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Something nobody has mentioned yet - there are ways to potentially reduce your NIIT liability through tax planning. We shifted some of our investments to tax-advantaged accounts like Roth IRAs which don't generate income that counts toward NIIT. You might also look into tax-loss harvesting or municipal bonds which generate tax-exempt interest.
Would investing in growth stocks that don't pay dividends help reduce the NIIT? Since they don't generate current income until you sell?
Yes, that's a good strategy. Growth stocks that don't pay dividends won't generate current investment income subject to NIIT. You'll only potentially face NIIT when you sell and realize capital gains. Investments that generate unrealized appreciation rather than current income can be an effective way to defer the NIIT. Just remember that the eventual sale will potentially trigger both capital gains tax and NIIT if your income is above the threshold in the year you sell.
Does anyone know if 401k withdrawals count as income that pushes you over the NIIT threshold? Not investment income itself but the income that determines if you're over $275k?
Yes, distributions from retirement accounts like 401ks and traditional IRAs count toward your MAGI, which is used to determine if you're over the threshold. They're not considered investment income subject to NIIT themselves, but they can push your other investment income into NIIT territory by raising your MAGI.
I'm surprised nobody's mentioned filing Form 14039 (Identity Theft Affidavit) yet. When I had a similar situation with my SSN being used, filing this form was a key step. You attach supporting documents (like your passport showing you were out of the country during the time in question), and it helps the IRS flag your account for extra protection. Also, you should check your credit reports ASAP! If someone used your SSN for employment, they might have also opened credit cards or loans using your identity.
Does filing that form slow down legitimate tax returns in the future? I heard once your account is flagged for ID theft, it takes forever to get refunds because they manually review everything?
It can slow things down a bit, but it's absolutely worth it for the protection. In my experience, my next tax return was delayed by about 3-4 weeks for additional verification, but all returns after that were processed normally. The IRS typically issues PINs to identity theft victims that you'll need to use when filing future returns. This extra security step actually makes filing smoother in the long run because it prevents fraudulent returns from being accepted in your name.
just wanted to add that if ur SSN was used for work, u could end up owing taxes on income u never earned!! happened to my cousin and the IRS came after HIM for the taxes owed! took almost a year to sort out and he had to get a tax attorney. social security admin and irs actually dont talk to each other much so u need to address this with both agencies separately.
omg this is my nightmare. how much did the tax attorney cost? i'm dealing with something similar and worried i can't afford legal help...
Your tax situation is pretty common and makes perfect sense! I'm an accounting student (not a tax pro yet) but we just covered this exact scenario in my tax class. The standard deduction for Married Filing Jointly for 2023 is $27,700 but there's an additional deduction of $1,500 per spouse that can apply in certain situations which would get you to the $29,200 total deduction you mentioned. Also, based on the income and filing status you shared, your refund amount is totally normal. Education credits plus the married filing status can really boost your refund especially when you've been withholding as if you were single all year.
Thanks for confirming! What's this additional $1,500 deduction per spouse you mentioned? Is that something specific I should look for in my return? TaxSlayer just shows the standard deduction amount.
Sorry, I misspoke! I was thinking of the additional standard deduction for elderly or blind taxpayers, which is $1,500 per qualifying condition when married filing jointly. The regular standard deduction for married filing jointly for 2023 is $27,700. It looks like TaxSlayer might be calculating the correct standard deduction based on your specific situation. The $29,200 might include adjustments for student loan interest or other "above-the-line" deductions that technically aren't part of the standard deduction but reduce your taxable income.
One thing to keep in mind - make sure you actually qualify for the American Opportunity Credit. It's only available for the first 4 years of post-secondary education and you need to be enrolled at least half-time in a degree program. Some people think any education expenses qualify, but that's not the case.
14 Has anyone had success using H&R Block online for filing 1042-S as a resident alien? TurboTax seems to be failing me completely.
2 I tried H&R Block last year for my 1042-S and it was just as confusing as TurboTax. Ended up having to go to their physical office and pay extra for an international tax specialist. Not worth it imo.
14 Thanks for the feedback! That's disappointing to hear. Seems like the mainstream tax software just isn't equipped to handle these international student situations properly. I might need to look into some of the specialized services mentioned in this thread instead.
19 Quick side note that might help - check if there's a VITA (Volunteer Income Tax Assistance) program at your university. Many universities with international students have special VITA volunteers trained specifically on handling 1042-S forms and residency status changes. It's completely free and they might save you a lot of headaches!
CosmicCowboy
Just a tip from someone who works in financial aid: most schools have access to the IRS Data Retrieval Tool through FAFSA which can automatically pull your tax info. You might not even need to manually enter the tax information! When you're filling out the FAFSA, look for the option to "Link to IRS" or "Use IRS Data Retrieval Tool" - this can save you a ton of headache and ensure accuracy.
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Ava Martinez
β’I tried using the IRS Data Retrieval Tool but got an error message saying it couldn't access my information. That's why I'm trying to manually enter everything from the transcript. Is there any way to troubleshoot the retrieval tool, or am I stuck doing it manually at this point?
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CosmicCowboy
β’That's frustrating, but it happens sometimes. The IRS DRT can fail if your tax filing status is Married Filing Separately, if you filed an amended return, or if your address on FAFSA doesn't exactly match your tax return address. It can also have issues if you've recently filed or if the IRS systems are experiencing high traffic. At this point, you'll likely need to enter the information manually using your transcript. Just make sure to have someone double-check your entries if possible, as errors can cause delays in processing your financial aid.
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Amina Diallo
Has anyone else noticed that the FAFSA instructions seem deliberately confusing? Why can't they just say "enter your total tax from line X of your transcript" instead of referencing the 1040 form only? Not everyone has their original forms, especially if they file electronically!
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Oliver Schulz
β’I think it's because the FAFSA form is designed by the Department of Education, while tax transcripts are an IRS thing. The two departments probably don't coordinate their documentation. It's super annoying, but I've found that calling your school's financial aid office can sometimes help - they deal with this confusion all the time.
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