One thing nobody's mentioned yet - if your foreign contractors are COMPANIES (like an LLC or corporation) rather than individuals, they should fill out a W-8BEN-E instead of a regular W-8BEN. Different form, similar purpose. I learned this the hard way when I had contractors in Australia who operated through their own companies. Had to redo all the paperwork. Also, keep in mind that the W-8 forms expire after three years, so you need a system to track and renew them.

Quick note about your last question regarding employees vs contractors: Foreign EMPLOYEES are completely different from contractors! If you hire someone as an actual employee (even if they work 100% abroad), you generally enter the US international tax system and might need to: 1. Register with foreign tax authorities 2. Potentially withhold for foreign social programs 3. Deal with totalization agreements between the US and that country 4. Handle complex payroll requirements It can get extremely complicated fast. Many companies use Professional Employer Organizations (PEOs) or Employer of Record (EOR) services in foreign countries to handle this instead of direct employment.

2 Anyone know if we need to report BAH and BAS on taxes? My W-2 seems way lower than what I actually got paid throughout the year, and I'm wondering if that's because those allowances aren't on the W-2 at all? TurboTax isn't asking me about them anywhere.

Just wanted to jump in as someone who went through this exact same confusion last year! The stress is totally understandable - I was convinced I had made a major error when I first noticed the discrepancy. What really helped me was creating a simple spreadsheet to track all my income sources. I listed my W-2 wages, then added any other income I had entered into TurboTax (even small amounts like bank interest or that $20 from a side gig). It all added up to match my 1040 total. Also, since you mentioned you're military, double-check if you had any PCS moves last year. Sometimes there are taxable reimbursements or benefits that get reported separately from your regular pay, and those would show up in your 1040 but not necessarily be obvious on your W-2. The key thing is that your W-2 is just ONE piece of your total tax picture. Your 1040 is the complete story of all your income for the year. Once I understood that concept, everything made sense!

Another thing to consider is whether your wife has other income. If the caregiver payments are her only income and it's below the standard deduction ($13,850 for 2023 for single filers), she wouldn't owe federal income tax anyway, regardless of whether the income can be excluded. But she'd still need to file if taxes were withheld and she wants to get a refund.

I'm dealing with a very similar situation with my father's caregiver payments. The confusion about W-2 vs 1099 is really common - I think agencies sometimes don't explain the tax implications clearly when you start. One thing that helped me was requesting documentation from the state program about whether it qualifies as a Medicaid Home and Community-Based Services (HCBS) waiver program. If it does, and if your mother-in-law lives in your home, you might qualify for the difficulty of care exclusion under IRS Notice 2014-7. Even if you qualify for the exclusion, you still need to report the W-2 income on your tax return and then exclude it with proper documentation. The IRS will have already received a copy of that W-2 with your wife's SSN, so not reporting it could trigger questions later. I'd definitely recommend having taxes withheld going forward. Even if you end up qualifying for exclusions, it's better to get a refund than to owe money you weren't expecting.

3 Has anyone used TurboTax for rental property depreciation? I'm struggling with how to enter improvements from previous years that I forgot to include.

Just to add another perspective on this - I've been managing rental properties for about 8 years and have dealt with this exact situation multiple times. The key thing everyone's mentioned is correct: you don't need to amend your 2022 return for the $3,800 window replacement. One thing I'd emphasize is documentation. Make sure you keep all your receipts, invoices, and any photos of the work being done. The IRS may ask for proof of when the improvement was actually placed in service if you ever get audited. I always create a simple spreadsheet tracking all my rental property improvements with dates, costs, and depreciation schedules. Also, since you mentioned this is a recurring issue (forgetting to include improvements), consider setting up a simple system to track these as they happen. I use a basic app on my phone to photograph receipts immediately and note what property they're for. Has saved me from missing depreciation on several occasions! The consensus here is solid - start depreciating this year and don't stress about the amendment for this amount.

I switched from simplified to regular method this year and found out you can actually deduct a portion of home repairs that benefit the entire house! I had my central AC replaced for $7,500 and got to deduct 18% of that cost (my office percentage). But be careful - if the repair only benefits personal spaces, you can't deduct any of it. Also, don't forget about these expenses for the regular method: - Property insurance - Security system - Cleaning services - HOA fees - Home maintenance

You're absolutely right about the math! In high-rent areas like yours, the simplified method rarely makes sense. I'm in a similar boat - paying $3,200/month rent in Seattle with 25% business use, so I'm looking at around $9,600 in rent deductions alone with the actual expense method. The main reason people choose simplified isn't because it's better financially, but because they're intimidated by the recordkeeping. You need to track and document every home-related expense throughout the year - utilities, insurance, repairs, etc. Plus you have to maintain floor plans and usage logs in case of an audit. But honestly, once you set up a simple spreadsheet or use accounting software, it's not that complicated. And the extra deductions are usually worth thousands more than the $1,500 cap. Just make sure you're using the space exclusively for business - that's the biggest audit trigger the IRS looks for.