Interesting approach! Do you know roughly what percentage of your self-employment tax gets covered by her additional withholding? And have you ever had issues with underpayment penalties this way?

We cover about 60% of my self-employment tax through her withholding. The remaining 40% I pay through quarterly payments, but they're much smaller and more manageable this way. We've never had underpayment penalties because the combination keeps us well above the safe harbor threshold (100% of last year's tax or 90% of current year). The key was finding the right balance - we started too high with her withholding and got a huge refund the first year, so we've adjusted downward since then.

This is actually really bad advice. If she claims both kids on her W-4 and the husband continues making the same quarterly payments, they'll likely be significantly underpaying their taxes. The quarterly payments were calibrated for just his income, not their combined income minus two child credits.

Wait, so if these forms don't even exist anymore, why would my preparer mention using different forms? Now I'm really confused and wondering if I should find a new tax person. Do you have any suggestions for how to find a good tax preparer?

I'd be concerned if your preparer is actually referring to these outdated forms, as they haven't been used since 2017. They might be using simplified language to describe your tax situation, but it's a red flag if they're literally talking about filing these forms recently. For finding a good preparer, I recommend looking for an Enrolled Agent (EA) or CPA who specializes in individual taxes. Ask friends for recommendations, check Google reviews, and interview potential preparers before hiring. Ask questions like: How long have you been preparing taxes? What continuing education do you complete? How do you stay current with tax law changes? A good preparer should be able to clearly explain why your refunds differed and shouldn't mind questions.

Good point! I had something similar happen when I moved from Illinois to Indiana mid-year. The state portion made a massive difference.

Does the same apply for H&R Block software? I have a similar situation with U.S. Government Securities but I'm using H&R Block instead of TurboTax.

Yes, this applies to H&R Block software too. The process is similar - you'll need to enter the U.S. Government Securities income information at the federal level first, and then when you get to the filing stage, you should see options for which amended returns you want to file. H&R Block's interface is slightly different, but the concept is the same since all tax software starts with federal information and flows to state. Look for a filing selection page toward the end of the amendment process where you can choose to only file the state amendment.

In my experience, if you file the amended state return promptly after discovering the error, many states will waive penalties but might still charge interest from the original due date. I amended my NY state return for U.S. Government Securities income I missed, and they charged interest but waived the penalty since I voluntarily corrected it.

Do scholarships count as taxable income? My financial aid letter called everything "scholarships" but some were grants I think.

Scholarships and grants used for qualified education expenses (tuition, fees, books, required supplies) are generally tax-free. However, if you receive scholarships or grants that exceed your qualified education expenses, or if they're used for room, board, or optional expenses, then that portion becomes taxable income. Your 1098-T should break down what was paid for tuition and qualified expenses, but you'll need to determine yourself if any scholarship/grant money went toward non-qualified expenses like housing or meals. FreeTaxUSA will walk you through this calculation when you enter your education information.

I had to switch to the Lifetime Learning Credit last year after using AOTC for 4 years. The Lifetime Learning Credit is definitely not as generous - only 20% of up to $10k in expenses (max $2,000) and it's non-refundable. But it's better than nothing after your AOTC eligibility runs out.

Thank you for this suggestion! I just rechecked my 1042-S forms and you're right - they actually show different rates. For Jan-March they withheld at 30%, but April and May were already at 25% even though I thought my W8-BEN update wasn't processed until June. So I only need to claim treaty benefits for the first quarter, which simplifies things a bit.

That's great news! That will definitely make your filing easier since you only need to address a smaller portion of your dividends. Just make sure your tax software applies the correct rate to each payment based on what was actually withheld. If the software is still giving you trouble with applying different rates to different payments from the same source, you might need to enter them as separate items or look into the more specialized tax preparation options others have mentioned.

Yes, the treaty still applies based on the source of the income, not where your brokerage is located. If they're US company dividends, the US-India tax treaty rate of 25% applies regardless of whether your broker is in India or the US. However, there's an additional complication - your Indian broker might not be withholding US taxes properly. You should check if they're sending you a 1042-S form showing US tax withholding. If they aren't withholding US tax, you would need to report the full dividend amount on your 1040-NR and pay the treaty rate of 25% yourself.