Thanks for bringing that up! Do you know if just working from a temporary apartment in Georgia would definitely create nexus? Or does it depend on what kinds of activities I'm doing there? I won't be meeting clients or making sales there - just doing the same online work I'd be doing from Texas.

It really depends on Georgia's specific rules, but physical presence often creates nexus regardless of what specific activities you're doing. Being physically present and working from Georgia for 6 months would likely trigger nexus in most states. However, Georgia may have thresholds based on income earned while in the state or number of days present. Some states have COVID-related exceptions that might still apply for remote workers, but these are being phased out in many places. I'd recommend checking with Georgia's Department of Revenue directly or having a tax professional review Georgia's specific nexus requirements for your situation.

What percentage of your business income did you set as salary? I've heard everything from 30% to 60% being "reasonable" depending on the industry.

Thank you for bringing this up! I hadn't even considered the PFIC angle. Do you know if educational non-profits typically generate enough investment income to trigger PFIC status? This organization mainly receives donations and some government grants. Also, did you determine the partnership classification yourself or did you need professional help? I'm wondering if Mexican non-profits might be viewed differently than Spanish ones.

Educational non-profits typically don't generate enough investment income to trigger PFIC status unless they have a large endowment that's actively invested. If they're primarily operating on donations and government grants for educational activities, it's unlikely to be classified as a PFIC. The PFIC test generally requires that 75% or more of the entity's income is passive (investment) income, or 50% of assets are held for the production of passive income. We definitely needed professional help to determine the correct classification. The key was looking at the organizational documents and how the entity operates rather than what it's called locally. We provided our tax professional with the Spanish equivalent of articles of incorporation and bylaws, which showed it operated more like a partnership with pass-through characteristics rather than a corporation. Mexican entity classification might differ, so I'd recommend either consulting with a tax professional familiar with Mexico-US tax matters or at minimum reviewing the actual organizational documents with that perspective in mind.

I used Greenback Expat Tax Services last year for a somewhat similar situation with interests in a Japanese non-profit. They weren't cheap (around $600 for my returns) but they knew exactly which forms were needed. For the penalties - they can be HARSH. Form 5471 penalties start at $10,000 per form per year if required but not filed. FBAR penalties are even worse. Don't mess around with this stuff!

Everything was handled remotely - I uploaded documents to their secure portal and had two video calls (initial consultation and then a review of the prepared returns). They were in a completely different time zone but made it work. They definitely provided advice for future years, which was actually the most valuable part. They suggested some changes to how I documented my involvement with the Japanese entity and recommended keeping certain records that would make future filings simpler. They also explained how getting married would affect my reporting requirements, which might be relevant to the original poster too. For what it's worth, they said most regular CPAs miss crucial details on these foreign filings because they rarely deal with them.

That's really helpful, thanks! How close was your estimate to the actual K-1 amounts when they finally arrived? And did you have to provide any documentation to prove you were waiting for the K-1s?

My estimates were within about 10% of the actual amounts, which seemed to be acceptable. I didn't have to provide documentation specifically showing I was waiting for K-1s - I just completed Form 2210 and attached a brief statement explaining the situation. The key is making a good faith effort to estimate accurately and pay what you can by the deadline. The IRS is generally reasonable if you're proactive about it and can show you weren't just ignoring your tax obligations.

This is the correct answer right here. The safe harbor rule saved me from penalties many times. I make sure I always hit the 110% of previous year's tax threshold through regular estimated payments, then whatever happens with investments or K-1s doesn't trigger penalties.

I had no idea about penalty abatement! Would that work even though it's been so long since the original due date? And do I need to have the return filed first before I can request this?

Yes, you can still request penalty abatement even after a significant delay. The IRS doesn't have a strict deadline for requesting abatement, though they're generally more receptive when you're actively trying to resolve the situation by filing your return and making payment arrangements. You absolutely need to file the return first before requesting any kind of penalty abatement. The IRS won't consider penalty relief on unfiled returns. Once your return is filed, you can request First-Time Penalty Abatement if you had a clean compliance history for the three years prior to 2021. If you had legitimate reasons for not filing (serious illness, natural disaster, etc.), you could alternatively request Reasonable Cause abatement with supporting documentation.

Those calculations seem high. Doesn't the failure-to-pay penalty cap at 25% just like the failure-to-file penalty? I thought the combined penalties couldn't exceed 47.5% of the original tax.

Thanks, that's really helpful about the lump sum election. I hadn't even thought about the tax implications of getting disability backpay. Do you know if I would need to file amended returns for the previous years in that case, or is it handled differently?

You don't need to file amended returns for the previous years with a lump sum election. Instead, when you file your taxes for the year you receive the backpay, there's a special calculation that's done on that year's return. The SSA will send you a letter (SSA-1099) showing how much of your payment applies to each previous year. Your tax preparer (or tax software) can then use this information to calculate your tax as if the income had been received in those earlier years, potentially putting you in a lower tax bracket for the lump sum. It's a bit complex, but any tax professional familiar with disability claims should know how to handle it. And definitely keep all documentation about your medical expenses, as some of those might be deductible as well.

I second the VITA suggestion. I used them when I was in college and they were great. Just make sure to bring all your documentation - they'll want to see your ID and social security card, plus any income info you have (even if it's just printouts from the survey sites showing your earnings).