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A word of caution - I was in almost exactly your situation in 2023 and I made a mistake with my dual-status filing. I incorrectly reported some foreign income I received during my NRA period and ended up getting a CP2000 notice from the IRS requiring additional tax plus interest. Double-check everything and consider using a tax professional who specializes in international taxation. The rules for dual-status aliens are super complicated, especially regarding things like foreign tax credits and treaty benefits. Definitely not something I'd recommend doing yourself unless you're 100% confident.
Has anyone successfully e-filed a dual-status return? I tried last year and every tax software I used (even the "premium" versions) said I had to print and mail it. Seems ridiculous in 2024 that we still have to mail these returns.
One thing I learned the hard way with amendments - if you wait too long after discovering an error, the IRS can technically consider it "willful neglect" which carries much higher penalties. I'm not saying this to scare you, but just something to be aware of. In your case, waiting a few weeks for your refund is fine, but I wouldn't wait months. The official rule is that you should file an amendment "promptly after discovering the error" - which isn't very specific, I know. Generally, within 30-60 days of discovering the error keeps you in the clear.
Would the IRS actually know when I "discovered" the error though? Like if I file the amendment in a month, couldn't I just say I discovered it then? Not trying to be deceptive, just wondering how they determine when you knew about a mistake.
Technically the IRS doesn't know when you discovered the error unless there's some obvious paper trail (like they sent you a notice about it). However, I always advise being honest because if you ever did face an audit or review, lying about when you discovered an error could significantly compound your problems. In practice, filing an amendment within 1-2 months is generally considered prompt enough that the timing wouldn't be questioned. The IRS is primarily concerned with willful, long-term neglect - like someone discovering an error and waiting a year or more to correct it. Your scenario of waiting a few weeks for your refund before filing the amendment is completely reasonable.
I had almost the identical situation last year, but I went ahead and e-filed the amendment right away before getting my refund. Big mistake! The original refund and the amount I owed from the amendment got caught in this weird processing limbo where they wouldn't offset each other automatically. I ended up with the IRS sending me the full original refund, then a separate bill for what I owed plus a small penalty because the system didn't recognize I was trying to fix my own mistake proactively. Took almost 6 months and multiple calls to straighten out.
Something else to consider - check if you're paying the correct estimated quarterly taxes for your husband's business. As a reseller, he's self-employed and should be making quarterly payments if he expects to owe more than $1,000 in taxes for the year. This was a painful lesson for me my first year selling online. I made good money but didn't pay quarterly, and got hit with underpayment penalties on top of a big tax bill. Now I set aside about 30% of profits each quarter and make estimated payments. Completely avoided surprises this year!
I didn't even think about quarterly taxes! We haven't been paying anything throughout the year. Is it too late to fix this for last year? And how do we figure out how much to pay each quarter going forward?
It's too late to fix last year's quarterly payments now, but you can avoid penalties going forward by starting them this year. For most resellers, you need to pay estimated taxes if you expect to owe $1,000+ at tax time. For calculating the amount, you can either pay 100% of last year's tax liability divided into four payments (the "safe harbor" method), or 90% of what you expect to owe this year. I personally set aside 30% of my net profit each month and make payments on the quarterly due dates (April 15, June 15, September 15, and January 15). There's a form called 1040-ES that helps with calculations, or your tax software should have an estimated tax calculator. Start now and you'll avoid the shock next tax season!
Don't forget about state taxes too! A lot of resellers focus so much on federal that they forget their state might also require quarterly payments and have different rules for deductions.
And sales tax! If you're selling online, the marketplace might collect it for you (like eBay or Amazon) but if you sell directly you might need to collect and remit sales tax depending on your state and sales volume. That tripped me up my first year.
As a married guy who's been filing jointly for years, here's my two cents - if your financial situation is just two W-2s and standard deductions, TurboTax will work fine. But if you start having investments, rental property, or significant itemized deductions, an accountant starts to pay for themselves. The first year filing jointly is a good time to establish a relationship with an accountant. Even if you don't use them every year, having someone who knows your tax situation can be invaluable when more complex questions come up. One thing to consider - at your income level, you might be approaching some phase-out thresholds for certain deductions and credits. An accountant might help identify tax planning opportunities for future years.
For the tax debt situation specifically, an accountant can provide strategic advice, but they don't have any special access to the IRS. They'd likely advise you to contact the IRS directly to set up a payment plan or explore settlement options. A tax professional might be able to help determine if any of the debt can be addressed through penalty abatement requests or other relief programs. They can also advise on whether filing jointly or separately makes more sense given the outstanding debt. But for actually resolving the debt, you'll still need to work directly with the IRS one way or another.
Make sure you look into the marriage penalty! My spouse and I were shocked when we filed jointly for the first time. Our combined income pushed us into a higher bracket and we ended up owing way more than we expected. The worst part was realizing after the fact that we could have saved money by filing separately that year. Def run the numbers both ways before deciding!!
The marriage penalty isn't as bad as it used to be after the 2017 tax changes, but it can still hit high earners. At their income level (over $400k combined), they could definitely face some penalty. I'd suggest looking at the actual tax brackets for 2024 and calculating both ways. Don't just assume joint is better!
Oliver Weber
Have you considered looking into an Offer in Compromise? If you truly can't pay the full amount, the IRS might accept a smaller payment to settle the debt. My brother-in-law owed about $25k and ended up settling for around $8k because of his financial situation. You need to complete Form 656 and pay a $205 application fee. It's not easy to get approved, but it might be worth exploring if your financial situation is really tight. The IRS looks at your income, expenses, asset equity, and ability to pay.
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Ava Martinez
ā¢Is this something I could do myself or would I need my CPA to handle it? And do you know how long the process typically takes? I'm worried about interest continuing to build while I wait for a decision.
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Oliver Weber
ā¢You can certainly do it yourself using the IRS's Form 656 Booklet which includes instructions, but having your CPA help might increase your chances of success since they understand what the IRS is looking for in terms of documentation and financial hardship proof. The process typically takes 6-12 months for the IRS to evaluate and make a decision. Interest and penalties do continue to accrue during this time, which is a downside. However, if you're approved, those additional amounts would be included in the settlement. If you're rejected, you'd still have the option to set up a payment plan for the full amount. Many people start with a payment plan and then apply for an Offer in Compromise if they realize they truly can't manage the payments.
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Natasha Romanova
Just wanted to add that you should DEFINITELY make sure you're tracking all legitimate business expenses for your freelance work! When I started freelancing, I was shocked at how many things I could deduct: - Portion of home internet - Cell phone (% used for business) - Home office space - Computer equipment and software - Professional subscriptions - Continuing education/courses - Mileage for business travel - Health insurance premiums - Professional services (like your CPA fees) These deductions make a HUGE difference in your self-employment tax. My first year I paid way too much because I wasn't tracking these expenses properly.
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NebulaNinja
ā¢Don't forget about the Qualified Business Income deduction (Section 199A)! For most freelancers, you can deduct up to 20% of your net business income. Saved me thousands last year.
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