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Don't forget that you might be able to deduct expenses related to winning that prize! I won a gaming tournament last year and was able to deduct my entry fee, travel to the tournament (since it was out of state), and even a portion of my gaming equipment as "cost of winning the prize." This reduced the taxable amount significantly. Just make sure you have receipts for everything and that the expenses were directly related to participating in the tournament. You enter these on Schedule A if you itemize, or possibly against the income directly on Schedule 1 (this is a bit of a gray area, so check with a tax professional).
Thanks for bringing this up! I did pay for my flight to Atlanta (about $350) plus the hotel for 3 nights (~$600) and the convention entry fee ($150). Would all of these potentially be deductible against the prize money? And where exactly would I list these on my tax forms?
Yes, those expenses would potentially be deductible against your prize money! The flight, hotel, and convention entry fee would all count as expenses directly related to winning the prize. You would list these as a reduction to the income on Schedule 1, Line 8z. For example, if your prize was $2,500 and you had $1,100 in related expenses, you would report "Gaming tournament prize income $2,500 less related expenses of $1,100 = $1,400" on that line. Make sure to keep all your receipts in case of an audit.
One thing no one has mentioned yet - depending on your state, you might owe state income tax on this too! Some states have special rules for prize/gambling winnings. I won money in a tournament in Nevada but live in California, and had to pay CA state tax on it even though Nevada has no state income tax.
Yep, and if you won it while physically in Texas but live in North Carolina, you might need to file a non-resident tax return for Texas too if they require it for prize winnings. Tax rules vary by state!
Just a heads up for parents claiming the Child Tax Credit - even with the January 23 start date, if you're claiming this credit, your refund won't be issued until mid-February at the earliest. This is due to the PATH Act which requires the IRS to hold refunds claiming certain credits until they can verify income. Same goes for the Earned Income Tax Credit. So don't panic if you file on day one and don't see your refund right away!
Does this apply even if I'm not getting a refund? I usually end up owing a small amount but still claim the Child Tax Credit for my two kids.
If you end up owing taxes rather than receiving a refund, the PATH Act verification delays won't impact you. The delay only affects refunds being issued to taxpayers claiming these credits. Since you typically owe a small amount, you can file as early as January 23rd and the PATH Act won't cause any additional delays in your return processing. Just make sure you pay any amount owed by the filing deadline (April 18th this year) to avoid penalties and interest.
Does anyone know if the Free File program will be available on January 23rd too? I used it last year and it worked great for my simple return.
Yes, IRS Free File typically opens on the same day as the tax season starts! I've been using it for years. Just be aware that some of the participating companies sometimes add their own software to the mix a few days later than the official start date.
Another possibility with 1040NR documentation requests - check if you properly documented your tax treaty benefits if you claimed any. I've seen this happen to several international students and researchers who claimed treaty benefits but didn't include Form 8833 (Treaty-Based Return Position Disclosure). The IRS notice might not specifically mention Form 8833, but if you claimed treaty benefits on your 1040NR and didn't file the supporting form, that could be what they're asking for. It's one of those things the IRS assumes you know you need to include.
Thank you for mentioning that! I did claim treaty benefits under Article 20 for my country, but I didn't submit a Form 8833 because I thought it wasn't required for standard treaty exemptions. Is that form always required even for common treaty positions?
Form 8833 has some exceptions for common treaty positions, but the rules are quite specific. For students and teachers claiming benefits under Articles like 20, you often don't need Form 8833 for the standard exemptions. However, if your situation has any unusual aspects or if you're claiming benefits that reduce your tax by more than $10,000, then Form 8833 is required. If you're unsure, it doesn't hurt to complete and send Form 8833 even if it wasn't strictly required. The IRS would rather have more documentation than less. Include a copy of your relevant treaty article and explain your position clearly to avoid further delays.
Did you include ALL your supporting documents with your original filing? I've filed 1040NR for 6 years now and I've learned you need to attach EVERYTHING: - Copies of ALL W-2s - ALL 1042-S forms - Form 8233 if you claimed exempt income - 1099s if you had any - Statement explaining treaty positions - Copy of your visa/status documentation The IRS is super picky with nonresident returns and if anything is missing, they'll hold your refund. What tax software did you use? Some don't properly tell you what attachments are needed for 1040NR.
Sprintax is the best for 1040NR btw... most regular tax software doesn't handle international situations well. I tried using TurboTax my first year and it was a disaster. Switched to Sprintax and haven't had issues since.
Something else to check - make sure your bank account info was entered correctly when you filed. My sister had a delay because she transposed two digits in her account number. The IRS tried to deposit the refund, it bounced back, and then they had to mail her a paper check which took another 3-4 weeks. Double check that your direct deposit info was entered correctly!
I just double-checked all my banking info and everything looks correct. My boss was super careful when entering everything. Is there any way to confirm with the IRS that they have the right account number on file?
Unfortunately, you can't verify the exact account details the IRS has on file through the Where's My Refund tool. The best way to confirm would be to speak with an IRS representative directly, which goes back to the challenge of reaching someone. If your return was e-filed through H&R Block, you could also contact them to verify what banking information was submitted with your return. They should have records of exactly what was sent to the IRS.
One thing nobody mentioned - if you file with EITC and a dependent, the IRS sometimes requires additional documentation. Check your mail regularly! They might have sent you a letter requesting more info to verify your eligibility. It happened to me last year and my refund was on hold until I responded.
Jamal Anderson
On the software question - I started my practice 3 years ago and tried several options. Drake is actually reasonably priced for small practices and has excellent support. But if you're really budget-conscious, look at TaxAct Pro or ATX. One thing to consider beyond just the tax software is practice management. I use Canopy for client management, document collection, and e-signatures. Having clients upload documents directly to a portal saved me so much headache compared to getting random emails with partial information. Whatever you choose, factor in training time. Each software has its quirks and learning curve. Try to decide by November so you have time to get comfortable before tax season hits.
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Mateo Martinez
β’Thanks for the software suggestions! I hadn't heard of ATX. I'm definitely worried about the learning curve - is it realistic to pick up new tax software and be proficient by February if I start learning in November?
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Jamal Anderson
β’Yes, starting in November gives you plenty of time to get comfortable with the software. Most professional tax programs have similar workflows since they're all built around IRS forms. The differences are mainly in navigation, shortcuts, and additional features. Most vendors offer free training webinars in November-December specifically for new users. Take advantage of those! I'd also recommend doing 5-10 practice returns using last year's forms - use your own return, family members, or make up some scenarios. This hands-on practice will make you much more efficient when you're facing real client deadlines.
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Mei Wong
Don't forget about insurance and licensing requirements! When I started my practice, I was so focused on software and pricing that I almost missed getting proper professional liability insurance. Check your state's requirements too - some require a PTIN and/or preparer registration at the state level. For payment processing, I tried Venmo initially and quickly abandoned it. Besides potential terms of service issues, it looks unprofessional to clients who expect a more formal payment system. QuickBooks Payments or even Square are better options that provide proper invoicing and give clients confidence.
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QuantumQuasar
β’Also, make sure you get an EFIN from the IRS if you plan to e-file for clients. The application process can take 6-8 weeks, so don't leave it until January! And definitely get E&O insurance. I had a client situation last year where it saved me from a potential $14,000 claim when I made a mistake on a complex investment calculation.
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