Can you walk me through exactly where in FreeTaxUSA I should be entering this? I keep getting stuck at the part where it asks if I want to file Schedule C. Should I be saying no to that?

You should definitely say NO to filing Schedule C since you're not claiming to be self-employed. In FreeTaxUSA, go to the Income section, then select "Wages paid by an employer who did not withhold Social Security and Medicare taxes" (not the 1099-NEC section). When you get to the screen asking for details, enter your income amount from the 1099-NEC, select reason code G, and enter the employer information exactly as it appears on your 1099. The software will calculate only the employee portion of FICA taxes rather than self-employment tax.

H&R block was terrible when I tried to file with Form 8919 last year. They kept adding the income back as self employment even after I removed it. Ended up having to paper file.

Couldn't those incentives be handled through direct spending programs instead of tax code complexity tho? Why mix revenue collection with social policy?

That's a valid point in theory. Direct spending programs could replace tax incentives, but there are practical challenges. Our political system has historically found it easier to create tax incentives than to approve new spending programs. Tax benefits are less visible and often face less opposition. The other issue is implementation. The IRS already has mechanisms to verify income, process claims, and issue refunds. Creating new agencies or programs to handle what the tax code currently does would require significant infrastructure. Just look at how complicated some benefit programs are to administer compared to tax credits.

This is such an important point that gets overlooked! A true flat tax would need to treat all income the same regardless of source. Otherwise it's just shifting more burden to wage earners.

Thanks for this! The corporation is definitely a DFIC in our case. The problem I'm having is that the client acquired the SFC in 2016, so we do have that year's info, but I wasn't sure if we needed to somehow account for pre-acquisition E&P for the Section 965 calculation or if we could just start with the E&P as of the acquisition date.

You should use the acquisition date as your starting point. The Section 965 inclusion applies to the shareholder's pro rata share of accumulated post-1986 E&P, but only for the period during which the foreign corporation was an SFC with respect to your specific U.S. shareholder. Pre-acquisition E&P wouldn't be included because your client didn't have a pro rata share of that E&P (they weren't a U.S. shareholder of the SFC during that time). Start with the E&P as of acquisition and then track forward to the measurement dates.

Generally, no. FTCs related to Section 965 inclusions should only be available for the taxes paid during the period your client was a US shareholder. The same principle applies - if they weren't a shareholder when the taxes were paid, they can't claim the credits associated with that pre-acquisition period.

That's absolutely wrong information. The IRS has been massively increasing their enforcement staff and technology. They're specifically targeting incorrect filing status claims because they're easy to detect with automated systems. The "they only audit poor people" thing is outdated - they're now using AI to flag suspicious returns across all income levels.

maybe ur right but all i know is my cousin has been filing hoh for years with no dependents and hasnt been caught. but yeah i guess the risk isnt worth it for most people. just saying the system is already rigged against regular people. i did hear they got a bunch more funding recently so maybe they will start catching more people. still think its stupid that we have such a complicated system in the first place.

Thanks for this insight! That makes more sense than them all incorrectly filing as HoH. I'll ask them about their W-4 withholding. I've always just chosen the standard withholding, but maybe they're having additional amounts taken out. That would explain the bigger refunds without them actually doing anything wrong!

Thank you! I'm here on an H1B, not a student visa. I did look up the treaty and confirmed it's Article 10 that applies to my situation with the 25% rate. Do you know if I need to attach any specific form to my 1040NR to document this treaty claim? Or do I just report the income with the 25% rate applied?

Since you're on an H1B and this is a standard treaty provision for the reduced dividend withholding rate, you typically don't need to attach Form 8833. You'll report the dividend income on your 1040NR and apply the treaty rate directly. In Sprintax, when you enter your dividend income, there should be an option to indicate that it's subject to a treaty rate. Make sure you select "India" as your country of residence for treaty purposes and the system should apply the correct 25% rate. For the period where no withholding was done, you'll need to calculate and pay the 25% tax on those dividends.

Not necessarily. If OP was mistakenly treated as a US person for part of the year, Fidelity might have issued a 1099-DIV instead of a 1042-S for those months with no withholding. They should check both documents.