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I'm surprised nobody mentioned this but if you file late without an extension, you're looking at penalties if you owe money. Like 5% of unpaid taxes for every month you're late, up to 25%. If you're getting a refund there's no penalty for filing late BUT you only have 3 years to claim your refund.
For the future, I learned my lesson and now I take pics of all my important tax docs with my phone as soon as I get them. Store them in a secure folder and you'll never lose them again, even if you move or misplace the paper copies.
This is good advice! There are also secure document apps specifically for this purpose that encrypt your tax documents. I started using one after having a similar issue a few years back.
This is why I always do my own taxes using software. Tax preparers at those cheap places often have minimal training and make mistakes like this. For a simple return (sounds like you just have a W-2?), you can use free filing options through the IRS website. Did the preparer ever explain WHY they thought you needed an EIN? There are very specific circumstances where an individual might need one (like if you're setting up a solo 401k), but for a typical college student with a part-time job, there's absolutely no reason.
They never really explained it clearly. When I called back to ask questions, they just quickly said they'd cancel everything and deactivated my account. That's what made me most suspicious - like they knew they got caught doing something they shouldn't have been doing. I think I'm definitely going to do my own taxes from now on. I only went to them because a friend recommended them, but now I'm wondering if my friend actually had a good experience or if they might have had something similar happen without realizing it.
Something similar happened to my son last year. The tax place was trying to classify him as an "independent contractor" when he was clearly just a regular employee with a W-2. They said getting an EIN would help him "write off expenses" and get a bigger refund. Turned out they were planning to file a Schedule C with fake business expenses. The IRS ended up auditing him and it was a huge mess to clean up. He had to pay back the incorrect refund plus penalties. Definitely contact the IRS right away and maybe even consider filing a report with the FTC for tax preparer fraud.
Did you check if they applied some of your refund to a past debt? This happened to me last year - my expected refund was $4,200 but I only got $2,700 because they took part of it to cover an old student loan debt I didn't even realize was in default. The notice had some code about "offset" in it. Might be worth checking if that's what happened?
I don't think that's what happened in my case. The notice specifically mentions adjustments to the child tax credit and earned income credit calculations, not an offset for previous debt. But thanks for mentioning this - I didn't know they could take your refund for other debts without telling you first! That's pretty scary.
They definitely can and do take refunds for various debts - federal student loans, back taxes, child support, etc. It's called a "Treasury Offset" and they're supposed to send you a notice before doing it, but those notices sometimes arrive after they've already taken the money. If you think this might be happening, you can call the Treasury Offset Program at 800-304-3107 to check if you have any debts in the system.
Double check that no one else claimed your kids on their taxes. My ex and I had an agreement about who would claim which kid each year, but one year he claimed both without telling me. When I filed my taxes claiming one child (as was our agreement), the IRS adjusted my return and reduced my refund significantly. Had to go through a whole dispute process to fix it.
This is actually super common. If two people claim the same dependent, the IRS will generally give the benefit to whoever filed first while the second person gets an adjustment. Then you have to provide documentation showing you're the rightful person to claim the dependent. It's a huge hassle.
A quick tip from someone who's dealt with this before: If you're filing an amended return to change from 1040 to 1040-NR, make sure to include a clear statement explaining the reason for amendment. Something like "Amended to correct filing status from resident alien (1040) to nonresident alien (1040-NR) based on failure to meet Substantial Presence test due to F1 visa exempt status." Also be aware that you might have different deduction eligibility as a nonresident alien - standard deductions work differently on 1040-NR, and certain credits may not be available. Your tax liability could change significantly.
Would this also apply if changing from 1040-NR to 1040? I think I might have filed the wrong way (opposite problem from OP). Is there a time limit for fixing this?
Yes, the same general process applies when amending from 1040-NR to 1040, but the tax implications might be more favorable since resident aliens generally have access to more deductions and credits than nonresident aliens. Regarding time limits, you typically have 3 years from the original filing deadline to file an amended return. So for a 2022 tax return originally due in April 2023, you'd have until April 2026 to amend it. However, if there's a significant refund involved, I wouldn't wait - the sooner you correct it, the sooner you'll receive any refund you're entitled to.
A heads up on the treaty benefits too - if your home country has a tax treaty with the US, you might be eligible for certain benefits as a nonresident that could reduce your tax liability. These are claimed on Form 8833 with your 1040-NR. I almost missed out on thousands in tax savings because I wasn't aware of the treaty provisions between my country and the US. Might be worth looking into depending on your citizenship!
This is so important! What countries typically have the best tax treaties with the US? I'm from Brazil and wondering if I should be looking into this.
Liam Brown
One thing nobody's mentioned yet - you should be tracking all utilities if you're not already. If you have separate meters for the rental unit, those utilities are 100% deductible. If you share utilities, you can deduct the rental percentage. Also, don't forget about deducting a portion of your property insurance and property taxes! And if you ever do yard work or maintenance on common areas, keep track of those expenses or even your own time if you're charging for landlord services.
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Arjun Kurti
ā¢Thanks for mentioning utilities! I forgot to include that in my original post. We actually have separate electric meters but shared water. Do I need some kind of formal calculation for the water usage or can I just use the square footage percentage? And can I deduct anything for my time spent doing repairs or only the actual materials?
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Liam Brown
ā¢For the shared water bill, using the square footage percentage is perfectly acceptable and is the most common method. Just be consistent with how you calculate it year to year. For your time spent doing repairs, unfortunately you cannot deduct the value of your own labor when you do repairs yourself - only the cost of materials. However, if you have a formal property management business and charge for your services, that's different. But for most individual landlords who make their own repairs, only the materials are deductible, not your time.
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Olivia Garcia
Random but important question - are you deducting depreciation on your rental portion? My accountant told me I HAD to take depreciation on the rental portion of my property even if I didn't want to. Something about recapture taxes later?
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Noah Lee
ā¢Your accountant is correct! You must take depreciation on the rental portion of your property - even if you don't claim it, the IRS will assume you did when you sell the property and you'll face "depreciation recapture" tax. Basically, you depreciate the rental portion of your property (excluding land value) over 27.5 years. So if 40% of your house is a rental and your house value (excluding land) is $200,000, you'd depreciate $80,000 over 27.5 years, meaning about $2,909 in depreciation deduction each year.
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