Do you know where I can find info about tax treaties? My in-laws are from India and I've wondered about this too.

You can find tax treaties on the IRS website - search for "United States Income Tax Treaties A to Z" and you'll find a list of all countries with treaties. For more detailed information, look for IRS Publication 901 (U.S. Tax Treaties). For India specifically, there is a tax treaty, but dependency rules are complex. The treaty mainly covers things like double taxation of income, but personal exemptions and dependent status are usually determined by the regular IRS rules I mentioned earlier.

Good point! I think the substantial presence test is 183 days (about 6 months) in a calendar year, so at 8 months she'd likely meet that. Would that make her ineligible as a dependent?

Thanks for the insight from the retail perspective. Do you think I should just go ahead and sign their paperwork to get my money back, or try to push back on the 1099-MISC part? I'm worried that signing means I'm agreeing to their classification of this as something other than a simple refund.

I would go ahead and sign to get your money back. Fighting them on the 1099 issue will likely just delay your refund further, and you've already waited almost a year. The important thing is how YOU handle it on your tax return, not how they classify it. When you file your taxes, you can properly categorize it as a refund rather than income regardless of what form they send. Just keep good documentation of the original purchase, the return attempt, and all communications about this being a refund for a returned item. That way, if there's ever a question, you have clear evidence this wasn't income.

Good point about the extra compensation. When I had a dispute with an online retailer, they refunded my original $200 purchase but added an extra $50 for my trouble. Only the $50 was considered taxable income.

That's a good point about the tax treaty - I didn't even think about that angle. Do you know if these tax treaties typically address dependents specifically, or are they more focused on the student's own tax obligations? Also, I've never heard of Form 8843 before. Is that something she would file separately from her regular tax return?

Tax treaties typically focus more on the student's own tax obligations rather than their status as someone else's dependent. The US-Canada tax treaty (Article XX) has provisions that may exempt certain scholarship or fellowship income from US taxation for Canadian students, but it doesn't directly address dependent status. Form 8843 is filed separately if she doesn't need to file a tax return, or alongside her tax return if she does need to file one. All F-1 students must file this form regardless of whether they earned any income, as it's essentially telling the IRS "don't count my days in the US for the substantial presence test because I'm exempt as a student.

Is the Other Dependent credit different from claiming someone as a dependent? I thought they were the same thing.

I think I've already missed that window since it's been about 11 months since her passing, and as you mentioned, I've already completed the rollover into my 401K. I feel like I should have researched this better before making the initial decision, but I was dealing with a lot emotionally and just followed what the HR person at her company suggested.

That's understandable - these decisions often need to be made during difficult emotional times. Since the disclaimer option is no longer available, your best approach now is probably a combination strategy: First, designate her brother as the beneficiary for that portion of your 401K, ensuring he'll receive it if something happens to you. Then, work out a yearly gifting strategy once you're eligible for qualified distributions without penalties. You might also consult with an attorney about creating a simple agreement documenting your intentions, which could help clarify things for your own estate planning. Don't be too hard on yourself - you're trying to do the right thing in a system that doesn't make it easy.

This is actually not great advice. 401K loans become immediately due if you leave your job, and since OP is living overseas, that could be risky. Plus, if you can't repay the loan, it becomes a distribution with all the taxes and penalties. The gift tax concerns would still apply too.

Oh crap, I had no idea there was a 3-year deadline on refunds! That's really good to know. Do you think we should use a tax service like Jackson Hewitt at this point or just try to do it ourselves with tax software?

For a simple tax situation, tax software should work fine and save you money compared to Jackson Hewitt. Something like TurboTax or FreeTaxUSA can handle late filings easily. If her taxes are more complicated (self-employment, multiple income sources, investments, etc.), then a professional service might be worth the cost. They sometimes catch deductions or credits you might miss on your own. But for basic W-2 income, the software should be more than adequate and much cheaper.

Exactly! IRS is the worst bank ever... they take your money all year and don't even pay interest when they owe you a refund, but they sure charge interest when you owe them 😑