Thanks for explaining this! I'm confused about the "incremental cost" part though. How exactly is that calculated? Does the IRS provide specific comparisons somewhere of EV vs gas vehicle costs?

The incremental cost calculation is indeed one of the more confusing aspects. The IRS hasn't provided an official database of comparisons, which leaves it somewhat open to interpretation. Generally, you'd need to identify a comparable gas-powered vehicle with similar features and capacity, then calculate the price difference. For many passenger vehicles and light trucks, the 30% calculation usually results in an amount exceeding $7,500, so you'll often just get the maximum $7,500 credit. The incremental cost calculation becomes more relevant for specialty commercial vehicles where the EV premium might be less pronounced or for vehicles over 14,000 lbs where the higher credit limit applies.

Did you have to make any modifications to the truck to qualify it as a business vehicle? I've heard some people say you need commercial insurance or special registration for it to count.

I haven't considered electing to be treated as a corporation - could you explain a bit more about when that might be advantageous for investment activities? Would the corporate tax rates be better than the withholding rates in some cases? And would I still need to file Form 5472 if I made that election?

Making an election to be treated as a corporation (Form 8832) can sometimes be advantageous because U.S. corporate tax rates might be lower than the withholding rates applied to foreign persons, especially for certain investment types. For example, while dividends are typically subject to 30% withholding (or lower with tax treaties), the corporate income tax rate is 21%. Yes, you would still need to file Form 5472 if you made the election, as it applies to 25% foreign-owned U.S. corporations. However, instead of filing a pro-forma 1120, you'd file a regular Form 1120 as an actual tax return. Another benefit is that a corporation can potentially claim deductions against income that might not be available to a foreign person receiving passive income. The downside is increased compliance requirements and potential for double taxation if you eventually distribute earnings to yourself. The optimal structure really depends on your specific situation, investment amounts, and how your country's tax treaty interacts with U.S. tax law.

I've had an account with Interactive Brokers for my foreign-owned Delaware LLC for about 3 years now. They're definitely more accommodating to international structures than many other brokerages. The documentation requirements were still extensive, but their system is set up to handle foreign ownership situations. They also have good systems for handling tax withholding based on tax treaty status.

Oh no, I might have missed the deadline for 2020 then! Does the IRS ever make exceptions for people who didn't know about the 3-year rule? And just to clarify, even if I can't get a refund for the older years, I should still file those returns anyway, right?

Unfortunately, the IRS is very strict about the 3-year refund statute and doesn't make exceptions even if you didn't know about the rule. It's set by law, not IRS policy, so they can't bend it. Yes, you should still file all unfiled returns even if you can't get the refund anymore. This closes your file with the IRS and prevents future issues. While you won't get money back for those older years, filing completes your tax record and can help with things like loan applications, government benefits, or any situation where tax return information is needed. Better to have everything clean and complete than leave those old years hanging.

Free File Fillable Forms only work for the current tax year (so right now, only 2024). For prior years, you need to download the specific forms for those tax years from the IRS website and mail them in. I did this last year for my 2021 and 2022 returns. You can still use free tax software though! Most of the major companies (TurboTax, H&R Block, TaxSlayer) offer access to prior year returns on their websites. The catch is that you can prepare them for free, but they usually charge to file them. Since you have to mail prior year returns anyway, you can just print them out and mail them yourself without paying.

Thanks for breaking that down! My state tax is about 6% and I do have a 5% 401k contribution that's automatic on all my income. When you add it all up, I guess it does get close to that 43%. Do you know if there's any way to adjust withholding specifically for bonuses? Or am I just stuck with this high withholding rate?

Unfortunately, you generally can't adjust withholding specifically for bonuses. The IRS rules for supplemental wages are pretty rigid - employers must withhold at either the flat 22% rate or use the aggregate method. Your best option is to adjust your W-4 withholding on your regular paychecks to compensate if you're consistently getting large bonuses. But be careful not to underwithhold too much or you could face penalties. The IRS withholding calculator can help you find the right balance.

Smart move! Does this work if your company has a separate bonus check? Mine always issues bonuses as a completely separate payment from regular payroll.

What's a good ratio of salary to distributions that won't trigger IRS concerns? I've heard different things from different sources.

There's no fixed percentage that's universally "safe" as the IRS looks at what's reasonable for your industry, experience, and business circumstances. A common approach is researching what comparable positions in your industry would pay and documenting that research. For many service businesses, I've seen recommendations ranging from 50-70% of profits as salary being reasonable, but it varies widely. Healthcare professionals often need higher salary percentages while capital-intensive businesses might justify lower percentages. The key is having solid documentation for whatever number you choose.

This! So many people don't understand marginal tax rates and make decisions based on completely wrong assumptions. OP needs to look at effective tax rate across all income, not just the highest bracket they hit.