Thanks for that breakdown! My friend definitely meets all those requirements. They're 28, made about $12k, have valid SSN, are a citizen, and have zero investment income. They aren't claimed as a dependent either. Do you know approximately how much EITC they might qualify for with that income level? Just trying to see if it's worth the effort for them to amend.

With an income of around $12k and no qualifying children, your friend would likely qualify for an EITC of approximately $500-600 for tax year 2024 (filing in 2025). The exact amount depends on their precise income and filing status. This is absolutely worth amending for! The amendment process isn't extremely difficult, and getting several hundred dollars back for filling out a form is a pretty good return on your time. Plus, if they qualify this year, they should make sure to claim it in future years too.

Did you file the amended return yourself or use tax software? I'm trying to figure out the easiest way to help my mom with a similar issue from last year.

Thanks for mentioning this! I definitely made under $10k for the year, so maybe I'd qualify for that credit? And you're right - I never got any forms from the company, so maybe they didn't report it. Would that make my penalties less severe?

You should definitely check if you qualify for the EITC. For 2023, a single filer with no children could qualify with income up to about $17,640, so you're well within that range. This could potentially give you a refundable credit of several hundred dollars. Regarding the unreported income, it's a double-edged sword. If they didn't report it, the IRS might not know you were supposed to file, which means they haven't been actively pursuing you for non-filing. However, you're still legally obligated to report all income regardless of whether you received a 1099. The safest approach is always to file and report everything accurately, even if it's late.

Definitely good to know. I'm in Texas so I think we don't have state income tax, but I'll double check to make sure I'm not missing anything else!

I did contact them but they said they only keep detailed records for the past 7 years, and this account was opened about 15 years ago. They gave me what they had, but it doesn't cover the initial contributions. I'm going to ask my grandparents if they kept any statements from when they first set it up.

That's actually pretty common for financial institutions to only maintain detailed records for 7-10 years. Definitely check with your grandparents for the older statements. Another approach is to work backward using your tax returns. If you've been reporting and paying taxes on the earnings each year, you might be able to reconstruct the basis by totaling all the reported earnings and subtracting that from the account value before your withdrawal. The difference would likely represent the contributions.

The COVID withdrawal provisions expired in 2020 - they wouldn't apply to a 2024 distribution. But there are other exceptions like first-time home purchase, education expenses, or unreimbursed medical expenses that might help avoid the 10% penalty (though not the tax on earnings).

Thanks for the suggestion! Have you ever run into any issues with FreeTaxUSA when filing with an ITIN instead of an SSN? I heard some tax software has problems processing ITINs correctly.

I've never had any issues using an ITIN with FreeTaxUSA. Their system is set up to handle ITINs just like SSNs during the filing process. One tip though - double-check that your name appears exactly as it does on your ITIN documentation. Even minor differences can cause processing delays with the IRS. Also, make sure you select the correct filing status for nonresidents, as the options are more limited than for residents.

That's not entirely accurate. The IRS requires nonresidents engaged in a US trade or business to file a 1040-NR regardless of the amount. There's no minimum threshold for business income like there is for passive income.

Thanks for mentioning this! I just checked my December paystub and you're right - it does show up there in a separate category called "Relo-MIDP" with the tax withholding. That's really helpful to know it should be on my W-2. Did you need to do anything special when filing your taxes, or did the tax software handle it automatically since it was part of your W-2 income?

Since it was included in Box 1 of my W-2, I didn't need to do anything special when filing. The tax software handled it automatically as regular income. The only thing I made sure to do was keep documentation from my relocation company that explained the payment, just in case I ever got audited. The one thing to double-check is that the withholding amounts match up with what was actually withheld from your MIDP payment. Sometimes companies withhold at a higher supplemental rate for these kinds of payments.

That's a good point about grossing up! My company did that for some relocation expenses but not others. It's definitely worth asking about.