I think everyone's overcomplicating this. I've been in this exact situation a few times, and here's what I did: just file the 1099 using "000-00-0000" for now, then later file an amended/corrected 1099 once they get their ITIN. The most important thing is to show you're making the effort to report all payments properly.

I went through this exact situation last year and want to add some practical tips that helped me avoid mistakes. First, document EVERYTHING - keep copies of the W-9 with "Applied For" written in the TIN field, records of when your contractor applied for their ITIN, and all correspondence about the backup withholding. Second, when you start the 24% backup withholding, make sure to issue your contractor a written notice explaining why you're withholding and that it's required by law. This protects both of you if there are questions later. One thing that caught me off guard was that you need to deposit the withheld taxes using Form 8109 or EFTPS just like regular payroll taxes - you can't just hold onto the money until year-end. The IRS expects these deposits on their normal schedule. Also, keep in mind that once your contractor gets their ITIN and provides a corrected W-9, you can stop the backup withholding going forward, but you'll still need to issue the 1099-NEC showing both the total payments and the amount withheld for backup withholding.

One important thing nobody's mentioned yet - if you use the physical presence test, you need to file Form 2555 with your tax return. Make sure you fill out Part III (Physical Presence Test) completely, not Part II (Bona Fide Residence Test). Also, remember that the FEIE only applies to earned income (salary, wages, self-employment), not investment income. And the max exclusion for 2022 was $112,000, but it's prorated if your qualifying period doesn't cover the whole year.

For your 2022 situation, the physical presence test is definitely your best option since you moved abroad mid-year. You'll need to count 330 full days in any 12-month period - I'd suggest using March 3, 2022 to March 2, 2023 as your qualifying period. A few key things to watch out for: travel days to/from the US don't count as full days abroad (you need to be outside the US for the entire 24-hour period), but partial days at the beginning/end of your qualifying period can count if you were already abroad or stayed abroad. Since you mentioned taking vacations and visiting the US twice, make sure to carefully count those US days. Even if you went over the 35-day limit for US presence, you can still qualify as long as you have 330 full days outside the US within your chosen 12-month period. For 2022, your exclusion will be prorated based on how many days of your qualifying period fall within the tax year. So if your qualifying period is March 3, 2022 - March 2, 2023, you'd get about 304 days worth of the $112,000 exclusion for 2022 (roughly $93,400 max exclusion). Document everything well - keep all travel records, passport stamps, and proof of your Netherlands residence!

Has anyone tried Credit Karma Tax (now Cash App Taxes)? It's completely free and claims to support Form 1116, but I'm worried it might miss something with foreign income.

I've been in a similar boat with cross-border tax situations! Based on my experience, TurboTax Deluxe should handle your situation well since you have straightforward wage income. The Foreign Tax Credit section walks you through Form 1116 step by step, and yes, it will prompt you for any carryover amounts from previous years. One tip: make sure you have your foreign tax documents translated if they're not in English, and keep records of the exchange rates used. TurboTax will use IRS published rates, but having your own documentation helps if there are any questions later. For penalty calculations, the software is pretty good at figuring out underpayment penalties based on when you made estimated payments throughout the year. Since you mentioned the cost was a major factor in wanting to DIY this year - TurboTax Deluxe runs around $60-80 depending on promotions, which is obviously much better than $650! Just take your time with the foreign income sections and double-check everything before filing.

This thread has been incredibly helpful! I'm dealing with a similar situation where my former employer is demanding repayment of a $30k signing bonus (gross amount) even though I only received about $22k after taxes. Based on what everyone's shared here, it sounds like since I'm repaying in the same tax year, they should only be asking for the net amount. I'm going to reference Revenue Ruling 79-311 and IRS Publication 15 when I talk to their tax department. One question though - has anyone had success getting their employer to put the corrected repayment calculation in writing? I want to make sure there's a paper trail showing they agreed to the net amount so there are no issues when I file my taxes next year. Also, for those who used the various services mentioned (taxr.ai, Claimyr), did you find them worth the cost? I'm trying to decide if I should invest in getting professional guidance or if the IRS publications and revenue rulings are sufficient to make my case.

I'm a CPA and want to add some clarity to this discussion. The key issue here is timing and proper tax reporting. For same-year repayments (which is your situation), your employer should indeed only request the net amount you received. This is because they can make what's called a "correcting entry" to their payroll records before year-end, essentially treating the bonus as if it was never paid. They recover the tax withholdings directly from the government when they file their quarterly payroll tax returns. However, I've seen many employers get this wrong because their payroll departments don't understand the distinction. Here's what I recommend: 1. Request a meeting with their tax/accounting department (not HR) 2. Reference IRS Revenue Ruling 79-311 and Publication 15, Section 13 3. Ask them to explain their "correcting entry" process for the W-2 adjustment 4. Get their revised calculation AND the process explanation in writing If they still refuse, you might consider filing a complaint with your state's department of labor, as demanding repayment beyond what you actually received could violate wage and hour laws in some states. The bottom line: you should only repay what actually hit your bank account when the repayment occurs in the same tax year as the original payment.

I'm dealing with a somewhat similar situation - discovered a forgotten Coverdell ESA at age 29, just under the wire! After researching this extensively, I can confirm that changing the beneficiary to your daughter is absolutely the right move. One thing I learned that might help: the IRS doesn't automatically track when Coverdell ESAs hit the age 30 deadline unless there's a triggering event (like a distribution or beneficiary change). So the fact that you're 32 doesn't necessarily mean you're already in trouble - many forgotten accounts just sit there until someone takes action. When you contact the financial institution, ask specifically about their "abandoned account" procedures. Some institutions have been known to automatically distribute forgotten Coverdells after age 30, but others just let them sit indefinitely. Understanding their specific policy will help you know if there's any urgency beyond just wanting to get this resolved. Also, once you change the beneficiary to your daughter, consider setting up automatic statements or alerts so this doesn't happen to the next generation! It's amazing how these accounts can just disappear from family knowledge. The $12,500 is going to be an incredible gift for your daughter's education - your grandparents' thoughtfulness will continue benefiting your family for years to come.

I'm really glad I found this thread - I'm actually in a very similar situation! I discovered a forgotten Coverdell ESA from my aunt when I turned 31 last year, and like you, had absolutely no idea it existed until I was going through some old documents. From my experience dealing with this, changing the beneficiary to your daughter is definitely the way to go. I changed mine to my nephew and it was surprisingly straightforward - took about 3 weeks total. The financial institution (Fidelity in my case) was actually really helpful and walked me through the whole process. One thing I'd add that I haven't seen mentioned yet: make sure to ask about any account maintenance fees that might have been eating into the balance over the years. My account had been charging $25 annually for "dormant account fees" that I was able to get refunded once I reactivated it. With $12,500, you might have lost some value to fees too. Also, don't beat yourself up about not knowing about it earlier. Apparently this is more common than you'd think - the customer service rep told me they handle several "rediscovered" education accounts every month. Your grandparents probably thought someone else in the family would mention it to you, or maybe they intended to tell you when you got older but unfortunately passed away before that happened. The good news is your daughter is going to have an amazing head start on her education savings thanks to your grandparents' foresight!