Thank you for mentioning this - I just checked and you're right, our state withholding is also way off. We did have about $6k in investment income from some stocks we sold, but I didn't think that would make such a huge difference. Maybe it's the combination of everything?

The investment income definitely contributed to your tax situation. Capital gains are taxed differently than regular income, and there's typically no withholding on those, so that $6k in investment income could easily add $1,000+ to your tax bill with no withholding to offset it. It's definitely the combination of everything - your increased regular income being under-withheld plus the investment income with no withholding at all. Next year, if you know you'll have investment income, you can adjust your W-4 to withhold extra to cover those taxes too.

This is good advice. I once had an employer that accidentally classified me as exempt for half the year! They had to issue a corrected W-2 and everything. Always double-check those withholding amounts against what should be taken out.

Thanks for this suggestion! I looked up Form 4972 but it seems to be for lump-sum distributions from retirement plans. Does this actually apply to SSDI backpay situations? I'm trying to make sure we use the correct forms.

You're absolutely right to question this - I apologize for the confusion. Form 4972 is indeed for retirement distributions, not SSDI backpay. The correct approach is using the lump-sum election method described in Publication 915, not Form 4972. This doesn't require a separate form but rather a special calculation worksheet that allocates the backpay to prior years for tax calculation purposes.

I used TurboTax last year for my SSDI backpay and it handled the basic reporting okay, but struggled with the lump-sum election calculations. I ended up needing to manually override some calculations and attach additional documentation. For complex situations like attorney fee discrepancies, you might want professional help.

Thank you so much for sharing this! It helps knowing someone else in a similar situation got a comparable refund. Did you have to provide any extra documentation when you filed? I'm still nervous about getting flagged for review.

Nope, didn't need any special documentation when filing. Just make sure you have everything on hand in case they do request verification later. For me, that meant keeping my kids' social security cards, school records showing they live with me, receipts for education expenses, and all my income documents in a folder. I filed in early February and already received my full refund by direct deposit about 2 weeks later with no issues. The system is designed to help working parents like us - these aren't loopholes, they're intentional benefits we qualify for!

This is good advice. I've seen people get excited about huge refunds only to find they entered $12,000 withholding instead of $1,200 by accident.

Thanks for the suggestion - I just doubled checked all my W-2 entries and the withholding amounts. Everything looks correct! My total federal withholding was about $4,800 for the year, so most of the refund is actually coming from the credits, not from over-withholding. It's still hard to believe though!

I've done both calculations for my last two tax years. For me, the regular method was WAY better - I got almost $2,200 in deductions versus $500 with the simplified method. But I live in a high-cost area with expensive rent and utilities. The simplified method is obviously easier, but worth running both calculations before deciding.

Thanks for sharing your experience. That's a huge difference! I'll definitely calculate both ways. I'm in a higher cost area too so maybe the regular method will be better for me as well, even with the extra record keeping.

Also, if you're a W-2 employee who can't take the federal home office deduction, some states still allow it on state returns! I know Massachusetts and New York have provisions for this. Definitely worth researching your specific state rules.

Does the Closer Connection Exception apply even if you're on a work visa? I thought that was mainly for people who are here temporarily like students or those on visitor visas who stay too long and risk becoming resident aliens.

You're right about the Closer Connection Exception having limitations - it primarily applies to those who meet the substantial presence test but want to claim they have stronger connections to another country. For work visa holders like those on H-1B, L-1, etc., this exception generally doesn't apply because your visa status already defines you as a Non-Resident Alien. The exception is more relevant for people who are in the US on visitor visas, business trips, or certain students who exceed the substantial presence thresholds but maintain stronger ties to their home country.

Don't use regular TurboTax for NRA taxes! They have a separate product called "TurboTax for Non-Residents" but even that missed several treaty benefits for me. I had better luck with Sprintax which is specifically designed for international taxpayers and Non-Resident Aliens.

Thanks for the tip about Sprintax! I was about to buy regular TurboTax not realizing they had different versions. Did Sprintax help you understand why you owed taxes or just complete the forms? I'm trying to avoid a big tax bill next year.