Has anyone actually gotten in trouble for incorrectly claiming exempt as a nonresident? My roommate did this for like 2 years on his F-1 visa and never had any issues with the IRS...

I went through a similar situation last year as a nonresident alien on an H-1B visa. You're absolutely correct that nonresident aliens cannot claim exempt status on W-4 forms, even if they would otherwise qualify under the standard exemption rules. Don't stress too much about your previous W-4 mistake - it's more common than you think! The key thing is to correct it going forward. Submit a new W-4 to your employer immediately following the special nonresident alien instructions (mark "Single," write "NRA" on the form, and don't claim exempt). If your employer didn't withhold enough tax due to the exempt status you claimed, you'll likely owe the difference when you file your return. As long as you file on time and pay what you owe, you shouldn't face serious penalties for an honest mistake like this. The IRS understands that nonresident tax rules can be confusing. I'd recommend keeping good records of when you submit your corrected W-4 and maybe even following up with your HR department to make sure they process it correctly. Some payroll systems need manual adjustments for nonresident aliens.

Make sure you're also checking if you're eligible for the Lifetime Learning Credit if the American Opportunity Credit doesn't work for your situation! It's worth looking into both to see which one benefits you more.

Hey Nia, I totally get the anxiety you're feeling - I went through something very similar last year! The good news is that you're being responsible by trying to get this right, and the IRS really isn't as scary as it seems for situations like yours. A few things that might help ease your worry: First, you can absolutely set up a payment plan with the IRS if you can't pay the full amount at once. They offer installment agreements that can be as low as $25-50 per month depending on your situation. You can even apply online through their website. Second, regarding last year's return - while it's true your dad should have reported that $3,500 in excess scholarship income, the fact that you're correcting things going forward shows good faith. If you do decide to amend last year's return (which is generally the right thing to do), you can include a statement explaining that you were unaware of the scholarship taxation rules and are voluntarily correcting the error. Also make sure you're maximizing any education credits you qualify for - the American Opportunity Credit could potentially offset a significant portion of what you owe. Don't let the anxiety paralyze you - take it one step at a time and remember that the IRS works with people who are trying to comply with tax law.

Just to add my experience - I was in the EXACT same situation during college. Had work study all 4 years and didn't file until senior year when I got a proper internship. I talked to an accountant years later who said since I was owed refunds (not that I owed any tax), there was no penalty for filing late. Apparently the IRS doesn't penalize you for filing late if THEY owe YOU money! I ended up filing the old returns and got small refunds for each year. The whole process was pretty easy. If I were you, I'd file those old returns just to get closure and the small refunds you're probably entitled to.

Don't stress too much about this! You're definitely not alone - so many college students go through this exact same confusion about work study income and filing requirements. From what you've described, you were likely not required to file for those years since your earnings were well below the filing thresholds. Work study income is treated like regular W-2 wages, so the standard filing requirements apply. However, since you had federal taxes withheld (even those small amounts of $11 and $9), you were actually entitled to get that money back as a refund! The IRS doesn't charge penalties for filing late when they owe YOU money, but there is a time limit to claim refunds - generally 3 years from the original due date. For 2021, you'd have until April 2025 to file and claim that $11 refund, and for 2022, until April 2026 for the $9. It's not a huge amount, but it's money that's rightfully yours, and filing those returns would give you peace of mind. Also, don't forget to check your state filing requirements! Some states have much lower thresholds than federal, so you might need to file state returns even if federal wasn't required. You're being very responsible by looking into this now - better late than never!

Has anyone actually been audited for claiming Section 1244 losses? I'm in a similar situation and wondering about the risk level if I go ahead with a conversion now.

I went through something very similar with a startup investment that went bad. The key issue with your situation is the timing - converting debt to equity after the company has already announced they're shutting down is going to be a huge red flag for the IRS. Section 1244 is designed for legitimate equity investments in small businesses, not for retroactive tax planning when a company fails. The IRS will look at whether you had a legitimate business reason for the conversion beyond just getting better tax treatment. Since the company has already announced closure, it's hard to argue there was any business purpose. Instead of the conversion route, you might want to look into claiming a bad debt deduction under Section 166. If you can demonstrate the loan is completely worthless (which sounds like your situation), you might be able to claim it as a short-term capital loss. While that's still subject to the $3,000 annual limitation, it's much safer from an audit perspective than trying to force a Section 1244 treatment through a last-minute conversion. I'd strongly recommend consulting with a tax professional before making any moves. The potential tax savings aren't worth the audit risk and penalties if the IRS views this as an abusive tax shelter.

Has anyone successfully used TurboTax for reporting futures trading correctly? My trades aren't that complicated and I'm wondering if I can just do it myself instead of dealing with CPAs who don't understand Form 6781.

I went through almost the exact same situation last year with my CPA getting Form 6781 completely wrong. After wasting weeks trying to get them to understand Section 1256 treatment, I finally just switched to a new tax professional who specializes in active trader taxation. The difference was night and day - the new CPA immediately recognized the issues, correctly applied the 60/40 split, and saved me over $6,000 in taxes compared to what my old CPA had calculated. Don't let your current CPA's ego cost you money - if they're not willing to admit they made a mistake on something this fundamental, find someone who actually knows futures taxation. You might also want to double-check if they made similar errors in previous years' returns. I discovered my old CPA had been incorrectly reporting my futures trades for 2 years, so I had to file amended returns to get my refunds. The clock is ticking though - you generally only have 3 years to amend and claim refunds for overpaid taxes.