Thanks for this guidance. Do you happen to know which tax software handles ITIN applications most efficiently? And approximately how long should we expect for the ITIN processing?

All the major tax software programs (TurboTax, H&R Block, TaxSlayer) can handle ITIN applications equally well. They each have guided interviews that walk you through the W-7 form and explain what supporting documents you need. As for processing time, unfortunately, it's quite lengthy right now. Initial ITIN applications are taking about 7-11 weeks according to the IRS, but in practice, it can sometimes take 3-4 months, especially during peak tax season. The good news is that you can still file your return while the ITIN application is processing - you just won't receive certain credits until the ITIN is issued.

This is so true! I used TaxAct last year on an L1 visa and it asked the right questions to determine I was a resident alien for tax purposes based on the substantial presence test. Made a huge difference in available deductions.

Thank you for explaining that! So to be clear, my only option would be filing an amended return (1040-X) if I think I missed something? And I'd need to be specific about exactly what I'm changing from my original return?

Yes, that's exactly right. You need to file Form 1040-X and be very specific about what you're changing and why. The form has columns for original amounts, changes, and corrected amounts. I'd recommend figuring out exactly what deductions or credits you might have missed before filing the amendment. There must be a specific reason your coworker got more back - different tax situations lead to different outcomes.

I've used both TurboTax and TaxAct for the same tax year once (just to compare before submitting) and got nearly identical results. The differences were tiny - like $12. The software shouldn't make a huge difference unless it's helping you discover deductions or credits you didn't know about.

Those business activity codes are super helpful! Do you know if there's a specific one for social media management? That's mainly what I do and I wasn't sure which category fits best.

Curious - how did the IRS figure out your lifestyle didn't match your income? I've always wondered how they catch that kind of thing if you're just spending cash.

They looked at my bank deposits compared to my reported income. Even though I wasn't depositing all the cash, enough of it was going into my account to show a pattern. Plus I financed a car with my "total income" (what I told the dealership I made) which was way higher than what I reported to the IRS. The audit process was brutal - they wanted documentation for EVERYTHING. They can also look at your rent/mortgage payments, car payments, credit card spending, etc. They have sophisticated methods to flag returns where the reported income doesn't support the person's known expenses. The stress and anxiety of going through that audit was the worst part - I wouldn't wish it on anyone.

You would report it on Schedule C (Profit or Loss From Business) as self-employment income. You'll need to fill out your employer's name and address in the appropriate sections. Even if they won't give you tax forms, you should still have their business name and location where you work. This means you'll be treated as an independent contractor rather than an employee. Keep detailed records of when you worked and how much you were paid. You'll also need to pay self-employment tax (Social Security and Medicare) using Schedule SE, in addition to regular income tax. While this means a higher tax burden than if you were properly classified as an employee, it's much better than not reporting and facing potential penalties later.

This is really helpful! I definitely haven't had any penalties before. Is First Time Penalty Abatement something I should specifically mention in my letter? Or should I try to call and request this directly?

You should definitely mention First Time Penalty Abatement specifically in your letter or phone call. Use those exact words. Many IRS agents are trained to check for FTA eligibility, but some might not think to offer it unless you ask directly. It's usually faster to call and request it, as they can often approve it immediately over the phone if you qualify. Just have your notice information ready when you call. In your case, since you've never had penalties before, there's a very good chance you'll qualify!

This is such good advice! I made the mistake of waiting to pay anything while I disputed the penalty, and the interest just kept growing. Ended up owing way more in the end.