Based on my experience helping clients with the closer connection exception, I'd say the IRS is generally reasonable about granting it when you have legitimate ties to your home country like you describe. The key is being thorough and consistent in your Form 8840. A few practical tips: Keep detailed records of your days in each country (I use a simple spreadsheet), maintain documentation of your home country ties (property tax bills, utility statements, insurance policies), and be prepared to show that your US presence serves a specific temporary purpose rather than indicating permanent settlement. One thing many people overlook is demonstrating active steps to maintain ties to their home country while abroad. Things like renewing professional licenses, maintaining voter registration, or keeping active memberships in home country organizations can strengthen your case significantly. The process itself isn't adversarial - you're essentially making a factual case that your life is centered elsewhere despite significant US presence. As long as that's genuinely true and you can document it, you should be fine.

The closer connection exception is actually quite manageable if you have genuine ties to your home country like you describe. I went through this process two years ago when I was spending significant time in the US for work but maintained my primary residence and life in Australia. The IRS looks for a "preponderance of evidence" that your ties to your home country are stronger than your US ties. With family, property ownership, and established life connections in your home country, you're already in a strong position. The key is being comprehensive on Form 8840 and consistent in your documentation. One thing I learned is that the IRS pays particular attention to where you have your "abode" - essentially where you consider home when you're not working or traveling. Since you mention maintaining most of your life connections in your home country, that should work in your favor. Just make sure you can demonstrate ongoing, active ties rather than just historical ones. The process was straightforward for me - I filed Form 8840 with my tax return and never heard anything back, which in tax terms means they accepted it. Keep good records of your days present in each country and maintain documentation of your home country connections, but don't overthink it if your situation is genuinely as you describe.

Anyone know how this affects my 401k? I'm in a similar situation where I got laid off and have a 401k with the old employer. Will taking distributions from that generate imputed income W-2s too?

Based on your description of receiving severance in 2023 and having a $2,800 W-2, this is most likely related to those restricted stock units (RSUs) that Victoria mentioned. Many companies have "accelerated vesting" or "continued vesting" provisions in their equity agreements for layoffs, where your unvested stock continues to vest for a period after termination. The key thing to understand is that when RSUs vest, the IRS treats the fair market value of those shares as regular W-2 income, even though you didn't receive cash. Your former employer is required to report this and withhold taxes just like regular salary. Check if there's any federal or state tax withholding shown on this W-2 - if so, you'll get credit for those withholdings when you file your return. Since you strategically timed your severance for tax purposes, you'll want to factor this additional $2,800 of income into your 2023 tax planning. It's treated exactly like regular wages for tax purposes, so it will be subject to your marginal tax rate. The good news is this is likely a one-time occurrence unless you have more equity that continues vesting in 2024.

Don't forget to check if you qualify for any tax treaty benefits! The high-tax kickout rules still apply, but sometimes tax treaties between the US and the foreign country have special provisions about how certain types of income are categorized or credited. For example, I have income from Canada and the US-Canada tax treaty has specific rules about pensions and social security that affected how I filled out my Form 1116. Might be worth looking into depending on which country your foreign income is coming from.

Just wanted to share my experience after dealing with a similar high-tax kickout situation last year. The key thing that helped me was creating a simple spreadsheet to track each source of foreign income separately before even touching Form 1116. I listed each type of income (interest, dividends, capital gains, etc.), the country it came from, the foreign tax paid, and calculated the effective foreign tax rate for each. This made it crystal clear which items needed to be "kicked out" to general category vs staying in passive. One thing I learned the hard way - make sure you're calculating the effective rate correctly. Don't just look at the statutory tax rate of the foreign country. You need to divide the actual foreign tax YOU paid by the actual foreign income YOU received. Sometimes withholding taxes, tax credits in the foreign country, or other adjustments can make your effective rate different from what you'd expect. Also, keep really good records of your calculations because if the IRS questions your categorization later, you'll want to be able to show exactly how you determined which income belonged in which category.

You might want to consider filing Form 8379 (Injured Spouse Allocation) if you're married filing jointly and your spouse has student loans that could possibly be in default. This form, which I believe could help in certain situations, essentially tells the IRS that part of the refund belongs to you and shouldn't be offset for your spouse's debts. It's perhaps worth noting that the processing time might be longer, possibly 11-14 weeks instead of the usual 3-4 weeks, but it could potentially protect your portion of the refund if there are any student loan issues that might appear later.

Based on my experience dealing with Treasury offsets, if you're showing $0 on the offset hotline right now, you're very likely safe for this tax season. However, I'd recommend double-checking a few things to be absolutely certain: First, confirm with your loan servicer that your student loans aren't actually in default status (270+ days delinquent). If you're making payments, in forbearance, or on an income-driven repayment plan, they typically can't offset your refund even if you're behind. Second, the timing matters - if you just filed recently, there's a small window where an offset could be submitted after you checked. But given that you're doing gig work and really need this refund, I'd suggest calling that Treasury number one more time about a week before you expect your refund to be processed, just for extra peace of mind. The vast majority of the time, no offset showing means no offset taken. Good luck! 🤞

Just to add another perspective - I was in a similar situation last year (US resident who moved abroad and then took a retirement distribution). One thing to be aware of is that you may be subject to additional reporting requirements beyond just the 1040 and figuring out how to report the 1042-S income. If you had financial accounts outside the US that exceeded $10,000 at any point, you might need to file an FBAR (FinCEN Form 114). And depending on your total assets abroad, you might also need Form 8938. These have serious penalties if you miss them.

Slight tangent but worth mentioning - when you file as a dual-status taxpayer, be aware that you generally can't file jointly with a spouse, you're limited on which deductions/credits you can claim, and you have to use the standard deduction (itemizing isn't allowed). Also, foreign tax credits work differently.