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Everyone here is giving advice about forms and services, but I think they're missing something important - you might want to look into whether the company is taking advantage of interns by misclassifying them to avoid paying employment taxes. I worked in HR for years, and companies often try to save money by calling workers "contractors" when legally they should be employees. The IRS has a 20-factor test they use to determine proper classification, and from what you described (working in their office, using their equipment, set hours), your wife sounds like she should have been classified as an employee. This isn't just about your taxes - it's potentially a labor law violation. You could report them to your state's labor department or the IRS. In many states, there are penalties for misclassifying employees.
That's a really interesting point I hadn't considered. Do you think reporting them could cause problems for us though? We're more concerned about getting our taxes right than getting the company in trouble. Would filing that SS-8 form someone mentioned above trigger some kind of audit or investigation?
Filing an SS-8 does alert the IRS to potential misclassification, which could trigger them to look at the company's practices. However, this wouldn't cause problems for you - in fact, it could work in your favor. If the IRS determines your wife should have been classified as an employee, you would only be responsible for the employee portion of FICA taxes (7.65%) rather than the full self-employment tax (15.3%). The process is designed to protect workers, not penalize them. You can file the SS-8 and still go ahead with filing your taxes using Schedule C in the meantime. If the determination later comes back in your favor, you can file an amended return. Many companies incorrectly classify workers because they don't understand the rules or they're trying to save money. The determination process is one way the IRS educates employers and protects workers from bearing tax burdens that should be the employer's responsibility.
Anyone know if TurboTax handles this situation well? I've got a similar issue with a 1099-NEC from a part-time teaching gig, and I'm wondering if I need to upgrade to the Self-Employed version or if Deluxe would cover it.
You definitely need TurboTax Self-Employed for any 1099-NEC income. The Deluxe version won't let you file Schedule C which is required for reporting self-employment income. Learned this the hard way last year and had to upgrade midway through filing.
One extra thing to consider - You'll also still owe self-employment tax on your $6,500 net income, which is about 15.3%. But you can deduct half of that on your 1040, which might reduce your AGI a tiny bit more. But even with that adjustment, you're still right at the edge of your contribution limit. Might be worth picking up a few extra delivery shifts before year-end if you want to make sure you can max out that Roth!
Thanks for that tip! I hadn't thought about the self-employment tax deduction reducing my AGI further. Does that mean I technically couldn't contribute the full $6,500 if my income after business expenses is exactly $6,500? Since that half of SE tax deduction would push me below?
That's a really good question. The self-employment tax deduction doesn't actually reduce your "earned income" for IRA contribution purposes. The IRA contribution is limited by your earned income before adjustments like the SE tax deduction. So if your Schedule C shows $6,500 in net profit, that's your earned income limit for IRA purposes, even though your AGI on the 1040 will be a bit lower after the SE tax deduction.
Anybody know if OP should consider a Traditional IRA instead of Roth at this income level? With such low income wouldn't it be better to take the tax deduction now?
At this income level, a Roth is almost definitely better. OP probably won't owe much federal income tax anyway with the standard deduction, so the traditional IRA deduction has minimal value. Plus they'd pay tax on withdrawals in retirement when their tax rate will likely be higher than it is now as a student.
Has anyone used TurboTax to file a 1040-X for something like this? Is it straightforward or should I find a tax professional?
I amended a return through TurboTax last year. If you used TurboTax for your original 2021 return, it's pretty straightforward - you can access your old return and make the amendment. If you used a different service originally, it gets more complicated. For something this specific, might be worth talking to a pro.
Something nobody's mentioned yet - getting a huge refund can actually be financially harmful in emergency situations. My sister was living paycheck to paycheck last year while overpaying taxes by about $400/month. When her car broke down, she had to put the repairs on a high-interest credit card because she didn't have the cash on hand. Meanwhile, that repair amount was sitting with the IRS, completely inaccessible to her until tax season. She ended up paying hundreds in interest on the credit card debt while waiting for "her" money to come back as a refund.
My accountant explained it like this: "If you're getting a big refund, it means you budgeted wrong all year." Changed my perspective completely!
That's a really good way to put it. I'm going to remember that one. Do tax preparers generally help with figuring out the right withholding amount?
Most definitely! A good accountant or tax preparer won't just file your return - they should help with tax planning throughout the year. Mine sends quarterly checkup emails to make sure my withholding is still on track based on any life changes (marriage, new job, etc). Just remember that their advice is only as good as the information you give them. If your situation changes significantly during the year (big bonus, side income, etc.), you should reach back out to adjust accordingly.
Jeremiah Brown
Just a heads up about amended returns with treaty benefits - they take FOREVER to process. I filed a 1040-X last year claiming French-US treaty benefits that were missed on my original return, and it took almost 9 months to get my refund. The IRS website says 16 weeks for amended returns, but international ones with treaty claims seem to go into a special review queue.
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Daniel Washington
β’9 months?! That's insane. Do you think there's anything that can be done to speed up the process? I was really hoping to get this refund before summer.
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Jeremiah Brown
β’Unfortunately there's not much you can do to speed it up. International tax treaty claims get additional scrutiny because they're considered more complex. You can check the status of your amended return on the IRS "Where's My Amended Return" tool, but it just gives basic tracking info. If it's been more than 16 weeks since you filed, you can call and ask about the status, but they'll usually just tell you it's "in process." If you absolutely need the money sooner, you could look into getting a Tax Refund Advance loan from some tax preparation companies, but those usually have fees attached.
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Royal_GM_Mark
Make sure you're actually eligible under the correct treaty article! I thought I qualified under the India-US treaty for my consulting income, but it turned out I had misinterpreted Article 15. Since I was physically present in the US for more than 183 days, I wasn't eligible for the exemption I thought I was. Double-check your specific situation against the exact treaty language before filing the amendment.
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Amelia Cartwright
β’This is really important advice. I'd recommend looking at IRS Publication 901 (U.S. Tax Treaties) which breaks down the common provisions by country. The India-US treaty has specific provisions for students, teachers, and various types of income that all have different requirements.
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