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Just a heads up - I had this exact issue when I worked 2 jobs last year. Made sure to claim my excess SS on Schedule 3, but my return got flagged for "verification" and delayed my refund by 3 months. Found out later this is pretty common when claiming excess SS tax. If possible, try to file early so you have time to deal with any potential delays. And keep all your W-2s organized in case they ask for documentation. They didn't ask me for anything, but better safe than sorry.
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.
My tax guy says we shouldn't file the 843 form at all. He said to put the excess on line 11 of Schedule 3 (the Credit for Excess Social Security Tax Withheld line). I'm using a diff tax software than you but all of them should have this. Add up all your W-2 box 4 amounts, subtract $10,453, and what's left is your credit. No need to contact employers or file extra forms. Much easier!
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!
Another option you might consider is forming an LLC in your home state but electing to be taxed as an S-Corporation. This can potentially reduce self-employment taxes while giving you flexibility. I did this while bouncing between states and it worked well because: 1) I maintained my business entity in one consistent state 2) I could pay myself a reasonable salary and take distributions 3) I only had to deal with one state for business filings 4) Sales tax was still collected based on customer location regardless Remember that your personal tax residence and business entity location are separate issues that sometimes overlap.
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.
Has anyone actually tried the Wyoming route with a digital business? I did this last year and regret it honestly. The initial setup was easy but I ended up having to register as a foreign entity in 4 different states because my customers triggered economic nexus thresholds. Each state had different requirements and filing deadlines. Ended up spending way more on compliance than I saved.
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.
Don't forget to set aside money for self-employment tax!! This catches so many first-time sellers off guard. You'll owe about 15.3% on your net profit for social security and medicare taxes, ON TOP OF regular income tax.
This is really important! I got hit with a surprise $400 tax bill my first year selling online because I didn't know about self-employment tax. Even small businesses have to pay it.
If you're feeling overwhelmed, the IRS has a special small business tax center with guides specifically for self-employed people: https://www.irs.gov/businesses/small-businesses-self-employed Also check if your state has sales tax requirements for online sellers. Some states require you to collect and remit sales tax even for small amounts of sales.
One thing nobody's mentioned yet: If you're making under the Foreign Earned Income Exclusion amount (which you definitely are), make sure you're also looking at the tax treaties between France and the US. The treaty has specific provisions for certain types of income that might benefit you when you start investing. Also, consider opening a brokerage account with a US company that accepts foreign residents like Interactive Brokers or Schwab International. This bypasses a lot of the FATCA headaches since you're investing through US institutions rather than French ones.
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.
Don't forget about state taxes! Depending on which state you had as your last residence before moving abroad (or if you were born abroad, possibly your parents' last state), you might still have filing requirements there too. Some states like California and Virginia are notorious for trying to claim you as a resident even after you've left.
Emma Johnson
For a first-time Federal 1040 filer, I highly recommend using the IRS Free File program if your income is under $73,000. It gives you access to guided tax software for free. I've used it for the past three years and it makes filing the 1040 pretty straightforward. The software asks simple questions about your situation and fills out all the correct forms behind the scenes. It'll also tell you whether the standard deduction or itemizing is better based on your answers. The link is on the IRS website under "File Your Taxes for Free.
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Liam Brown
ā¢Does the free version still try to upsell you every five minutes like TurboTax does? I started using their "free" version last year and ended up paying $89 because of some "required upgrade" halfway through.
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Emma Johnson
ā¢The IRS Free File options are genuinely free if you meet the income requirements. They're different from going directly to TurboTax or H&R Block's websites, where they often use the word "free" but then upsell you. You need to start through the IRS Free File portal (search "IRS Free File") rather than going directly to the tax software sites. This ensures you get the truly free version that's part of their agreement with the IRS. I've completed my 1040 filing three years in a row without paying a penny using this method.
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Olivia Garcia
Don't overlook checking if you're eligible for the Earned Income Tax Credit on your Federal 1040! With an income of $32,000, you might qualify especially if you're single. It's worth looking into because it could potentially get you a bigger refund.
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Noah Lee
ā¢The EITC income limit for single filers with no qualifying children is way lower than $32k though - I think it's around $17k. So they probably wouldn't qualify unless they have kids?
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