This is super helpful. They finally sent over some financial statements after we pushed back, and it looks like they had really uneven income - huge contract payment in April (after we left) and then pretty steady performance the rest of the year. Is there a simple calculation I can do to figure out my tax difference with vs without the election?

The quick-and-dirty calculation is: Without election: Take your ownership percentage × (days you were owner ÷ 365) × company's entire year income With election: Take your ownership percentage × actual income during your ownership period only So if you owned 10% and were an owner for 59 days (through Feb 28), without election you'd get 10% × (59 ÷ 365) × full year income. With election, you'd get 10% of only what was earned through Feb 28. If that April contract was huge compared to Jan-Feb earnings, signing the election form would likely save you money. Remember though, the company's expenses matter too - not just income.

Great advice. My company's CFO initially refused to provide monthly data when we asked. We had to have our attorney send a formal demand letter. Amazing how quickly the detailed statements appeared after that! Turned out they had accelerated some income before our departure and pushed expenses to after - totally trying to manipulate the situation.

This is super helpful! Quick question - how far back can you go with TurboTax for previous years? I haven't filed since like 2019 and I'm trying to get caught up without making the same mistake as OP.

TurboTax typically keeps the last 7 years of tax software available, so you should be able to file returns back to 2019 without issues. You'll need to download the specific software version for each tax year you need to file. Start with your oldest return (2019) and work forward chronologically. Each year's return may affect the next, especially if you're carrying forward losses or credits. Just be prepared for potential late filing penalties if you owed taxes for those years. The IRS generally has a 10-year collection period for unpaid taxes, so it's definitely good you're getting caught up now.

Yeah, prior year returns definitely get processed differently. The IRS prioritizes current year returns during tax season. Did you get any kind of notice or explanation for the delay?

Does increasing W-2 withholding actually prevent underpayment penalties the same way estimated payments do? I thought those were treated differently by the IRS.

Yes, it absolutely works! The IRS doesn't care how you pay as long as enough tax is withheld throughout the year. W-2 withholding is actually treated even better than estimated payments because withholding is considered to have been paid evenly throughout the year even if it wasn't. For example, if you realize in December that you're going to owe more, you could have extra withheld from your last few paychecks. The IRS treats that withholding as if it had been paid evenly across all quarters, which can help you avoid underpayment penalties even if your first few quarters were underpaid. Many people find this easier than keeping track of quarterly payment deadlines. Just make sure you're withholding enough total to meet your safe harbor requirement (either 90% of current year tax or 100% of prior year tax).

Try setting aside 30% of everything you make from 1099 work right when you get paid. I have a separate savings account just for taxes. That way you never "feel" like that money is yours to spend, and you're not scrambling at tax time.

Is there a way to check online if your extension was properly processed? I made a payment two weeks ago but I'm paranoid now after reading your comment.

Yes, you can check if your extension was processed by logging into your online account at IRS.gov. Go to the Tax Records section and look for the account history or payments section. You should see your extension payment listed there with the correct tax year and payment type. If you don't see it after about 5-7 business days, I'd recommend calling the IRS to confirm. Better to deal with it now than months later when penalties might have accumulated.

This is a common misunderstanding. The extension only gives you extra time to FILE your return (until October 15th), not extra time to PAY what you owe. Any tax you owe is still due by the original April deadline. That's why you make an estimated payment when requesting the extension - to cover what you think you'll owe. If you don't pay the full amount you end up owing by the April deadline, you'll face interest charges and possibly penalties on the unpaid portion, even if you filed an extension.

Thank you so much for mentioning Form 8833! I just checked my 1042-S and they did apply a treaty benefit (there's something in Box 3 and 4). Will that form be available in regular tax software or do I need something special to file it?

Most major tax software packages like TurboTax, H&R Block, and TaxSlayer have Form 8833 available, but you might need to specifically search for it as it's not always included in the standard interview process. Some of the free filing options might not include this form. When you complete Form 8833, you'll need to reference the specific treaty article that applies to your situation. This information should be mentioned on your 1042-S in Box 13j typically. You'll also need to provide a brief explanation of the treaty benefit you're claiming. Don't worry too much about the technical language - just clearly state what type of income is covered (scholarship, fellowship, etc.) and which country's treaty applies to you.

Is that form 8843 required even if you're just getting a small amount on a 1042-S? I got one for a $500 prize from a contest but I'm a US citizen. Do i still need that form?