Thank you for mentioning this - I just checked and you're right, our state withholding is also way off. We did have about $6k in investment income from some stocks we sold, but I didn't think that would make such a huge difference. Maybe it's the combination of everything?

The investment income definitely contributed to your tax situation. Capital gains are taxed differently than regular income, and there's typically no withholding on those, so that $6k in investment income could easily add $1,000+ to your tax bill with no withholding to offset it. It's definitely the combination of everything - your increased regular income being under-withheld plus the investment income with no withholding at all. Next year, if you know you'll have investment income, you can adjust your W-4 to withhold extra to cover those taxes too.

This is good advice. I once had an employer that accidentally classified me as exempt for half the year! They had to issue a corrected W-2 and everything. Always double-check those withholding amounts against what should be taken out.

Thanks for bringing this up! I did check with my parents and they're not claiming me anymore since I've been fully supporting myself since graduation. But that's definitely something I wouldn't have thought about before reading your comment. How do you know whether someone can claim you as a dependent? Is there like an age cutoff or income limit?

There's actually a few tests the IRS uses. For a "qualifying child" dependent, you need to be under 19 (or under 24 if you're a student) and live with your parents for more than half the year. There's also a support test - if you provided more than half of your own financial support during the year, then your parents can't claim you, regardless of age or living situation. Since you mentioned you've been fully supporting yourself, you're definitely not a dependent anymore. It's definitely something that causes confusion that first year of independence! Glad you already sorted it out with your parents.

This is the best advice here. When I was a new grad, I missed out on the American Opportunity Credit my first year because I didn't realize I could claim it for my final semester. That was literally $1,500 down the drain! Also check if your state has additional credits. In California, I got a renter's credit that most of my friends didn't know about.

Thanks for this! I was in school for the spring semester before graduating in May, so I'll definitely look into the American Opportunity Credit. I had no idea there was a difference between credits and deductions until reading these comments. Do software programs like TurboTax automatically check for these credits, or do I need to specifically know to look for them? I'm worried about missing something important now.

The biggest shock for me was realizing that when you're self-employed, you pay BOTH halves of FICA (Social Security and Medicare). As an employee, your employer pays half and you pay half, but self-employed folks pay the whole 15.3%. Then on top of that, you're still paying regular income tax! What helped me was setting aside 30% of every payment I receive for taxes. It sounds high but it's better than being surprised with a huge bill at tax time.

That makes so much sense! No wonder I've been getting hit so hard. I was only setting aside about 15% thinking that would cover it. Guess I need to bump that up to 30%.

I haven't checked that! My home country is Malaysia - would that make a difference even if I'm determined to be a nonresident alien? And how do I find out what the specific treaty provisions are?

Yes, tax treaties can definitely make a difference! Malaysia does have a tax treaty with the US, and it can affect how certain types of income are taxed even as a nonresident. The IRS has Publication 901 (US Tax Treaties) that summarizes the provisions, but they're not always easy to understand. The treaty might give you special treatment for scholarships, fellowships, or certain types of income. You can find the basics on the IRS website, but the actual treaty text is more detailed. When you file your taxes, you'd need to fill out Form 8833 to claim any treaty benefits.

I used Sprintax last year as an F-1 student and it was pretty good. It's specifically designed for nonresident aliens so it asks all the right questions about visa type, entry dates, and tax treaties. It's a bit pricey compared to some other options but the peace of mind was worth it for me.

Did you have to do anything special to add that explanation letter when e-filing? Or did you just mail it separately?

I e-filed my return and then mailed the explanation letter separately with a cover page that had my name, social security number, and tax year clearly marked. I included a brief note stating it was supplemental documentation for my already-filed return. If you're using FreeTaxUSA like you mentioned, they also have a section where you can add notes or explanations directly in your e-filed return, which might be sufficient without needing to mail anything separately.

The federal threshold for 2023 was actually supposed to be $600, but the IRS delayed implementation and kept it at $20,000 and 200 transactions. But some companies might have already updated their systems for the $600 threshold before the IRS announced the delay.