What's an EOR service? Is that like a PEO? And do you have any recommendations for ones that work well with very small businesses? I'm only looking to hire one person to start.

An EOR (Employer of Record) is similar to a PEO but specifically designed for international hiring. They essentially become the legal employer in the foreign country while you maintain day-to-day management. For small businesses hiring just one or two people, services like Deel, Remote.com, or Ontop tend to be more cost-effective than traditional global PEOs which usually cater to larger companies. They handle everything from compliant contracts to local tax withholding and benefits requirements. The fees usually range from 5-8% of the employee's salary, which might seem high but is typically cheaper than setting up your own foreign entity. For just one employee in India, this approach could save you significant headaches with compliance.

The US-India tax treaty definitely applies here. Article 15 covers dependent personal services (employment), while Article 14 covers independent personal services (contractors). Generally, if your Indian worker never comes to the US to perform services, their income is only taxable in India. As for LLC vs S-Corp, it really depends on your overall business situation. An LLC with S-Corp election could give you some employment tax advantages if you're also taking a salary, but for purely hiring overseas workers, the structure is less important than properly documenting the relationship. What matters more is whether you classify them correctly as employees vs contractors, and whether you follow the reporting requirements for foreign persons.

Oh wow, I hadn't even thought about the FBAR requirements! Do you know if there's a specific form for that or is it part of the regular tax filing?

The FBAR (Foreign Bank Account Report) is actually filed separately from your tax return. It's officially called FinCEN Form 114 and must be filed electronically through the BSA E-Filing System. It's not part of your regular tax filing with the IRS. The deadline is technically April 15, but there's an automatic extension to October 15 if you miss the April deadline. The penalties for not filing can be pretty severe - starting at $10,000 for non-willful violations - so definitely make sure you file if your wife's foreign accounts exceeded $10,000 at any point during the year.

But don't you lose a bunch of tax benefits if you file separately? Like I think you can't claim education credits and some other stuff.

I never thought to check his paystubs! I'll have him dig those up tonight. Do you remember if your tax withholding was affected when the ownership changed? That's the part that seems strange to me - one W2 has withholding and one doesn't.

Yes, the withholding situation definitely changed when ownership switched. The first owner withheld taxes properly, but the new owner classified me as an independent contractor for the first month before fixing it. That meant one W2 had normal withholding while the other had almost none. The paystubs should show exactly when the change happened. If you notice one of the employers wasn't withholding properly, you might owe more at tax time than you expected. It's better to find out now rather than get surprised with a tax bill!

This is super important! When I delivered for Pizza Hut, one owner reported credit card tips on the W2 while the next owner made us report our own cash AND credit tips. Made my tax situation confusing.

That's really helpful! I know she did a kitchen renovation about 10 years ago and replaced all the windows. I'll have to see if she kept the receipts. Does TurboTax have a specific section for entering these improvements or do you just add them to the original purchase price?

Yes, TurboTax does have a specific section for this. After you enter the original purchase price, it should ask if you made any improvements to the home. There will be a place to itemize and enter each major improvement separately. If she doesn't have all the receipts, reasonable estimates are generally acceptable - just be prepared to justify them if ever questioned. Make sure to only include capital improvements (things that add value, prolong the home's useful life, or adapt it to new uses) - not repairs or maintenance. So the kitchen renovation and window replacement definitely count, but something like painting or fixing a leaky faucet wouldn't.

This is so important! I'm in California and got hit with state capital gains even after applying the federal exclusion. Totally wasn't expecting that extra 9.3% tax on the gain that exceeded the federal exclusion.

Do you remember what the official IRS number is? I got one of these calls yesterday and now I'm paranoid even though I'm 99% sure it's a scam.

The general IRS customer service number is 800-829-1040. When you call, be prepared for a long wait time, and have your tax return handy as they'll ask verification questions to confirm your identity. I recommend calling early in the morning right when they open or later in the evening before they close as those tend to have shorter wait times. You can also try calling mid-week as Mondays and Fridays are typically their busiest days.

Yes, these scams are successful enough that they keep doing them. My coworker's father lost $12,000 to an IRS scammer last year. They told him he had outstanding tax bills and would be arrested at work the next day if he didn't pay. They kept him on the phone for 5 hours while he went to different stores buying gift cards. He was too embarrassed to tell anyone until weeks later.