I actually know someone who got caught for tax evasion on illegal income. The issue wasn't just not reporting it, but the lifestyle mismatch. They had a minimum wage job but drove an expensive car and bought a house. IRS flagged it, started investigating, and that led to the criminal charges for the original illegal activity. So yeah, damned if you do (admit to illegal activity) and damned if you don't (get caught for tax evasion AND the original crime).

This is a fascinating legal paradox that highlights the complexity of tax law. The Fifth Amendment protects against self-incrimination, but the Supreme Court ruled in United States v. Sullivan (1927) that this doesn't exempt illegal income from taxation. The practical reality is that the IRS operates under strict confidentiality rules (IRC Section 6103), so they generally can't share your tax information with law enforcement without proper legal process. However, unexplained wealth discrepancies are what typically trigger investigations in the first place. If someone hypothetically had $135k in unreported income, the bigger risk isn't necessarily how you categorize it, but whether your reported lifestyle matches your claimed income sources. The IRS has become very sophisticated at detecting these mismatches through data analytics. The "illegal activities" checkbox exists primarily for legal compliance with Supreme Court rulings, not as a trap. But you're right that it creates an impossible situation - report honestly and potentially incriminate yourself, or misrepresent and risk fraud charges if discovered later. For anyone in genuinely complex income reporting situations, consulting a tax attorney who can provide privileged advice is usually the safest approach.

Thanks everyone for the detailed responses! This has been incredibly helpful. Based on what I'm reading, it sounds like TurboTax Deluxe should handle my Robinhood crypto transactions just fine, especially since I'm only dealing with around 30-40 trades and Robinhood will provide the 1099-B. I think I'll stick with Deluxe for now and see how the import process goes. If I run into any issues or need additional forms, I can always pay the extra fee to add them rather than upgrading to Premier upfront. The suggestion about taxr.ai is interesting too - might give that a try if I find myself getting confused with the cost basis calculations. Really appreciate everyone sharing their experiences, especially those who were in similar situations with Robinhood crypto trading. Makes me feel much more confident about tackling this year's taxes!

Just to add another perspective - I've been using TurboTax Deluxe for crypto reporting for the past two years with Robinhood, and it's worked perfectly. The key thing is making sure you wait for Robinhood to send you the consolidated 1099-B (they usually send it by mid-February). This form includes all your crypto transactions with the correct cost basis already calculated. One tip: when you import the 1099-B into TurboTax Deluxe, double-check that all transactions are properly categorized as short-term vs long-term capital gains. With 30-40 transactions, this is manageable to review manually. I found that most of my crypto trades were short-term since I was actively trading, which means they're taxed as ordinary income rather than the lower capital gains rate. Also, keep your own records of all transactions as a backup. While Robinhood's 1099-B is generally accurate, having your own transaction history helps if there are any discrepancies or if you need to reference specific trades during the filing process.

Anna, I totally feel your pain with this topic! I went through something very similar when I sold my former primary residence that I had been renting out. The confusion around qualified vs non-qualified use is real, and it sounds like you need a tax professional who can actually explain this stuff clearly. Based on what everyone has shared here, it sounds like you're in a much better position than you initially thought. The key insight is that your work-related relocation means those 4.5 years of renting don't count against you for the non-qualified use calculation - that's huge! Your $63k partial exclusion calculation seems right based on the 2-out-of-5 year rule. Just make sure you have good documentation of your work-related move (job offer letter, employment records, etc.) in case the IRS ever asks questions. One thing I'd add - if you did claim depreciation on the rental during those 4.5 years, you'll need to account for depreciation recapture separately from the capital gains calculation. That gets taxed at a different rate (up to 25%) regardless of the non-qualified use rules. Definitely consider finding a new accountant who specializes in real estate transactions. This stuff is complex but shouldn't be a source of frustration between you and your tax professional. Good luck with everything!

Anna, I can definitely understand your frustration with this topic - the non-qualified use rules are genuinely one of the more confusing aspects of capital gains tax on primary residences! The good news from reading through all these responses is that your work-related relocation in July 2018 is actually a huge advantage. Since you moved out for employment reasons, those 4.5 years of rental income don't count as "non-qualified use" under Publication 523. This means you avoid the worst-case scenario where part of your gain would be allocated to non-qualified periods and potentially lose exclusion eligibility. Your $63,000 partial exclusion calculation sounds correct based on the 2-out-of-5 year rule (living there only 6 months out of the last 5 years before sale). So here's how it works in practice: 1. Calculate your total capital gain from the sale 2. Subtract your $63,000 partial exclusion 3. Any remaining gain gets taxed as long-term capital gains (plus depreciation recapture if applicable) 4. But thanks to your work-related move, none of that remaining gain gets penalized for the rental period Make sure to keep documentation of your job relocation - employment offer letter, moving records, anything showing the timeline. And honestly, I'd echo what others have said about finding a new accountant. Someone who specializes in real estate transactions should be able to walk through Publication 523 with patience and clarity rather than getting frustrated with legitimate questions about complex tax rules. You're actually in a much better position than many people who rent out former primary residences!

I've been dealing with this exact same frustration! After reading through all these strategies, I wanted to share what finally worked for me last month. I tried the 7am Wednesday approach that everyone's recommending (which is legit - that timing really does matter), but I also discovered you can sometimes get through by calling the IRS International line at 1-267-941-1000. It's technically for taxpayers living abroad, but they can often help with basic domestic issues or transfer you directly to the right department without going through the main phone tree nightmare. The wait times are usually much shorter since fewer people know about it. Worth a shot when you're desperate! Also, that congressional representative tip is gold - I had no idea that was even an option until I read about it here. This whole system is completely broken but at least we can help each other navigate the madness! 🤞

I've been battling this exact same issue for over a month now with my 2023 return! Reading through all these strategies gives me so much hope - I had no idea about the 7am Wednesday timing or the international line trick. It's absolutely insane that we need to strategize like we're planning a military operation just to talk to our own tax agency. I'm definitely going to try calling at exactly 7:00am tomorrow (setting multiple alarms for 6:55am) and if that doesn't work, I'll try the international line approach. The congressional representative option is something I never knew existed either - crazy that our elected officials can actually help cut through this bureaucratic nightmare. Thanks to everyone sharing their war stories and tips! This thread has been more helpful than anything else I've found online. It's both comforting and depressing to know so many of us are stuck in this same phone system purgatory, but at least we're all fighting it together. Will definitely report back if I manage to break through the fortress tomorrow! 🤞

One thing to keep in mind with your Germany situation is the timing of when you can claim the Foreign Tax Credit. Since Germany operates on a calendar year like the US, you should be able to claim the €8,500 you paid for 2024 on your 2024 US return. However, make sure you have proper documentation from the German tax authorities showing the exact amount paid and that it was indeed income tax (not social security or other types of taxes). The IRS can be very particular about this documentation, especially during audits. Also, since you mentioned using TurboTax, be aware that the software sometimes struggles with complex international situations. You might want to double-check its calculations manually or consider getting a consultation with a tax professional who specializes in expat taxes. The Foreign Tax Credit can get complicated when you factor in different tax rates, timing differences, and the interaction with potential state tax obligations. One last tip: keep detailed records of your days in Germany vs any time spent in California or other US states. This documentation could be crucial if California ever challenges your residency status.

One more thing to consider that I haven't seen mentioned yet: if you're planning to stay in Germany long-term, you might want to look into whether you qualify for the "bona fide residence test" vs. the "physical presence test" for the Foreign Earned Income Exclusion. The bona fide residence test can be more flexible than the physical presence test (which requires 330 days outside the US in a 365-day period). If you establish bona fide residence in Germany, you don't have to count days as strictly, which gives you more flexibility to visit California without jeopardizing your tax benefits. Also, since you mentioned working remotely for a US company, make sure your employer isn't withholding California state taxes from your paychecks while you're abroad. I've seen cases where payroll departments continue withholding state taxes for remote workers overseas, which creates a mess when you're trying to establish non-residency. If they are withholding, you'll want to update your state tax withholding status immediately and potentially file for refunds of any California taxes already withheld for 2024. The combination of Foreign Tax Credit on federal plus establishing non-residency in California could save you thousands compared to paying both German AND California taxes on the same income.