Form 3115 is actually filed in TWO places - you attach the original to your timely filed tax return (including extensions) for the year of change. Then you also have to send a COPY to the IRS national office in Ogden, UT. The copy to the national office must be sent at least 90 days before your tax return is filed. And as far as I know, even if you e-file your return, you still have to mail a physical copy of the 3115 to the Ogden address. It's one of those weird IRS quirks that hasn't caught up with the digital age yet.

This is really helpful advice about shopping around for specialists! I'm curious - how did you find a CPA who specifically specializes in Form 3115s? Did you just call around asking, or is there some directory or way to search for tax professionals by specialty? I'm definitely interested in getting multiple quotes now, especially if I can find someone who does these regularly and might be more efficient (and cheaper) than my current CPA.

Your brother is right! Selling items on Facebook and getting paid through Venmo is considered income and is different from personal transfers. If you receive more than $600 total for selling items this way in a year, Venmo is supposed to send you a 1099-K form. Even if you don't get a 1099-K, you're still legally required to report the income on your tax return. You can deduct your original cost of the items to reduce the taxable amount - you're only taxed on the profit. Keep good records of what you paid originally and what you sold items for!

This is super helpful! I've been so confused about this whole thing, but your breakdown makes it crystal clear. I think I was overthinking it because I kept reading conflicting information online. So basically, all those Zelle transfers I mentioned in my original post (splitting rent, paying back for concert tickets, vacation expenses) are just personal payments and I don't need to worry about reporting them at all? That's such a relief! I was starting to panic thinking I'd been doing something wrong tax-wise all this time.

Good point about tracking throughout the year. What's the best way to handle currency conversion for determining if you hit that $10,000 threshold? I've heard different things about using year-end rates versus rates on the specific dates.

For FBAR purposes, you should use the Treasury's published exchange rates for the last day of the calendar year to convert foreign currency amounts to USD. This applies when determining both the maximum value during the year and the year-end value. The IRS provides these rates on their website, and you should use the rate closest to December 31st of the tax year in question. If Treasury rates aren't available for your specific currency, you can use another verifiable exchange rate source, but you need to be consistent and document which source you used. The key is that all your foreign accounts should be converted using the same method and date for consistency.

That spreadsheet idea is brilliant! I wish I had thought of that earlier. I've been keeping loose track of my balances but having everything organized in one place with the currency conversions would definitely give me more confidence that I'm staying compliant. Do you happen to remember where you found the Treasury exchange rates? I've been using random online converters but having an official source would be much better for documentation purposes.

You can find the Treasury's official exchange rates on the IRS website under "Yearly Average Currency Exchange Rates" - they publish them annually for tax purposes. For FBAR reporting specifically, you'll want to use the rates from the last day of the calendar year rather than the yearly averages. The Federal Reserve also publishes daily exchange rates that are considered official sources. I bookmarked both sites when I was setting up my tracking system. Having that official documentation definitely helps if you ever need to justify your currency conversions to the IRS!

This is such valuable advice! I hadn't even thought about tracking improvements separately by which portion of the property they benefit. Looking back at my records, I definitely have some costs that should be allocated specifically to the house parcel - like the septic system installation and the electrical service connection from the road. Do you know if there's a specific way the IRS expects these improvements to be documented? I have receipts for most of the work, but I'm wondering if I need to get something more formal like an engineer's assessment of which improvements benefit which parcel. Also, regarding the survey - did you find that having professional documentation of the property boundaries and improvements helped justify your basis allocation during the sale process, or was it more for your own peace of mind?

For documenting improvements, the IRS generally accepts receipts and invoices as long as they clearly show what work was done and where. You don't necessarily need an engineer's assessment unless the allocation gets disputed later. I kept a simple spreadsheet that listed each improvement, the cost, and which parcel it benefited, along with photos showing the work location relative to the property boundaries. The survey was incredibly helpful during the actual sale process - not just for tax purposes, but the title company required it anyway for the subdivision. Having that professional documentation made the whole basis allocation much more defensible. The surveyor's report showed exactly where improvements were located and even included notes about utility easements and access rights that affected the property values. One tip: if you're getting a survey done, ask the surveyor to include notes about major improvements and their relationship to the property boundaries. This creates an independent professional record that carries more weight than just your own documentation.

This is exactly the kind of comprehensive overview I was hoping for! Your point about using fair market values rather than just acreage percentages makes a lot of sense - the 1.5 acres with the house is definitely worth more per acre than undeveloped land. I'm curious about one aspect you mentioned - when you say "improvements specific to that parcel," would things like landscaping around the house count? I spent about $8,000 on professional landscaping, irrigation, and a retaining wall that are all within what will become the sold parcel boundaries. Also, do you have any recommendations for how to find good comparable sales data for the valuation approach? I'm in a somewhat rural area where land sales aren't as frequent, so I'm not sure how recent the comparables need to be to be considered valid by the IRS. Thanks for the advice about consulting a tax professional - given the complexity and dollar amounts involved, that's probably wise even if it costs a bit upfront.

Yes, landscaping improvements that will stay with the sold parcel should definitely be included in your basis calculation! The $8,000 you spent on landscaping, irrigation, and retaining walls are legitimate improvements that add value to the specific 1.5-acre parcel you're selling. These are exactly the types of improvements that should be allocated to the sold portion rather than split proportionally. For comparable sales data in rural areas, the IRS typically accepts comparables within the past 6-12 months, but they understand that rural properties may require a longer lookback period. You can start by checking your county assessor's website for recent sales, or contact local real estate agents who specialize in land sales in your area. Some states also have online databases of property transfers that you can search by property type and date. Another option is to look at listings (both current and recently sold) on sites like LandWatch or similar platforms that focus on rural/land sales. Even if the comparables aren't perfect matches, having a reasonable methodology and documentation of how you arrived at your allocation will go a long way if questioned. The key is showing you made a good faith effort to determine fair market values using available data, rather than just picking arbitrary percentages.