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I've found that the accuracy of WMR also depends on how you filed. E-filed returns with direct deposit are the most accurate with WMR updates. Paper filed or mailed returns can be super unreliable on the tool. My parents mail their returns every year (they're old school) and WMR barely works for them, but for me with e-file it's spot on.
Does WMR work differently for amended returns? I filed an amendment about 5 weeks ago and it's still not showing up anywhere.
Amended returns are completely different! For those, you need to use the "Where's My Amended Return" tool instead of the regular WMR. It's a separate system entirely. Amended returns also take much longer to process - the IRS says to allow up to 16 weeks (although in recent years it's been taking even longer for many people). The tracking for amendments is also much less detailed than regular returns. You'll typically just see "received," "adjusted," or "completed" without the specific deposit information that the regular WMR provides.
Hey guys major PSA about WMR - if you check it too many times in one day, it will lock you out temporarily! Learned this the hard way when I was obsessively checking every hour lol. Had to wait 24 hours to get back in. So don't be like me š¤£
OMG this happened to me too!! So frustrating. Does anyone know how many times is "too many" before it locks you out?
One thing no one mentioned yet is that the tax brackets changed slightly from last year to this year due to inflation adjustments. So not only did your income go up (putting you in a higher bracket), but the brackets themselves shifted a bit. When combined with withholding that wasn't properly calculated for your new income, that's why you're seeing this difference.
Is there a simple way to check if your withholding is correct? I just started a new job and don't want to be surprised next April.
The IRS has a Tax Withholding Estimator tool on their website that's pretty straightforward to use. You input your income, filing status, and other tax situations, and it calculates whether your current withholding is appropriate or if you need to adjust your W-4. I'd recommend running this calculator midway through the year to make sure you're on track. It's especially important if you have multiple jobs, a working spouse, or any significant changes in your financial situation during the year.
This whole system is such a scam. The government knows exactly how much we owe, but they make us figure it out ourselves and then penalize us if we get it wrong. Meanwhile, rich people pay nothing with their fancy accountants finding loopholes. Last year I owed $600 after getting refunds for years and nearly had a heart attack.
It does seem unnecessarily complicated, but there are some free resources that can help. I've been using the free filing options through the IRS website for years and haven't had any issues. They partner with several tax software companies that offer free filing if your income is below a certain threshold.
Another strategy you might consider is timing your deductions. You could potentially still take the deductions but spread them out differently. Maybe take fewer deductions in the year before applying for your mortgage, then take more the following year to balance things out. That way you show higher income for the mortgage qualification but don't completely give up the tax benefits long-term.
Does this actually work with mortgage lenders though? Don't they usually look at 2 years of tax returns? I wonder if they'd notice the pattern and question it.
It can work depending on the lender and your specific situation. You're right that they typically look at 2 years, but many put more emphasis on the most recent year, especially if your income is trending upward. The key is to be strategic and consistent. Don't make it look like you're manipulating numbers - instead, make legitimate business decisions about when to make major purchases or when to defer income. For example, delaying some business purchases until after you close on the home is completely legitimate. Lenders understand that self-employed income fluctuates naturally.
Don't forget about self-employment taxes! If you choose not to take deductions, you'll pay more in income tax AND self-employment tax. For every $1000 in additional profit you show, you'll pay an extra $153 in SE tax (15.3%) plus whatever your income tax rate is. For most people that's at least another $120-220 per $1000 depending on your tax bracket. It adds up fast!
This is a really good point. When I did this last year, I was surprised how much extra I ended up paying because I forgot about the self-employment tax part. Definitely do the math carefully!
Just to add another perspective here - I'm a tax preparer who works with a lot of international clients. For your 1040NR IRA recharacterization situation, here's what you need to know: 1. For Form 8606: You'll need to report the recharacterized amount on Part I if you're making nondeductible contributions. Line 1 would include your $938.75 recharacterized amount. 2. For Form 8880 (Saver's Credit): As a 1040NR filer, you may qualify for this if you're not a student and not claimed as a dependent. The credit is based on your income level. 3. For future backdoor Roth: You'll want to do the conversion in a tax year when your income is lower if possible, since you'll pay taxes on the conversion amount. Also, be aware of the pro-rata rule if you have other pre-tax IRA funds. The timing question - I usually recommend clients wait until the new tax year to do a conversion after a recharacterization, just to keep everything clean and separate for reporting purposes.
For the pro-rata rule, does that apply to nonresident aliens the same way? I've heard conflicting things about how 1040NR filers have to calculate this.
Yes, the pro-rata rule applies to nonresident aliens filing 1040NR the same way it does to resident taxpayers. When you convert any portion of a traditional IRA to a Roth IRA, you must consider all your IRA balances collectively (including SEP and SIMPLE IRAs). The calculation is the same: you determine what percentage of your total IRA balance consists of non-deductible contributions, and that same percentage of your conversion will be tax-free. The rest is taxable income in the year of conversion. This is all reported on Form 8606, and the rules don't differ based on residency status.
Has anyone actually completed a recharacterization and then backdoor Roth on a 1040NR? I'm in the exact same situation (came to US late in the year, overcontributed to Roth) and I'm trying to figure out if I should just take the excess contribution penalty instead of going through all this hassle with forms.
I did this last year on my 1040NR. The recharacterization part wasn't too bad - my custodian handled most of it. For the tax forms, I reported the nondeductible contribution on Form 8606. Then about 2 months later, I converted it back to Roth. The following year I had to report the conversion on my tax return. The 6% excess contribution penalty would have been more expensive in my case. Plus, doing the recharacterization followed by conversion taught me how the system works for future years.
Isaiah Thompson
One thing nobody's mentioned is that when your parents formed the LLC, did they elect S-Corporation taxation? Many small business owners switch from Schedule C filing to S-Corp status (which requires forming an entity like an LLC first) to save on self-employment taxes. If they did this, the big difference you're seeing might be because with an S-Corp, your parents should be paying themselves a "reasonable salary" which is subject to payroll taxes, with the remaining profit distributed as "distributions" that aren't subject to self-employment tax. This completely changes how income and expenses flow through to the tax return. Ask your parents if they're filing Form 1120-S rather than Schedule C now. That would explain the major differences you're seeing.
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Santiago Martinez
ā¢Thank you for this explanation! I just checked and it looks like they ARE filing something called an 1120-S now instead of the Schedule C. So does this mean we're actually making the same amount of money but it just looks different on paper? Could this hurt my chances for need-based scholarships?
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Isaiah Thompson
ā¢Yes, that's exactly what's happening! With an S-Corporation (Form 1120-S), the income gets reported differently even if the actual money coming in is the same. The business income flows through to your parents' personal return on Schedule E rather than Schedule C. This could definitely impact your need-based scholarships because the FAFSA and many scholarship programs look at adjusted gross income. With an S-Corp structure, sometimes more of the business income flows to the personal return because expenses get handled differently. Your parents should talk to their tax preparer about optimizing their S-Corp approach for both tax savings and financial aid purposes. There are legitimate strategies to properly categorize business expenses on the 1120-S that might help reduce the reported income while still following tax laws correctly.
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Ruby Garcia
Just to add something nobody mentioned - when your parents switched to an LLC and possibly S-Corp taxation, did they start taking inventory into account differently? This could explain the weird cost of goods sold numbers. With a Schedule C, some small business owners are more casual about inventory tracking. But with an LLC, especially if they've switched to accrual accounting, the timing of when inventory is purchased versus when it's sold can cause huge swings in reported income from year to year.
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Alexander Evans
ā¢This is actually a really good point. When I switched my restaurant to an LLC, we had to change how we tracked inventory and it made our first year look WAY more profitable than it actually was because of timing differences. It evened out the next year.
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