I'm a GC and I can tell you there's NO WAY to legally pay zero taxes unless you're either: 1) Making so little money that you fall below taxable thresholds 2) Having business losses that offset any income 3) Lying Even if he's writing off every possible business expense, self-employment taxes ALONE would be 15.3% of net income. There's basically no way around that unless he's incorporated in a specific way, but then he'd be paying corporate taxes.

Your neighbor is almost certainly either exaggerating or breaking the law. As someone who's worked in tax compliance for years, I can tell you that the IRS has gotten very sophisticated at catching unreported income, especially in cash-heavy industries like construction. Even if he's legitimately maximizing every business deduction available - vehicle expenses, tools, materials, home office, etc. - there are still minimum tax obligations he can't avoid. Self-employment tax alone is 15.3% on net earnings, and that applies regardless of how many deductions he takes. The lifestyle you're describing (new truck, vacations, pool) while claiming zero tax liability is exactly the kind of red flag that triggers IRS scrutiny. They have algorithms that compare reported income to spending patterns, and auditors are specifically trained to spot these discrepancies. If he's really bragging about this to neighbors, he's being incredibly reckless. The IRS takes tax evasion seriously, and the penalties can be devastating - not just back taxes, but interest, fines, and potentially criminal charges. I'd stay far away from whatever "system" he thinks he's using.

Has anyone here dealt with selling a Treaty of Amity company? I'm considering buying one from another American, and wondering about tax implications of the purchase/sale transaction.

This is such a helpful thread! I'm in a similar situation - American looking to start a business in Thailand under the Treaty of Amity. Reading through all these responses, it sounds like the key takeaways are: 1) It's a Thai company with special ownership privileges, not a US company 2) Form 5471 is definitely required for CFC reporting 3) FBAR and Form 8938 likely needed for bank accounts 4) GILTI and Subpart F rules can apply 5) FEIE is still possible but gets complicated with company ownership One question I haven't seen addressed - does the type of business matter for these reporting requirements? I'm looking at starting a consulting business vs. my friend who wants to do e-commerce. Would both have the same IRS filing obligations, or do certain business types trigger additional requirements under the Treaty of Amity structure? Also, has anyone worked with a US tax professional who specializes in Treaty of Amity businesses? It seems like regular expat tax preparers might not be familiar with this specific structure.

Have you tried the "Two Earners/Multiple Jobs" worksheet that comes with the W-4 form? It's specifically designed for couples where both spouses work. It helps you figure out the additional withholding needed to cover the combined income.

You're definitely being smart to check this now! I went through something similar when my wife and I both got promotions mid-year. The key thing to remember is that the safe harbor rule can help you avoid penalties - if you pay at least 100% of last year's tax liability (or 110% if your prior year AGI was over $150k), you won't owe penalties even if you end up owing money. Since you mentioned you're around $115k combined, I'd suggest running the IRS withholding calculator first to get a baseline. Then consider whether you want to be conservative and slightly overwithhold to avoid any surprises, or try to get it exactly right. One thing that caught many people off guard this year - if either of you got sign-on bonuses or other lump sum payments with your job changes, those are often under-withheld because they're treated as supplemental income. That could be contributing to your shortfall. The good news is you caught this in April with plenty of time to adjust! Much better than discovering it in January when filing.

Has anyone actually dealt with getting the penalty reduced? I filed almost 90 days late for 2024 taxes and am looking at about $600 in penalties on a $2,500 tax bill. First time I've ever filed late.

Based on everyone's experiences here, it sounds like there are actually several penalty relief options that most people don't know about! For anyone dealing with penalties: 1. **First Time Penalty Abatement** - If you've had clean filing history for 3 years, you can get penalties completely removed for your first offense. Just call and ask specifically for this. 2. **Reasonable Cause Abatement** - If you had medical issues, natural disasters, or other circumstances beyond your control, you may qualify for penalty removal. 3. **Payment Plans** - Even if you can't get penalties removed, the IRS offers payment plans that are pretty flexible once you've actually filed. The key takeaway seems to be: **always file on time even if you can't pay**. The failure-to-file penalty (5% per month) is 10x worse than the failure-to-pay penalty (0.5% per month). And don't just accept penalties without exploring your options - sounds like many people are getting significant relief by simply asking for it or getting proper help understanding their situation.

Has anybody used TaxAct or TurboTax for nonprofit returns? I'm wondering if they handle these kinds of special situations or if I need specialized nonprofit tax software.

Just want to echo what others have said about documenting everything, even for that short initial period. I went through something similar with my nonprofit - we incorporated in late 2022 but didn't really start operations until 2023. For your situation, since you had zero revenue in 2023 and minimal expenses, the 990-N (e-Postcard) is probably your best bet for that first partial year (11/15/23-12/31/23). It's much simpler and you can file it online in about 10 minutes. The key eligibility factor is that your gross receipts were under $50K for that period, which they clearly were. Regarding penalties - yes, there can be late filing penalties ($20 per day up to $10K for small organizations), but the IRS is generally reasonable about waiving them for new organizations with legitimate reasons. When you file, include a statement explaining you were a newly formed organization waiting for 501(c)(3) determination and had no significant financial activity. I did this for our late first filing and never heard anything about penalties. One thing to keep in mind - make sure your fiscal year is properly established with the IRS. Since you're doing calendar year (Jan 1 - Dec 31), that should be straightforward, but double-check that it matches what you indicated in your 1023 application.