One more thing to consider - state taxes! Depending on which state you last lived in, you might still be considered a resident for state tax purposes even while living abroad. Some states are SUPER aggressive about keeping you as a tax resident (looking at you, California and New York). Make sure you properly terminate your state residency before moving abroad. This usually means getting rid of state driver's license, voter registration, bank accounts, etc. I didn't do this properly when I moved to Singapore and ended up owing CA taxes for 2 years until I fixed my residency status!

This is such a helpful thread! I'm in a similar situation but working in Germany. One thing I'd add - make sure you understand the timing of when you can start claiming the Foreign Earned Income Exclusion. You need to qualify for either the bona fide residence test OR the physical presence test for the specific tax year you're claiming it. The physical presence test requires 330 full days outside the US in any 12-month period, but it doesn't have to align with the calendar year. So if you just moved to China, you might not qualify for the full exclusion in your first tax year depending on when you arrived. Also, Hugo, since you mentioned your income will be around $45,000 USD equivalent, you'll likely be able to exclude all of it under the FEIE (the limit is $120,000 for 2025). But definitely keep good records of your days in/out of the US and your Chinese tax payments just in case you need them later! The investment income advice from Nasira is spot on - those dividends and capital gains will still be taxable in the US regardless of the FEIE.

One thing nobody's mentioned - if you receive a gift over $17,000 from any single person in 2023, the GIVER might need to file a gift tax return (though they probably won't owe taxes). This doesn't affect you as recipient, but worth knowing if any of your cash deposits are from large gifts.

As someone who's dealt with similar concerns, I'd recommend keeping it simple but organized. Create a basic spreadsheet with columns for date, amount, source, and purpose. For example: "3/15/2024, $800, Mom & Dad, Birthday gift" or "4/2/2024, $1,200, Sarah + Mike, Trip to Vegas repayment." The key is consistency - if you start tracking now, keep doing it. Banks and the IRS look for patterns that don't make sense with your lifestyle and income. Your deposits sound completely normal for someone with an active social life and family relationships. One practical tip: if you're selling items online, take screenshots of the listings and any messages about payment method. This creates a paper trail that shows legitimate personal transactions, not hidden business income. Same goes for Venmo/Zelle requests from friends - those digital records are gold if you ever need to explain the source of cash deposits. The fact that you're being proactive about documentation actually works in your favor. It shows you're not trying to hide anything, just being responsible about record-keeping.

Has anyone actually been audited on this? What did the IRS actually accept as documentation? I haven't been keeping great records and I'm stressed about it.

Based on what I'm seeing here, it sounds like you're in a good position to benefit from the actual expense method given your high mileage and newer SUV. With 12,000 business miles out of 20,000 total (60% business use), you'd apply that percentage to all your vehicle expenses. Here's what I'd suggest for documentation: Start tracking now even if you haven't been perfect about it before. You don't need to log every single trip, but you do need enough records to prove that 60% business use. Since you're in sales visiting clients, your work calendar/appointment schedule could be really helpful here - note the mileage for client visits and use that pattern to establish your typical business driving. For a newer SUV with higher insurance costs, the actual expense method often beats the standard mileage rate (currently 67 cents per mile for 2024). Do the math both ways - 12,000 miles × $0.67 = $8,040 with standard mileage. If 60% of your actual car expenses (insurance, gas, maintenance, depreciation) exceeds $8,040, go with actual expenses. The key is starting good record-keeping habits now. Even if your past records aren't perfect, having solid documentation going forward will help if you're ever questioned about it.

Something everyone seems to be overlooking in this thread - the contribution limits you listed don't seem right. The Roth IRA contribution limit for 2019-2022 was only $6,000 per year if you were under 50, or $7,000 if you were 50+. You mentioned contributing $8k each year which would exceed the limits unless you're counting both yours and a spouse's contributions together? If you over-contributed, you might need to address that before worrying about the withdrawal rules. Excess contributions are subject to a 6% tax penalty for each year they remain in the account.

Just to add a small clarification that might help - there's also a separate ordering rule for Roth IRA withdrawals that determines what comes out first: 1) Regular contributions come out first (always tax and penalty free) 2) Conversion contributions come out next (might be subject to penalties if within 5 years of conversion and under 59½) 3) Earnings come out last (subject to tax and possibly penalties if you don't meet requirements) Since you're over 59½ and if your first Roth contribution was indeed in 2019, then starting in 2024, everything comes out tax and penalty free including earnings. This assumes 2019 was truly your first-ever Roth IRA.

Just to add another option - you might consider having your higher-earning partner claim one child and file as HOH, while you claim the other child, also filing as HOH. This way, both of you get some tax benefits. This only works if you can legitimately maintain two separate households though, which doesn't sound like your situation. If you all live together in one home, only one person can claim HOH status. The other must file as Single. Also, with your business income at $27k, you'd probably benefit more from claiming both kids for EITC purposes. That credit phases out at higher incomes, so your partner wouldn't benefit from it anyway.

As someone who went through a similar situation a few years ago, I can confirm what others have said - you'll want to claim both children and file as Head of Household, while your partner files as Single. The key thing to remember is that the IRS cares about who actually has custody and provides care for the children, not just who earns more money. Since you're the primary caregiver and have lower income, you'll maximize your household's overall tax benefits by claiming both kids. You'll be eligible for the full Child Tax Credit (up to $2,000 per child) and potentially significant EITC benefits with your $27k income. Your partner, making $120k, would phase out of most child-related credits anyway due to income limits. By filing as Single without dependents, they avoid any complications while you capture all the available credits. Just make sure you keep good records showing that the children lived with you for more than half the year and that you provided more than half of each child's support - even if your partner contributes more to overall household expenses, the IRS looks at support provided specifically to each child.