 and $1,750) makes me think this could be two different fraudulent returns rather than just a simple IRS mistake. Most legitimate refunds would come as one deposit, not split amounts like this. When you call the IRS, make sure to ask them specifically if any returns have been filed using your banking information but different SSNs. They can check this and will be able to tell you if this is fraud-related rather than just an administrative error. If it is fraud, they'll need to flag your account and potentially investigate how your banking information was compromised. Also consider changing your bank account numbers just to be safe. Better to deal with the hassle of updating your direct deposit info than risk this happening again.

8 Just want to mention that if you're from a country that has a tax treaty with the US, that can sometimes override the substantial presence test. I'm from India, and even though I qualified as a resident alien under the usual rules, certain income was treated differently because of the treaty. Check out IRS Publication 901 (Tax Treaties) to see if your home country has a treaty that might affect your situation. It could potentially save you a lot in taxes!

4 One thing nobody mentioned yet - if you're a resident alien, you might need to file an FBAR (FinCEN Form 114) if you have foreign bank accounts that exceed $10,000 combined at any point during the year. Non-resident aliens don't have this requirement. This is separate from your tax return and has serious penalties if you're required to file but don't. The deadline is April 15 but it automatically extends to October 15.