Omg I didn't even think about that! I don't know much about tax credits tbh. Is there an income limit for the Earned Income Credit? And do I need any special documentation to claim it beyond what I'd need for claiming my nephew as a dependent?

Yes there's an income limit but at $42k with a qualifying dependent you should be under the threshold. For 2025 filing season the limit is around $46,000 for Head of Household with one qualifying dependent. You don't need any additional documentation beyond what you'd already gather for claiming your nephew as a dependent. The same proof that he lives with you and that you provide more than half his support works for both. Just make sure when you file your amended return you complete Schedule EIC along with your 1040-X. The credit could be worth anywhere from $1,500-$3,500 depending on your exact income and situation.

This is great advice! And another thing - amended returns can't be e-filed. You have to print and mail them, which means they take forever to process (like 4+ months minimum). Just be prepared for a wait.

Thank you so much for this clear explanation! So I should download the current form labeled "2024" to report my 2023 non-deductible contributions, correct? And then do I just mail it in by itself, or do I need to include anything else with it?

Yes, you should use the current form labeled "2024" for your 2023 non-deductible contributions. You can mail just the completed Form 8606 by itself to the same IRS address where you'd normally send your tax return. No need to include a 1040 or other paperwork since this is a standalone form for your non-deductible IRA contributions. Just make sure to sign and date it, and keep a copy for your records. The IRS may assess a small penalty for filing it late, but it's much better to file late than not at all.

I had to file 3 years worth last year. I sent them all in separate envelopes to make sure they wouldn't get confused or lost together. Each year needs the correct form (so 2022 form for 2021 contributions, 2023 form for 2022 contributions, etc). I also wrote the tax year very clearly at the top of each form to avoid confusion.

Does the FBAR thing apply if I don't have my name on any foreign accounts but I'm still sending/receiving money to family abroad? My parents in the Philippines use their local account but sometimes send me money from it.

FBAR filing requirements typically apply when you have a financial interest in or signature authority over foreign financial accounts that exceed $10,000 in aggregate at any time during the calendar year. If the account is solely in your parents' names and you don't have signature authority, you generally wouldn't need to file an FBAR just for receiving transfers from their account. However, you still need to report any income you receive from abroad on your tax return, regardless of FBAR requirements. The nature of the transfers matters - if they're genuine gifts from your parents, different rules apply than if they're income or business distributions.

Absolutely this! I had a similar setup with my uncle's business in Brazil and it turned into a nightmare during an audit because we had nothing in writing. The IRS ended up treating all the money I sent as gifts (which hit gift tax limits) and all returns as pure income. Documenting everything properly from the start would have saved me thousands.

Thank you all for the amazing advice! I definitely need to formalize the arrangement with my grandfather. I hadn't considered that without proper documentation, the IRS might interpret our arrangement differently than intended. I'll work on creating a written agreement that clearly specifies my contribution is an investment and outlines the expected returns. I've started tracking all transfers in a detailed spreadsheet as suggested. Would it be better to classify this as a loan with interest rather than an equity investment to simplify the tax treatment? I'm wondering which approach would be cleaner from a reporting perspective.

This is really good advice. Different payroll systems handle the transition differently. I work in HR (not a tax expert though) and we've had tons of questions about this exact issue. Some systems use a "behind the scenes" conversion while others actually require you to fill out both the old and new formats.

Exactly! It's even more complicated because some of these systems were updated in phases. For my company, employees hired before 2023 still see the allowances language while newer employees get a different interface entirely. The most important thing is to make sure your actual withholding amounts align with your tax situation, regardless of how the form presents it. When in doubt, the payroll or HR department can usually provide a withholding calculator or estimate specific to their system.

Try using the IRS Tax Withholding Estimator (it's free on the IRS website). It's way more accurate than just guessing with allowances. You can adjust throughout the year too if your situation changes.

Thanks for the practical breakdown! Do you have any payroll services you'd recommend specifically? And how did you decide what salary to set for yourself?

I use Gusto for payroll and have been happy with it. Very user-friendly and they handle all the filings automatically. OnPay and Square Payroll are also good options that several of my contractor friends use. All run about $45-60/month depending on features. For salary, I researched construction project managers in my area on sites like Glassdoor and Indeed. The range was $90k-140k, so I settled on $120k as my reasonable salary. I also documented this research and keep it with my tax records in case of questions. My accountant suggested keeping the salary above 40% of business profit as a general rule to avoid red flags, but that varies by industry.

Yikes! I didn't know about state franchise taxes. Does anyone know what the requirements are in Texas?

Texas doesn't have state income tax but does have a franchise tax (also called margin tax). However, there's a threshold - businesses with less than $1.23 million in annual revenue are exempt. So for most small S-corps in Texas, you wouldn't owe this tax.