That sounds stressful! Did you have to pay penalties for filing the wrong form? And did the IRS contact you about it, or did you discover the mistake yourself?

I discovered it myself after attending a tax workshop for international employees at my company. I filed an amended return (Form 1040-X) right away, which limited the penalties. I did have to pay some interest on the additional tax owed, but no major penalties since I corrected it voluntarily before the IRS caught it. The IRS did eventually send a notice, but by then I had already filed the amendment. The most painful part was that I had claimed some credits on the original Form 1040 that I wasn't eligible for as a nonresident, so I had to pay back that money plus interest. Don't make my mistake - get the form right the first time!

Sprintax is good but expensive! I found a free option through the IRS Free File program that handles 1040-NR, but you have to dig for it on their website.

That's what I suspected! I was so confused because it directly contradicted what other teachers in my district told me about their education expenses. Is there any documentation I should specifically request from the university to help with claiming education credits?

You should definitely request Form 1098-T from your university, which shows your tuition payments and is required for claiming education credits. Also keep all receipts for required books, supplies, and equipment as these can sometimes be included in qualified education expenses depending on the credit you're claiming. Make sure the 1098-T shows your payments rather than just amounts billed. Some universities only report billed amounts by default, which can cause issues with your tax filing. You may need to specifically request a 1098-T that shows actual payments made during the tax year.

You can potentially do both but NOT for the same expenses. If you claim certain expenses for the LLC, you cannot also deduct those same expenses on Schedule C. It would be considered double-dipping. However, if you have enough education expenses, you could use some for the LLC (up to the $10k limit) and then deduct additional, separate expenses on Schedule C if they're directly related to your self-employment work.

Thanks for clarifying! That makes sense - I wasn't sure if it was an either/or situation or if I could split the expenses between the two. I'll make sure to track which expenses I'm applying to each category.

This is exactly the kind of real-world experience I was hoping to learn from. Would you mind sharing what documentation the IRS specifically questioned during your audit? And did you qualify as a real estate professional or were you trying a different approach?

The documentation they zeroed in on was my activity log for proving real estate professional status. I claimed to meet the requirements but my records were inconsistent and some activities I counted weren't considered "material participation" by the auditor. I did qualify as a real estate professional based on hours, but they questioned whether I was truly spending more time on real estate than my primary job. They wanted to see detailed, contemporaneous records - not just a spreadsheet I created after the fact. They also scrutinized whether the rent I charged myself was truly market rate, asking for multiple comparable properties and professional rental assessments. One major issue was commingling of funds between personal and business accounts. They viewed this as evidence I wasn't treating the LLC as a separate entity. Make sure every expense goes through separate accounts and that you have a formal process for paying rent that looks like a true landlord-tenant relationship.

Good points. Also worth mentioning that mortgage rates for investment properties are typically higher than primary residences, often by 0.5-1%. So even if you find a lender willing to do this arrangement, you'll likely pay more for the mortgage, which could offset some of the tax savings.

This!!! I had a W-2C a couple years ago and completely overlooked my city taxes. Ended up getting a notice 6 months later for underpayment and penalties 😭

Thanks for bringing this up! Fortunately Arizona doesn't have county income taxes, just state-level. So I think I'm ok on that front but it's definitely something important for others to consider.

That's a great idea, can't believe I didn't think of that! I was so focused on trying to figure it out myself that I forgot the source could just explain it. Do you think I should also ask them if this will affect my tax return calculation?

Absolutely ask them how it affects your tax return! That's the most important part. Bring specific questions like: "Does this amount need to be reported separately on my tax return?" and "Will this increase or decrease my taxable income?" A good payroll person should be able to tell you exactly where on your tax return this information belongs, if anywhere. Some items on tax forms are just informational and don't actually affect your filing.

TurboTax has similar features but charges extra for everything. I switched to FreeTaxUSA last year and saved a ton. They have good explanations too.