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9 Former international student advisor here. One thing to check that nobody's mentioned yet is if SPRINTAX applied the correct FICA exemption. As a J1 visa holder, you should be exempt from Social Security and Medicare taxes (FICA) during your first 2 calendar years in the US. If your employer incorrectly withheld these taxes (which happens A LOT), you should be getting those back in your refund. Check your W2 boxes 4 and 6 - if there are amounts there, you should be getting those back completely, which could be a significant amount!
7 Omg thank you for mentioning this! I just checked my W2 and there's like $300 in box 4 and $75 in box 6. SPRINTAX never mentioned anything about this. Do I need to file something special to get these back??
9 You need to file Form 8843 along with a special statement requesting a refund of incorrectly withheld FICA taxes. SPRINTAX should have this capability, but sometimes you need to specifically indicate your FICA exempt status. If they missed this, you can either restart your SPRINTAX return and make sure to answer the FICA questions correctly, or use a different service that better handles J1 visa FICA exemptions. This could easily explain why your friends got larger refunds if they properly claimed their FICA exemptions and you didn't.
4 Just wanted to add that tax refund amounts can vary widely even among J1 visa holders from the same country working in the same state. The biggest factors are: 1. Your actual income amount 2. How long you worked (partial year vs full year) 3. If your employer withheld at the correct rate 4. Whether you had any US source income before arriving I'm guessing your friends who got bigger refunds either had higher withholding relative to their income, or they successfully claimed FICA exemptions that you might have missed.
For those unfiled years, I recommend filing them in order from oldest to newest. We had to file 4 years of back taxes for my father-in-law who had health issues, and doing them chronologically made it much easier to track everything. Also, put each year in a separate envelope! We made the mistake of sending multiple years in one package and it caused confusion at the IRS processing center.
Thank you for that tip about separate envelopes! I definitely would have put them all in one package thinking I was being efficient. Did you receive any kind of confirmation when they received/processed the returns? I'm worried about them getting lost in the mail.
You should definitely send them certified mail with return receipt requested through USPS. That way you'll get confirmation they were delivered. As for processing, it took about 4-5 months before we saw any activity - they're very slow with paper returns. Eventually, we received notices for each return - either bills for what was owed (with penalties) or notices about refunds. If you're really concerned, you can check your husband's IRS transcript online about 6-8 weeks after sending them to see if they show as processed.
Just a heads up - for that 2016 return, if your husband was owed a refund, he's probably out of luck now. The deadline for claiming refunds is generally 3 years from the original due date. So for 2016, that would have been April 2020. But he should still file it! Even if he can't get the refund, having a complete tax history is important for things like mortgage applications, loan approvals, etc.
Yep, this is correct. I worked for a tax firm and we had clients who lost out on thousands in refunds because they waited too long. The 3-year rule for refunds is strict, but the IRS can come after you for taxes owed for much longer!
Something critical that hasn't been mentioned yet - you might need to file an FBAR (Report of Foreign Bank and Financial Accounts) if you have any financial interest in foreign accounts that exceed $10,000 at any point during the year. This includes accounts where you're considered to have signature authority. If you're considered to have an interest in your grandfather's business accounts (which sounds possible given your arrangement), you might need to file this form. The penalties for not filing can be really severe - like $10,000+ for non-willful violations.
Wait, this sounds serious. I don't have signature authority on any accounts in Ecuador, but since I'm sending money and receiving profits, could that count as having a "financial interest"? How would I know if I need to file this FBAR thing?
The definition of "financial interest" can be broad. If you have an arrangement where you're entitled to profits from the business, the IRS might consider you to have a financial interest in the accounts, even without signature authority. The safest approach would be to consult with a tax professional who specializes in international reporting. But generally, if you're investing in a business and receiving returns based on performance, you likely have a financial interest. If the total of all foreign accounts you have an interest in exceeds $10,000 at any point in the year, you'd need to file the FBAR. You might also need to look into Form 8938 (Statement of Specified Foreign Financial Assets) depending on the amounts involved. These are separate from your tax return and have different filing requirements and deadlines.
Curious if anyone knows - would it be better for the grandpa to just label all the money as "gifts" instead of business returns? Wouldn't that avoid all these tax issues?
That approach could create more problems than it solves. The IRS looks at the substance of transactions, not just what you call them. If there's a pattern of you investing money and then receiving returns that correlate with business performance, relabeling them as "gifts" could be seen as tax evasion. While non-US persons can give gifts to US citizens without triggering gift tax for the recipient, unusual patterns of large gifts might trigger extra scrutiny. If audited, you'd need to prove these were genuine gifts with no expectation of return, which contradicts the investment arrangement described.
I actually tried taking loans from my S-Corp last year and got hammered in an audit. Here's what I learned the hard way: If you don't document everything properly with actual loan agreements, repayment schedules, and market-rate interest, the IRS WILL reclassify it as a distribution or compensation. In my case, they treated it as a distribution which meant I had to pay taxes on it anyway, PLUS a penalty for not reporting it correctly. For S-Corps specifically, you also need to be careful about maintaining reasonable compensation before taking any distributions or loans. My mistake was trying to take a "loan" while not paying myself a market salary. Don't mess around with this - do it right or don't do it at all.
What about for a single-member LLC? Are the rules any different since it's a disregarded entity for tax purposes? Could I take loans from my business more easily?
For a single-member LLC that's a disregarded entity, the situation is actually quite different. Since a disregarded entity is treated as the same taxpayer as you for federal tax purposes, technically you can't loan money to yourself - it would be like taking money from one pocket and putting it in another. The business funds are already considered your funds from a tax perspective, so there's no tax advantage to structuring withdrawals as loans. You're already being taxed on the business profits regardless of whether you withdraw the money or not (via Schedule C on your personal return). That said, for proper bookkeeping and to maintain the liability protection of your LLC, you should still document any personal withdrawals properly. If you're mixing business and personal funds without documentation, you risk piercing the corporate veil in legal situations.
Wait I'm confused. So what about these "buy, borrow, die" strategies that billionaires use? Is that completely different from taking money from your business?
Completely different. The billionaire strategy works because they're borrowing from a third party (bank or broker) using assets as collateral. They're not taking money directly from their companies without taxation. When Musk or Bezos get liquidity, they either: 1) Take loans from banks using their stock as collateral (legitimate third-party loans), 2) Sell shares and pay capital gains tax, or 3) Receive salaries/compensation that are taxed as income. The "loan" from your own business isn't actually a loan in the IRS's eyes unless it meets very specific criteria that most small business owners don't satisfy. Otherwise it's just income/distribution with extra steps.
Clarissa Flair
Quick tip from someone who dealt with this last year - make sure you also check your state tax requirements. In some states, you need to file additional paperwork at the state level to report misclassification. I'm in California and had to file a separate form with the state labor board. Also, keep detailed records of EVERYTHING that shows you were treated as an employee - emails about your schedule, equipment they provided, org charts showing your supervisor, orientation materials, etc. If you get audited or the company challenges your misclassification claim, this evidence will be crucial.
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Everett Tutum
β’Thanks for mentioning this! I'm in New York - do you know if I need to file anything special with the state here? I definitely have plenty of evidence (emails, company handbook they gave me, etc). Should I be reaching out to the company about this or just handle it on my tax forms?
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Clarissa Flair
β’New York has pretty strong worker protection laws. You'll want to look into filing the IT-2104 form which is NY's equivalent of the W-4 for your state taxes. Also consider filing a report with the NY Department of Labor about the misclassification - they take these cases seriously and can help recover the employer portion of taxes you shouldn't have to pay. Regarding contacting the company, it depends on your relationship with them. Some people have success simply explaining the situation to their former employer and requesting they issue a corrected W-2. Others find this creates conflict. If you need them as a reference, consider how approaching them might affect that relationship. Either way, you can still file correctly on your end using Form 8919 even if they refuse to correct their mistake.
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Caden Turner
Has anyone actually had the IRS rule in their favor on an SS-8 form? I filed one 2 years ago for a similar situation and it took 11 months to get a determination letter. They did rule I was an employee but by then I had already paid the full self-employment tax. Had to file an amended return to get the overpaid taxes back.
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McKenzie Shade
β’Yes! I got a favorable determination but it took forever (9 months). The key was documenting everything thoroughly in the initial filing. I included copies of emails showing they controlled my schedule, photos of the company equipment I was required to use, their employee handbook they made me follow, etc. The more evidence you provide upfront, the faster and more likely you'll get a favorable ruling.
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