You're both partially right and partially wrong. After having this exact issue last year (we owed $7k which was painful), here's what I learned: 1) The W-4 doesn't have "claim 0 or claim 2" anymore. The form changed in 2020. 2) Your best bet is to follow the instructions exactly, including the multiple jobs worksheet if both of you work. 3) At your income level, you might be in the phase-out range for the child tax credit, which complicates things. 4) The safest approach is to calculate your withholding accurately, then add an additional amount on line 4(c) as a buffer. Don't overthink this - just use the IRS withholding calculator online, answer all questions honestly, and follow what it tells you. We did that this year and are on track to get a small refund rather than another huge bill.

I went through this exact same situation last year with a similar income level and two kids. Here's what I learned after consulting with a tax professional: At your income level ($235k), you're actually still below the child tax credit phase-out threshold for married filing jointly (which starts at $400k), so you should get the full $2,000 credit per child. However, the issue isn't really about claiming dependents vs not claiming them - it's about getting your total withholding right. What worked for us: We completed the W-4 accurately including our dependents in Step 3, but then added an extra $200 per paycheck on line 4(c) as additional withholding. This gave us a small buffer without massively over-withholding. The key insight is that the standard withholding tables sometimes don't perfectly account for all the interactions between income levels, deductions, and credits. Rather than playing games with the dependent section, it's better to be accurate there and then adjust with the additional withholding amount. One more tip: If you've been owing "several thousand" in recent years, look at your prior year tax returns to see what your actual tax liability was, then calculate if your current withholding will cover it. That's the most reliable way to avoid surprises.

Just a warning to everyone - if you don't file Form 8865 when required, the penalty is $10,000 per year! And there are additional penalties if the IRS requests you file and you don't comply within 90 days. I found this out the hard way when I ignored a foreign partnership interest. I thought since it was just passive income reported on a K-1, I only needed to put it on Schedule E. Totally missed the Form 8865 requirement because I met Category 2 (owned >10%). If anyone's unsure, definitely consult with a tax professional with international tax experience. Regular CPAs often miss these requirements.

This is a great discussion that highlights how complex foreign partnership reporting can be! I wanted to add something that hasn't been mentioned yet - the importance of understanding the "constructive ownership" rules that can catch people off guard. Even if you only directly own 1% like Javier, you might be deemed to own more under IRC Section 267 attribution rules. This includes ownership attributed from family members, related entities, or even certain trust arrangements. I've seen cases where someone thought they were safely under the 10% threshold but actually exceeded it due to their spouse's ownership or business relationships. Also, for those mentioning PFIC issues - this is crucial. Foreign partnerships often hold investments that are classified as PFICs (like foreign mutual funds or certain foreign corporations). Even if you don't need Form 8865, you might still need Form 8621 for each PFIC the partnership holds. The partnership should provide details about PFIC holdings, but many foreign partnerships don't understand US reporting requirements. One last tip: keep detailed records of your partnership agreement, K-1s, and any correspondence. If you're ever audited, having clear documentation of why you believed you weren't subject to Form 8865 filing requirements will be essential for avoiding penalties.

One thing nobody's mentioned - check if there's a reciprocity agreement between your home state and the state where taxes were incorrectly paid. Some neighboring states have agreements that simplify this process. For example, I live in Maryland but work in DC, and there's a reciprocity agreement so I only pay taxes to my home state. Makes it way easier. Not all states have these agreements though. Also, if the amount is really small (like under $50), sometimes it's not worth the hassle of filing an extra state return. Just something to consider when weighing your options.

Don't forget to check if your company can issue a corrected W-2! I work in payroll (not for your company) and we absolutely can fix this kind of error by issuing a W-2C (corrected W-2). Your company's payroll department might initially say they can't help, but escalate to a supervisor if needed. They should be able to reallocate that week's wages to your correct state and issue a W-2C showing the proper state allocation. This makes everything much cleaner when filing.

Just wanted to share that I successfully navigated this exact scenario last quarter. After submitting my LLC to S-Corp election via Form 2553, I experienced the same anxiety about its status. The Business Entity department finally processed my election after 10 weeks. What I discovered is that you can actually operate under the assumption that your election will be approved retroactively to your requested effective date, as long as you've filed within the statutory time limits (generally within 2 months and 15 days of the beginning of the tax year). The acceptance letter I eventually received confirmed this retroactive application, which was a tremendous relief given I had already begun filing quarterly estimated taxes as an S-Corporation.

I'm dealing with this exact same situation right now! Filed my Form 2553 about 6 weeks ago and the uncertainty is killing me. What's particularly frustrating is that I need to know my tax classification for quarterly estimated payments due next month. Has anyone had experience with how the IRS handles situations where you've been making S-Corp tax elections (like paying yourself a reasonable salary) while the election is still pending? I'm worried about potential penalties if I've been operating under the wrong assumption. Also, for those who eventually got their acceptance letters - did the IRS backdate the election to your requested effective date even when processing took months? The lack of a simple status check system really highlights how outdated some of these IRS processes are. At this point I'm considering just sending a duplicate copy via certified mail like others have suggested.

Does anyone know if we still need to physically tag converted assets with asset numbers like businesses do? My accountant mentioned something about this but it seems excessive for my small home office with converted personal items.

One thing to keep in mind is the mixed-use percentage if any of your converted items aren't used 100% for business. For example, if you're using that MacBook for both business and personal activities, you can only depreciate the business-use percentage of its FMV at conversion. Also, make sure to document the date you actually started using each item for business purposes - this is your "placed in service" date for depreciation. It doesn't have to be when you officially started your business, but rather when each specific item began being used for business activities. For QuickBooks setup, create your fixed asset accounts first, then enter each converted item at its FMV (not original cost) with the conversion date as the acquisition date. The software should handle the depreciation schedules automatically once you specify the asset class and recovery period for each item.