Thank you for mentioning this! I completely forgot about his IRA. He does have a small one with about $42,000 in it. I guess that means he'll need to take distributions from that too? Does that change how much he should withhold from the pension?

Yes, at 73 he definitely needs to take required minimum distributions (RMDs) from his IRA. For his age, it's roughly 4% of the balance, so that's about $1,680 for the year based on the $42,000 balance you mentioned. This additional income should factor into his total tax picture. While it's not a huge amount, it does push his total income higher. I would probably increase the pension withholding slightly to account for this - maybe closer to 15-18% rather than the 12-15% others suggested. Alternatively, he could have taxes withheld directly from the IRA distributions when they're taken, which many people find simpler.

No, that's not right. If you check that box, they won't withhold ANY taxes. That's definitely not what OP's father wants based on his situation.

You're right, I should have been clearer. Checking that box means NO withholding at all. I was thinking of a different scenario. For OP's father, he should NOT check that box, and instead complete Step 2 to indicate his filing status and Step 4c to specify any additional withholding he wants beyond the standard calculation. Most pension administrators will calculate a base withholding amount, and Step 4c lets you add more if needed. Thanks for the correction!

The IRS distinguishes between negligence (misunderstanding the law, making mistakes) and willful evasion (deliberately hiding income). From what I understand, most servers who underreport tips fall into the negligence category, especially if coworkers told them it was normal practice. Criminal charges typically only come into play with large-scale, deliberate tax evasion schemes. The IRS is much more interested in collecting the taxes owed than pursuing criminal charges against servers who come forward voluntarily to correct their returns.

Thanks so much for the clarification! That makes a lot of sense about the difference between negligence and willful evasion. My friend will be relieved to hear this explanation. I'll definitely suggest they file those amended returns sooner rather than later. Seems like being proactive about fixing the situation is way better than waiting for the IRS to discover it on their own.

I was in a similar spot last year (different job but same issue with unreported income). I handled it myself with Form 1040-X and a letter explaining my situation. It wasn't that complicated tbh, and I probably saved like $2000 by not hiring a professional. As long as you're willing to gather your income info and fill out some forms, you can probably DIY this.

Thanks for sharing your experience! That's really helpful to know. I'll probably try to handle it myself first and save the money. Did you use any specific tax software to help with the amended returns or just fill out the forms directly?

That's interesting about building the fees into the investment structure! Do you know if that approach creates any issues with PFIC reporting specifically? And would that potentially simplify the 8621 forms at all?

It actually can simplify PFIC reporting slightly because those built-in fees reduce the fund's performance directly, meaning any income or gains you report on Form 8621 already have those fees factored in. You're effectively reporting net returns after fees. This wouldn't reduce the number of 8621 forms you need to file (still one per PFIC), but it eliminates the separate tracking of management fees. Just be aware that this approach typically works better for new investments rather than existing ones, as transitioning might trigger taxable events.

This is actually super smart advice. I looked into it after similar PFIC headaches and found that many major US brokerages offer international exposure through US-based ETFs specifically to avoid these PFIC filing requirements. You get basically the same investment exposure without the tax form nightmare.

Exactly! It's what tax professionals call "tax-efficient investing." My mistake was buying the foreign funds directly instead of through US-based vehicles. My new approach gives me nearly identical investment exposure (sometimes the exact same underlying assets) but with dramatically simplified tax reporting. For anyone dealing with this PFIC headache, seriously consider restructuring your international investments for next year.

12 That's absolutely incorrect. The January 31st deadline is a hard deadline set by the IRS, not a "soft" one. Employers are required by law to provide W-2s to employees by January 31st, and they must also file copies with the Social Security Administration by this date. The February 15th date your employer mentioned might be getting confused with another tax deadline - that's when the IRS suggests you should follow up if you haven't received your W-2 yet. It's not an extended deadline for employers to issue W-2s. Your employer is providing misinformation. They are already late and potentially subject to penalties. I would recommend politely correcting them by referring to the official IRS guidelines and asking when you can expect to receive your W-2.

5 Thanks for confirming it's BS! I figured as much but wanted to make sure. I'll forward them the IRS guidelines and see if that helps speed things up. My boss likes to make up his own rules so I'm not surprised.

3 Does using Form 4852 trigger any kind of audit or extra scrutiny from the IRS? I'm worried about raising red flags.

Exactly! My friend who runs a restaurant got convinced by one of these "specialists" to claim ERC based on dining capacity restrictions, which was legitimate. But then they pushed him to claim additional quarters when only OSHA guidance was in effect. Now he's worried about what will happen and the ERC company is nowhere to be found. They already took their 20% fee!