Are you saying I should just avoid French investment options entirely? That seems extreme just to avoid some paperwork. Are there any decent investment options that are compatible with both French and US tax systems?

I'm not saying avoid French options entirely, but you should be selective. The main investments to avoid are foreign mutual funds and similar pooled investments that get classified as PFICs. Look into individual stocks, bonds, or ETFs that are listed on US exchanges even if bought through a French broker (though finding one that accepts US citizens can be challenging). Some French banks have created US-compliant investment products specifically for Americans living in France. Another option is to use a US brokerage while living abroad. The paperwork is much simpler for US tax purposes, though you'll still need to report the investment income on your French taxes. The US-France tax treaty prevents double taxation in most cases.

This isn't relevant to the OP's situation. They said they were born in France and have lived there their whole life. There's no prior state residency to worry about.

That's interesting! How did you handle the "reasonable salary" determination? I've heard the IRS can be picky about that with S-Corps. And did you have to register as a foreign entity in other states where you were physically working?

For reasonable salary, I researched what someone would make in a similar role in my industry and documented my justification. It's generally accepted that 40-60% of your business income as salary is reasonable, but it varies by industry and circumstances. Yes, technically you're supposed to register as a foreign entity in states where you're physically working. However, many digital nomads don't do this for temporary stays (risky but common). I registered in states where I stayed more than 2-3 months to be safe. Some states have thresholds before registration is required, but they vary widely.

Wyoming works great if you truly don't have physical presence elsewhere AND your sales don't trigger economic nexus in multiple states. I went this route for my consulting business that primarily works with clients in just 2 states, and it's been manageable.

That makes sense. My mistake was having customers spread across too many states and exceeding those economic nexus thresholds. Looking back, I should have incorporated in the state where I spend most of my time and just dealt with being a resident there for tax purposes. The complexity of multi-state compliance wasn't worth the theoretical tax savings.

Did you get your full refund eventually? And did they contact you during those 3 months or was it just radio silence while they were verifying?

Yes, I did get my full refund including the excess Social Security tax amount. They didn't adjust anything once they verified my information. During those 3 months, it was mostly radio silence. I kept checking the "Where's My Refund" tool, and it just said "Your refund is being processed" the entire time. I called once after about 2 months and was told it was in the verification department and I just needed to wait. Then one day the status suddenly changed to approved, and I got the deposit a few days later.

Thanks so much for this! I just checked my tax software and found the Schedule 3 section. You're right - there's a specific line for "Excess social security tax withheld" and it was really straightforward to enter. I was definitely overthinking this. After entering the information, my refund increased by the exact amount of my excess withholding. No need for Form 843 or contacting employers at all!

Just to add - make sure you keep good records showing your calculation of the excess amount. A friend of mine got audited for this (bad luck I guess) and needed to show how she calculated the excess amount from her multiple W-2s.

Thanks for bringing this up! We're in Pennsylvania - do you know if we'd have to use the same filing status for state as federal? I didn't even think about how this might affect our state taxes.

Pennsylvania doesn't actually have married filing jointly or married filing separately options like the federal return does. PA has a flat income tax where each person files their own return reporting their own income, regardless of federal filing status. You'll each file your own PA-40, reporting just your individual income. This is actually good news for your situation because your state tax situation won't be affected by whatever you decide for your federal return. But definitely double-check with a tax professional about your specific situation, as local taxes might have different rules.

The student loan interest deduction isn't the only thing to consider though. Child tax credits, education credits, and retirement contribution limits all have different phase-out thresholds too. At their income level, they need to look at the whole picture.

That's a really good point, I didn't even think about the company deducting it on their end. I'll definitely tell him to keep all the settlement paperwork and document everything. Would you recommend he send in any specific documentation with his tax return, or just keep it all on hand in case of questions?

I wouldn't send any extra documentation with the return itself. The IRS doesn't want that unless they specifically ask for it. Just have him keep all the settlement documents, correspondence, and proof of the payment amount in a safe place for at least 7 years (the extended audit timeline). Also, when he reports it on Schedule 1, Line 8z, he should write a brief description like "Breach of contract settlement" next to it. That shows transparency and makes it clear he's not trying to hide anything.

Sometimes companies refuse to issue 1099s for settlements because they don't want to admit liability. I had this happen and my accountant said to just report it anyway. The IRS cares more that YOU report income than whether THEY issued the proper form.