As someone who's been dealing with both US and international tax compliance for years, I wanted to add a few practical tips that might help other expats: 1. **Keep detailed records**: For Form 8938, you'll need to track not just year-end values but also the highest balance during the year. I recommend taking screenshots of your account balances monthly, especially for accounts that fluctuate significantly. 2. **Currency conversion timing matters**: Use the Treasury's published exchange rates for the specific dates you're reporting. Don't just use average rates or whatever Google shows you - the IRS expects you to use their official rates. 3. **Australian superannuation complexity**: While your super is technically reportable on Form 8938, there are ongoing debates about whether it should also be reported on Forms 3520/3520-A as a foreign trust. The IRS hasn't provided clear guidance, so many practitioners take a conservative approach and report it on multiple forms. 4. **P2P lending platforms**: These can be tricky. If you're lending directly to individuals, it's likely "other financial assets." If the platform pools funds and you own units/shares in a fund, it's probably custodial. Check your statements to see exactly what you own. Remember that Form 8938 and FBAR have different thresholds and requirements, so you might need to file one but not the other depending on your account values.

Just went through this exact situation last year as a fellow Aussie expat! Your regular bank accounts (CommBank savings, etc.) are definitely deposit accounts - pretty straightforward there. For your trading platform shares, that's a custodial account since the platform holds the securities on your behalf. Your superannuation is also custodial, though as others mentioned, there might be treaty protections to consider. The P2P lending is the tricky one - it really depends on the platform structure. If it's something like RateSetter or SocietyOne where you're essentially buying loan parts directly, that's usually "other financial assets." If it's more like a managed fund where you own units, then custodial. One thing I learned the hard way: make sure you're converting to USD using the Treasury rates for the actual dates, not just year-end rates for everything. Also, keep really good records of your highest balances during the year - I had to go back through 12 months of statements to find peak values. The good news is once you get the hang of the classifications, subsequent years are much easier. And don't forget about FBAR filing if your combined account values hit $10K+ at any point!

I messed this up last year and got a letter from the IRS. Make sure the health insurance plan is actually in YOUR name or your business name. My wife had purchased our family plan under her name only (even though she's not self-employed), and I tried to take the self-employed health insurance deduction. The IRS disallowed it and I had to pay back taxes plus a small penalty.

This is such a helpful thread! I'm in a similar boat with W-2 income from my day job and Schedule C income from freelance consulting. One thing I learned the hard way is to keep really detailed records of your health insurance payments throughout the year. The IRS wants to see that you actually paid the premiums (not just that you were supposed to pay them), so keep all your bank statements, credit card statements, or cancelled checks showing the monthly payments. Also, if you have any gaps in coverage during the year, you can only deduct premiums for the months you were actually covered. Since you mentioned your Schedule C business is profitable and generates most of your income, you should be in great shape to take the full deduction. Just make sure you don't deduct more than your net self-employment income - that's the cap on how much you can claim.

For your situation in California specifically - keep in mind that California taxes retirement account distributions as ordinary income just like the federal government. So if you take a lump sum, you'll pay both federal and CA state taxes on it. If your HELOC interest rate is lower than the potential growth rate in an inherited IRA, you might want to consider keeping some money invested and stretching distributions over the 10-year period. The market has historically returned more than typical mortgage rates.

The advice about estate distributions potentially losing IRA status is crucial - this is actually a common mistake executors make. If the IRA funds were distributed to the estate first, you're likely looking at fully taxable distributions for everyone. However, there's still hope! Some IRA custodians will work with you to establish inherited IRAs even after an estate distribution, especially if you can document that the intent was always to preserve the tax-advantaged status for beneficiaries. The key is acting quickly. For your non-citizen family members, once you get this sorted out, they'll follow the same rules as citizens regarding inherited IRAs. Your father will need annual RMDs plus the 10-year rule, while your sisters just need to empty their accounts within 10 years. Given your San Diego location and that 7.5% HELOC rate, paying off the debt might indeed be the smart move - especially with current market volatility. Just make sure to factor in the combined federal and California tax hit when calculating your net savings. I'd strongly recommend having the executor contact the IRA custodian immediately to see if this can be corrected before any individual distributions are made.

I've verified my identity with the IRS for three years in a row now, despite them saying it should be a one-time thing. Each time they hold my refund until I jump through all their hoops again. The system is completely broken. I've literally sent them the same documents year after year. my advice: just expect to verify every year and be pleasantly surprised if you don't have to.

Based on my experience and what I've seen from others, it really depends on several factors. Generally, ID.me verification should carry over year to year - that was the whole point of implementing it. However, certain triggers can require you to verify again: - Major changes in income or filing status - Moving to a new address - Adding new dependents or credits you didn't claim before - The IRS fraud detection system flagging something unusual Since your tax situation is similar to last year, you'll probably be fine. But honestly, the IRS system can be unpredictable. Some people go years without having to verify again, while others get flagged annually for seemingly no reason. My suggestion: go ahead and file. If they need verification, you'll get a notice or see it when you check "Where's My Refund." No point in worrying about it beforehand since there's nothing you can do to prevent it if their system decides to flag you.

Protip: Always keep a folder with ALL your tax docs, even the ones you think you don't need. You never know when the IRS is gonna come knocking! 📁💼

I went through this exact same situation a few months ago! The CP063 can be really stressful, but here's what worked for me: First, don't panic - you have time to respond. Second, gather ALL your income documents (W-2s, 1099s, bank statements, etc.) and compare them to what you reported. In my case, I had missed a small 1099-MISC from some freelance work. Once I found the discrepancy, I filed an amended return (1040X) and included the missing income. The whole process took about 6 weeks to resolve. If you can't find any missing income and think the IRS is wrong, you can dispute it, but make sure you have solid documentation. Good luck! 🤞