Has anyone e-filed with this situation? My tax software (TurboTax) keeps rejecting my return because it wants me to enter a W-2 for any income on Line 1a. I'm about ready to just file by mail instead.

I've been dealing with this exact situation for the past 3 years as an expat. You're absolutely right to be confused - the form language is misleading. But yes, your foreign earned income should go on Line 1a even without a W-2. Here's what I do: I report my foreign salary on Line 1a, then complete Form 2555 for the Foreign Earned Income Exclusion (which reduces my taxable income on Line 8). I also attach a brief statement explaining that Line 1a includes foreign earned income without a W-2, referencing Form 2555 for full details. The IRS wants to see the full picture - total income first, then applicable exclusions. If you tried to report your foreign income somewhere else or skip Line 1a entirely, that would actually cause more problems. I've e-filed successfully this way through FreeTaxUSA (they handle expat situations better than TurboTax in my experience). Just make sure Form 2555 is complete and accurate since that's your primary documentation for the foreign income details.

Has your daughter considered forming an S-Corp instead of operating as a sole proprietor? Once her business income gets high enough (usually around $40k+), it can be a way to save on self-employment taxes. You pay yourself a reasonable salary which is subject to FICA taxes, but can take the rest as distributions which aren't.

The tax burden difference you're seeing is completely normal, unfortunately. Self-employment income gets hit with both regular income tax AND self-employment tax (Social Security and Medicare taxes that total 15.3%), while W-2 employees only pay half of those payroll taxes since employers cover the other half. A few things that might help reduce her tax bill: 1. **Business deductions** - Make sure she's claiming ALL legitimate business expenses for her jewelry business. This includes materials, packaging, shipping supplies, business use of her phone/internet, marketing costs, etc. Even small expenses add up and reduce both income tax and self-employment tax. 2. **QBI deduction** - At her income level, she should qualify for the 20% Qualified Business Income deduction on her net business profit, which can provide significant tax savings. 3. **Future planning** - For next year, she should make quarterly estimated tax payments to avoid another big bill at filing time. A good rule of thumb is setting aside 25-30% of self-employment income for taxes. The $4,900 sounds high but could be accurate depending on her total income and how much was already withheld. Double-check that all business expenses are included and consider having a tax professional review it if the amount seems excessive.

I found my tax guy on Facebook marketplace of all places. He's an EA who works from home and charges half what I used to pay at H&R Block. Does anyone else think the big tax prep chains are getting too expensive for what they offer?

As someone who switched from using a CPA to an EA three years ago, I can confirm this advice is spot-on! I was paying my CPA $650 annually for what was essentially a straightforward return with some business expenses. My EA charges $280 and actually specializes in small business taxes, so she catches deductions my CPA missed. The key is understanding what you actually need. If you just need tax preparation and planning, an EA is perfect. If you need business valuations, financial statement audits, or complex financial planning beyond taxes, then a CPA makes sense. But for most people filing personal returns - even with some complexity like rental income or side businesses - an EA will give you the same quality service at a much better price point. I wish more people understood this distinction before automatically assuming they need the most expensive option!

About the rich people paying less taxes thing - it's not just retirement accounts. A big factor is that wage income (W-2) gets hit with both income tax AND payroll taxes (Social Security and Medicare). But once you hit the Social Security wage base ($168,600 in 2024), you stop paying the 6.2% Social Security tax on earnings above that amount. Also, higher-income folks often get more of their total compensation as stock options or capital gains, which are taxed at lower rates than regular income. Plus they can afford good CPAs who know all the legal strategies to minimize tax burden.

If you want exact info on quarterly payment requirements, IRS Publication 505 has all the details. I got hit with an underpayment penalty a few years ago because I didn't realize a large year-end bonus would push me over the threshold. Remember there are "safe harbor" provisions - you can avoid penalties by paying either 90% of current year tax OR 100% of last year's tax (110% if your AGI was over $150,000). The second option is often easier if your income fluctuates a lot.

Warning - my husband and I did this (both claimed 1) while filing separately and we ended up owing $1,200 at tax time! Make sure you're accounting for the fact that married filing separately means you lose some tax benefits. We had to scramble to pay our tax bill.

As someone who's been through the exact same situation (married filing separately due to student loans with a young child), I'd strongly recommend being conservative with your withholding changes. The student loan repayment strategy that requires separate filing often means you're already in a more complex tax situation. Here's what worked for me: I kept claiming 0 on my W-4 but had my spouse claim 2 allowances on theirs (or use the equivalent on the new W-4 form). This way we weren't both over-withholding, but we also weren't risking a big tax bill. The person with the higher income (sounds like your husband) can usually handle claiming more allowances safely. Also, make sure you've agreed on who will claim your child each year - this needs to be consistent and strategic since that parent gets the child tax credit. We alternated years based on who had higher income that year to maximize the benefit. I'd suggest running the numbers through the IRS withholding calculator first before making any changes, especially with your income levels. Better to get a small refund than scramble to pay a tax bill!