I've been following this thread closely because I'm dealing with a very similar situation with my own tax return. What's been most helpful to me is understanding that the IRS verification request doesn't necessarily mean there's a problem - it's often just their automated system doing a routine check. From everything I've read here and my own research, it sounds like your 1098-T with Box 8 checked should be the primary document you need. The fact that you were full-time in spring 2022 clearly meets the "at least half-time for one academic period" requirement for the American Opportunity Credit. One additional tip I'd add: when you respond to the IRS, make sure to include the notice number from their original letter and respond within the timeframe they specified. I've heard that timely responses help avoid any potential complications or additional follow-up requests. It's also worth noting that if your mom used tax preparation software or a tax professional, they might be able to help with the response since they would have the original Form 8863 and can verify that everything was reported correctly. The advice about getting an enrollment verification from your registrar's office is spot-on - it's usually a quick process and provides that extra layer of documentation that can put both you and the IRS at ease.

I went through this exact same situation with my son last year! He was full-time in spring but dropped to part-time in fall, and we got a similar verification request from the IRS about his American Opportunity Credit. The key thing that helped us was understanding that "part-time" doesn't automatically disqualify you - it's all about whether you meet the federal "at least half-time" standard. In our case, even though my son was only taking 7 credit hours in fall (which his school considered part-time), that still met the federal half-time requirement of 6+ credit hours. Here's what we sent to the IRS and it resolved everything quickly: 1. Copy of the 1098-T with Box 8 checked 2. An enrollment verification letter from the registrar showing credit hours for both semesters 3. A brief cover letter explaining that he was full-time in spring (clearly meeting the "at least one academic period" requirement) The IRS accepted this documentation without any follow-up questions. The whole process took about 3 weeks from when we mailed our response to when we received their acceptance letter. Don't stress too much about this - these verification requests are really common and usually just routine compliance checks. Your situation with being full-time in spring definitely meets the requirements for the American Opportunity Credit!

One thing I haven't seen mentioned yet is the potential impact on your wife's Social Security benefits. If she's been out of the workforce for a while, having documented earnings through the LLC could help build her Social Security credits and increase her future benefits. Also, regarding the retirement account question - if you do set up an LLC and she becomes an employee, consider a Solo 401(k) instead of a traditional 401(k) plan. Solo 401(k)s have much lower administrative costs and allow for higher contribution limits if she's also considered an owner of the business. Just make sure to consult with a tax professional who has experience with trading businesses before making any decisions. The IRS has specific guidelines for what constitutes a legitimate trading business versus investment activity, and getting this wrong could result in penalties and back taxes.

I'd recommend being very careful about the employment arrangement between spouses in an LLC. The IRS has specific "reasonable compensation" requirements that can trip people up. Your wife would need to receive wages that are comparable to what you'd pay an independent trader with similar skills and responsibilities. One often overlooked aspect is that if you elect S-Corp taxation for the LLC, your wife would be subject to employment taxes on her salary, but any additional distributions could avoid self-employment taxes. However, the salary portion must still be reasonable for the work performed. Also consider that creating a formal business structure means you'll need to maintain corporate formalities - separate bank accounts, formal documentation of business decisions, and proper record-keeping. The IRS looks closely at family businesses to ensure they're legitimate business arrangements rather than just tax avoidance schemes. Before making any decisions, I'd strongly suggest consulting with both a tax professional and a business attorney who have experience with trading businesses. The rules around trader vs. investor status, reasonable compensation, and family employment can be quite complex.

One important thing to keep in mind is that you need to receive Form 1098-T from your daughter's school to claim education credits. The school should send this by January 31st showing tuition and fees paid during the tax year. However, don't just rely on the 1098-T amounts - sometimes the form shows payments received by the school rather than what you actually paid. You should use your actual payment records (receipts, bank statements, etc.) to determine the correct amount of qualified expenses. Also, remember that room and board don't qualify for education credits, only tuition, fees, and required course materials like textbooks. Some people mistakenly try to include housing costs which can trigger IRS scrutiny later.

This is such a helpful thread! I'm in a similar situation with my son starting his sophomore year. One thing I learned the hard way is to keep detailed records throughout the year, not just wait until tax time. I created a simple spreadsheet tracking all education payments - tuition, fees, required textbooks, lab fees, etc. - along with dates and payment methods. This made it so much easier when I needed to verify amounts against the 1098-T form. Also, if your daughter buys textbooks from sources other than the school bookstore (like Amazon, used book sites, etc.), make sure those receipts clearly show they were required for her courses. The IRS can ask for documentation proving the books were actually required, not just recommended reading. One last tip: if you're paying tuition in December for spring semester, those payments count toward the current tax year's education credits, not the following year when the classes actually happen. The timing is based on when you pay, not when the education occurs.

This has been an incredibly educational thread! As someone relatively new to partnership taxation, I've been struggling with mineral royalty reporting and this discussion has really clarified things for me. One area I'd love more insight on is the documentation aspect. Several of you mentioned including detailed supporting statements, which makes perfect sense for defending the position. But I'm wondering about the practical mechanics - do you attach these as separate PDF schedules to the electronic filing, or do you include them as text in the "Additional Information" sections of the tax software? Also, I'm curious about how you handle the partnership agreement language. Do you recommend that clients include specific language about the passive nature of royalty activities in their partnership agreements, or is this more of a facts-and-circumstances determination based on actual operations? Finally, for those dealing with multiple properties across different states, do you find any states have particularly aggressive positions on partnership-level taxation of royalty income that might influence the federal reporting strategy? Thanks to everyone who has shared their expertise here - this is exactly the kind of real-world guidance that makes all the difference in building confidence with these complex returns!

This discussion has been incredibly thorough and helpful! As someone who handles a mix of partnership returns including several with mineral interests, I really appreciate seeing the consensus around treating passive royalty income as portfolio income on Schedule K rather than business income on page 1. One practical question I haven't seen addressed - for partnerships that receive multiple 1099-MISC forms for royalty payments throughout the year, do you typically reconcile these to a separate royalty income schedule on the return? I've been summarizing them in a supporting statement, but I'm wondering if there's a preferred method for showing this reconciliation, especially when dealing with partnerships that have dozens of small royalty payments from different operators. Also, has anyone dealt with the situation where a partnership receives both royalty payments and bonus payments for new leases in the same year? I assume the bonus payments would also be treated as portfolio income, but I wanted to confirm this treatment is consistent with the royalty income approach. The revenue ruling reference and software recommendations have been particularly valuable - it's clear I need to upgrade my research resources and possibly consider more specialized tax software as this area of my practice grows. Thanks to everyone for sharing their real-world experience!

11 Does anyone know if attorney fees for these cases are deductible? I got a settlement too but almost 40% went to the lawyers. Do I report the full amount or just what I actually received?

Just to add another perspective - I went through something similar with a different class action settlement last year. The key thing I learned is that you absolutely need to keep detailed records of everything related to the settlement. Make copies of your settlement check, any correspondence from the law firm, and especially any documentation that describes what the settlement was for. Even if GM doesn't send you a 1099, having this paperwork will be crucial if the IRS ever questions the reporting. Also, if you're unsure about the tax treatment, consider making quarterly estimated payments on at least a portion of it. Better to overpay slightly and get a refund than to owe penalties for underpayment. The IRS safe harbor rule generally protects you if you pay 100% of last year's tax liability (110% if your prior year AGI was over $150,000). One more tip - if this settlement pushes you into a higher tax bracket, you might want to look into whether you can spread the recognition of this income over multiple years, though that's typically only available in very specific circumstances.