One thing nobody's mentioned yet - if he takes the 1099 job, he should factor in the cost of liability insurance! As a 1099 contractor, especially in anything medical-adjacent, he might need professional liability coverage that the W2 employer would otherwise provide. I learned this the hard way and ended up paying $1,200/year for basic coverage.

Based on all the factors mentioned here, the W2 position at $37/hour is clearly the better financial choice for your husband. Here's why: 1. **Tax burden**: As others noted, 1099 contractors pay both sides of FICA taxes (15.3% self-employment tax), while W2 employees only pay half. 2. **Benefits value**: You mentioned the W2 includes health insurance ($520/month saved = $6,240/year), 5 days PTO (~2% of annual salary), and 2% 401k match. That's easily $8,000+ in additional value annually. 3. **Hidden costs**: 1099 work may require liability insurance, disability coverage, and other protections that W2 employment typically includes. 4. **Administrative simplicity**: W2 means less quarterly tax planning, simpler record-keeping, and reduced audit risk. When you factor in the benefits package alone, you're essentially comparing $41+ effective hourly rate (W2 with benefits) versus $40 (1099 with additional tax burden and no benefits). The math strongly favors the W2 position, especially since he's already maintaining his primary 1099 work for that entrepreneurial flexibility.

I'd also recommend your friend check if he needs to file FinCEN Form 114 (FBAR) in addition to the tax forms already mentioned. If the Canadian trust account holding the settlement money had a balance over $10,000 at any point during the year, he's required to report it even if he wasn't the direct owner of the account. This is separate from his regular tax filing but has serious penalties if missed. The FBAR deadline is usually October 15th (with automatic extension) rather than April 15th like regular tax returns. Given the complexity of this situation - international taxation, indigenous rights, treaty settlements, and potential trust reporting - I'd strongly suggest your friend consult with a CPA who specializes in both international tax law and indigenous taxation. The cost of professional advice upfront will likely be much less than dealing with penalties or audit issues later. The IRS has been increasingly focused on international compliance, so getting this right the first time is really important.

One important aspect that hasn't been mentioned yet is the potential impact on your friend's US immigration status, if applicable. If he's in the US on a work visa or has any pending immigration applications, receiving a large foreign settlement could potentially affect his status or future applications. Immigration authorities sometimes view large foreign financial windfalls as changing someone's intent to remain temporarily in the US versus permanently. While this shouldn't affect the tax treatment of the Robinson Huron Treaty settlement, it's something to keep in mind for his overall situation. Also, regarding record keeping - make sure your friend keeps detailed records of all the settlement documentation, any tax advice received, and copies of all forms filed. Given how unique this situation is, there's a higher chance of IRS questions or audit, so having everything well-documented from the start will be crucial. The combination of Canadian indigenous treaty rights, US tax residency, and international income reporting makes this a textbook case for needing specialized professional help. The upfront cost of getting proper tax and legal advice will likely save significant money and stress in the long run.

Has anyone used IRS Form 8949 to adjust the basis when selling a property where depreciation wasn't claimed? I've heard conflicting advice about whether that's an alternative to Form 3115.

I'm dealing with a similar situation but with a twist - we converted our primary residence to a rental in 2019, but we also did about $25,000 in renovations (new HVAC, flooring, kitchen updates) right before we started renting it out. Should these improvements be added to my basis for depreciation purposes since they were done specifically to prepare the property for rental use? Also, I'm curious about the timing - we completed the renovations in March 2019 but didn't actually list the property until May 2019. Would the placed-in-service date be March (when renovations were complete) or May (when we started marketing it)? The property has been consistently rented since June 2019, and like the original poster, I've been skipping depreciation because I wasn't sure how to handle it correctly. Thanks for all the helpful information in this thread - it's really clarified a lot of things I was confused about!

This is a really common source of confusion, and you're absolutely right to question this practice. What your client is doing - mixing disregarded entity EINs with parent W-9s - creates unnecessary complications and doesn't align with IRS requirements. The key issue here is that a disregarded entity, by definition, is ignored for federal tax purposes. Even if the disregarded entity has its own EIN (which it might need for state taxes, employment taxes, or banking purposes), for federal information reporting like 1099s, you must use the parent/owner's EIN. Your client should provide clean W-9s with: - Line 1: Disregarded entity name - Line 2: Parent/owner name - Part I: Parent/owner's EIN If they need you to track payments separately by disregarded entity for their internal purposes, that's fine - but the 1099s should still be issued under the parent's EIN. You might want to explain that using the disregarded entity's EIN could create matching problems when the IRS tries to reconcile the 1099s with filed tax returns, since the disregarded entity doesn't file its own return. I'd recommend having them provide corrected W-9s that follow standard IRS guidelines to avoid any compliance issues down the road.

I'm dealing with a similar situation at my CPA firm and wanted to share what we've learned from working through this with several clients. The confusion often stems from the fact that disregarded entities can have legitimate business reasons for obtaining their own EINs - like opening bank accounts, getting business licenses, or handling state-level requirements - but that doesn't change their federal tax treatment. What we've found helpful is explaining to clients that having an EIN doesn't automatically make an entity "regarded" for federal tax purposes. The entity classification election (or lack thereof) determines tax treatment, not the EIN itself. A single-member LLC that never made an entity classification election remains disregarded regardless of whether it has its own EIN. For your banking compliance purposes, I'd recommend sticking to the standard W-9 format that others have outlined here. If the client needs internal tracking by entity, you could potentially accommodate that in your internal systems while still issuing 1099s under the correct parent EIN. Document their requests but follow IRS guidelines for the actual reporting. The last thing you want is to create a paper trail that shows you knowingly deviated from standard practices, especially in a regulated industry like banking. Have you considered reaching out to the client's tax preparer directly? Sometimes they can help explain why proper W-9 completion is important for their tax filings.

I've been through this exact situation and can confirm what everyone else is saying - you absolutely need to file those missing 8606 forms, and yes, you'll likely need to amend your 1040s too. The blank lines 4a/4b are definitely problematic. Even though your conversions were non-taxable, the IRS matching system expects to see those 1099-R amounts reported somewhere on your return. When they don't find them, it creates a mismatch that could trigger unwanted attention. Here's the approach that worked for me: First, I filed all missing 8606 forms separately by mail with "Filed pursuant to Section 301.9100-2" written at the top for penalty relief. Then I waited about 6-8 weeks before filing 1040X amendments to add the missing conversion amounts to lines 4a (full distribution) and 4b ($0 taxable portion). The good news is that since you made non-deductible contributions and never took improper deductions, this should be tax-neutral. You're just cleaning up the paperwork trail to properly document what already happened. Your old preparer was completely wrong - Form 8606 isn't optional when you make non-deductible IRA contributions. It's the ONLY way to establish basis and prove to the IRS that you already paid tax on those dollars. Without it, their default assumption is that all conversions are fully taxable. Don't delay on this - the longer you wait, the more complex it gets. Find a CPA who actually understands retirement account rules and get this squared away. The process is straightforward once you know what needs to be done!

I've been through this exact same situation and want to echo what everyone else is saying - you absolutely need to file those missing 8606 forms ASAP, and yes, you'll almost certainly need to amend your 1040s given the blank 4a/4b lines. The consensus here is spot-on: file the missing 8606 forms first with "Filed pursuant to Section 301.9100-2" at the top for penalty relief, then follow up with 1040X amendments to properly report those conversions. The blank 4a/4b lines are a real red flag - the IRS matching system expects to see those 1099-R amounts reported even when the taxable portion is $0. I used the same timeline approach others mentioned: filed all my missing 8606s by mail first, waited about 6-8 weeks for processing, then submitted the 1040X amendments. The key is that the 8606 forms establish your basis, which then supports showing $0 taxable on line 4b of your amended returns. Your old preparer's advice was dangerously wrong. Form 8606 isn't optional - it's literally required by law for non-deductible IRA contributions and is the ONLY way to prove those were after-tax dollars. Without proper documentation, the IRS default assumption is that everything is taxable. The good news is this should be tax-neutral since you never took improper deductions. It's just paperwork cleanup, but critical paperwork that protects you from potential audit issues down the road. Don't delay - get those forms filed and find a CPA who actually understands retirement account rules!