Thank you for bringing this up! I hadn't even considered the resident vs. nonresident alien distinction. Do you know if there's any advantage to being classified one way or the other? And will FreeTaxUSA automatically determine which forms I need based on my answers?

There can definitely be advantages depending on your specific situation. Generally, if most of your income was earned outside the US (which sounds like your case), being a nonresident alien means you only pay US tax on US-source income. As a resident alien, you'd be taxed on worldwide income. FreeTaxUSA will guide you through questions to determine your status and should select the appropriate forms. However, there's a special provision where nonresident aliens married to US citizens can elect to be treated as residents for tax purposes, allowing you to file jointly. This is often beneficial but depends on your specific numbers. The software should walk you through this option as well once it determines your status.

I've used both. TurboTax is more hand-holdy with foreign income but WAY more expensive when you need the premium version for international situations. FreeTaxUSA has all the same forms and capabilities but the interface is slightly less polished. Functionally they both work fine - I switched to FreeTaxUSA and saved about $70.

Thanks for this - my settlement does break down different amounts. About $21k was compensatory for financial losses and about $7k was listed as "other damages." Is there a way to deduct at least the compensatory part?

Based on your breakdown, if the $21k compensatory damages were related to financial losses from a business activity or investment property, then yes, that portion would likely be deductible in the appropriate section (Schedule C for business, Schedule E for rental property, etc.). The $7k listed as "other damages" is more ambiguous and would depend on the specific nature of those damages. If they're punitive damages, those typically aren't deductible. If they're for emotional distress without physical injury, those generally aren't deductible either. But if they relate to a business loss in some way, they might be.

Do cancelled checks count as proof or do you need more than that? I paid my settlement in 3 installments and have the cancelled checks but wondering if I need more documentation.

Do you need receipts for absolutely everything? I haven't been great about keeping track so far. Also, how do you calculate the portion of internet/phone to deduct?

Yes, you should keep receipts for everything - the IRS can ask for documentation if you're ever audited. But if you've lost some, bank/credit card statements can sometimes work as backup. For internet/phone, you need to determine what percentage is used for business. For example, if you estimate 30% of your phone use is for business communications with customers, you can deduct 30% of your phone bill. Just be honest and reasonable with your estimates. Some people keep a log for a few weeks to establish a usage pattern. Same concept applies to your home office - you calculate what percentage of your home's square footage is used exclusively for business, then deduct that percentage of rent/mortgage, utilities, etc.

Omg this tax stuff is so complicated. Im making bracelets and selling them on etsy too and i had no idea about any of this!!! How do you even make quarterly payments? And what's this 199A thing?

Do you have a template for this coversheet you could share? I'm trying to visualize what should be on it besides just a list of documents.

I don't have a specific template, but I include these sections: Personal Info (names, SSNs, address), Income Documents (list all W-2s, 1099s by source), Deduction Documentation (charitable contributions, home office, etc.), Credits (child tax credit info), Estimated Tax Payments (dates and amounts), and Questions (things I specifically want the CPA to address). I also add a section for "Changes from Last Year" that highlights anything new (like your new baby) so they immediately know what's different.

Smart! What app do you use for this? Just regular notes app or something specific for tracking expenses?

Thank you for bringing this up! I do have a separate business account for the dance studio, but I've occasionally used my personal card for studio expenses when I forgot the business card. Is that going to be a problem? Should I be reimbursing myself officially or something?

Using your personal card occasionally isn't the end of the world as long as you properly document everything. Keep all receipts and create a formal reimbursement process - even if it's just you approving it as the director. I recommend creating a simple reimbursement form that details the expense, date, purpose, and business justification. Attach the receipt and have it "approved" (by you or ideally another board member if you have any). This creates a clear paper trail showing these were legitimate business expenses, not personal ones. The key is maintaining that clear separation with proper documentation.

This! I run a small nonprofit music education program and had to file separate forms with my state's department of revenue AND secretary of state to maintain our state-level exemptions. Each state has different requirements.