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I think another factor that might explain the discrepancy is the different ways states handle standard and itemized deductions for part-year residents. Many states prorate the standard deduction based on the portion of the year you were a resident. So if you lived in a state for 3 months, you might only get 3/12 of the standard deduction amount. For itemized deductions, some states require you to prorate all itemized deductions, while others allow you to claim the full amount of deductions for expenses like property taxes or mortgage interest on property located in that state, regardless of your residency period. Have you checked if your tax software is prorating your standard deduction correctly? That could account for some of the difference you're seeing.
I ran into this exact issue when I moved from Colorado to Texas! The software correctly prorated my standard deduction in Colorado, but I didn't realize that was happening until I looked at the detailed state worksheets. Definitely worth checking the state-specific calculation pages in your tax software.
This is a really complex situation that many people face when moving between states mid-year. From what you've described, there are several factors that could be causing the discrepancy between your calculations and TaxSlayer's results. First, Washington State actually doesn't have a personal income tax on wages, salaries, or most other types of income. Are you perhaps referring to a different state? If you meant a different state with income tax, that would explain the confusion. However, regarding the 529 distribution tax you mentioned - that's likely correct. Many states do impose taxes and penalties on non-qualified 529 withdrawals, and this is often overlooked when people do their own calculations. For Oregon, the difference you're seeing could be due to how they handle the various loss limitations. Oregon has specific rules about how much of your capital losses and rental losses can offset other income in the current tax year, and these limits might be stricter than federal rules or different from what you calculated. I'd recommend double-checking which state you actually lived in before Oregon (since Washington doesn't have income tax), and then reviewing both states' specific rules for part-year residents. The "taxation based on total annual income" method that others mentioned is definitely a key factor that catches many people off guard.
22 Has anyone used TurboTax to handle reporting this kind of situation? I'm in a similar situation with medical crowdfunding and wondering if the basic version handles this or if I need to upgrade.
10 Since gifts aren't reported on your tax return at all, any version of TurboTax would work fine - even the free version. The only part that might require a paid version is if you're itemizing deductions to claim the medical expenses you paid out of pocket (not covered by insurance or GoFundMe).
I went through something very similar after my car accident last year. My family set up a GoFundMe that raised about $28,000 for my medical expenses, and I was terrified about the tax implications. After consulting with a tax professional, I learned that medical crowdfunding donations are indeed treated as gifts and aren't taxable income to you as the recipient. The key is that people donated without expecting anything in return - they were helping with your medical crisis out of generosity. A few important points from my experience: - Keep detailed records of the GoFundMe campaign, including the total raised and donor information - Save all your medical bills and receipts showing how the money was used - If you itemize deductions, you can only deduct medical expenses you paid out of your own pocket (not the portion covered by GoFundMe) - The donors are responsible for any gift tax reporting if they gave over the annual exclusion limit I kept a simple spreadsheet tracking donations received vs. medical expenses paid, which gave me peace of mind. You're not required to report the gifts as income, but having good documentation is always smart. Hope this helps ease your worry!
Thank you so much for sharing your experience! This is exactly what I needed to hear from someone who actually went through this. The spreadsheet idea is brilliant - I'm definitely going to create one tracking the donations vs my medical expenses. Did your tax professional give you any specific advice about what documentation would be most important to keep? I have all the GoFundMe records and medical bills, but I'm wondering if there's anything else I should be organizing now rather than scrambling later if questions ever come up. Also, when you say you consulted a tax professional, was that worth the cost? I'm trying to decide if I should pay for a consultation or if the information here is sufficient for my situation.
Has anyone actually had their Parent PLUS loan 1098-E audited? My parents claimed the interest deduction last year even though I filed independently (I didn't know any better at the time). Should we be worried about getting in trouble with the IRS?
I wouldn't risk it. My cousin works for a tax preparation company and says the IRS has been flagging education credits and deductions more frequently in the last few years. They can easily cross-reference dependency status with 1098-E forms. Better to file an amended return than risk penalties and interest if caught.
Great question about voluntary corrections! If you file an amended return (Form 1040X) to correct the mistake voluntarily before the IRS catches it, there typically aren't penalties - you'll just need to pay back any refund you shouldn't have received plus interest from the due date of the original return. The IRS is generally much more lenient when taxpayers proactively correct errors versus waiting to be audited. Since this sounds like an honest mistake rather than intentional tax fraud, voluntary correction through an amended return is definitely your best bet. Just make sure to include a clear explanation with the amended return about why you're making the change (student filed independently, so parents can't claim Parent PLUS loan interest deduction). This helps prevent any follow-up questions from the IRS. You have up to 3 years from the original filing date to amend, so you're not under immediate time pressure, but sooner is better than later for peace of mind!
kinda surprised no one mentioned this yet but another thing to consider is health insurance. if ur on ur parents insurance plan, some providers require that u be claimed as a dependent. not all do this but worth checking before u make any decisions.
Actually, the Affordable Care Act allows young adults to remain on their parents' health insurance until age 26 regardless of tax dependency status, student status, or whether they live with their parents. That's federal law, so it applies in all states.
oh thats good to know! i was told differently when i called my insurance last year but maybe the person was wrong or i misunderstood. thanks for correcting me! Appreciate that info since i was giving outdated advice. glad to know young adults can stay on parents insurance no matter what til 26.
I went through this exact situation with my parents two years ago! After a lot of research and talking to a tax professional, here's what I learned: Your mom is incorrect about it being fraud. The IRS explicitly states that claiming dependents is optional - you "may claim" qualifying dependents, not "must claim" them. This is clearly outlined in IRS Publication 501. However, the reality is more nuanced than just the tax aspect. Even if your parents don't claim you, you're still considered a dependent student for FAFSA purposes until you're 24 (unless you meet specific exceptions like being married, having dependents, military service, etc.). So federal financial aid likely won't change. BUT - and this is important - there can be tax benefits to consider. If your parents' income is too high to claim education credits, you might be able to claim the American Opportunity Tax Credit yourself if they don't claim you as a dependent. This could be worth up to $2,500. My advice: Run the numbers both ways. Calculate what your family saves/loses in total taxes under both scenarios, then factor in any potential institutional aid differences at your specific school. Sometimes the tax implications alone make it worthwhile, even without FAFSA changes. Also, definitely talk to your school's financial aid office about whether they consider tax dependency status for their own institutional aid - some do, some don't.
This is exactly the kind of detailed breakdown I was hoping for! Thank you so much for sharing your experience. The point about the American Opportunity Tax Credit is something I hadn't fully considered - my parents make too much to qualify for it, but I might be able to claim it myself if they don't claim me. Do you remember roughly how much your family ended up saving by going the route of not claiming you? And did you have to convince your parents initially, or were they open to running the numbers once you explained it properly? I'm definitely going to look up IRS Publication 501 to show my mom the official language about claiming dependents being optional. Having that official source might help get her to at least consider running the scenarios.
Ravi Sharma
Last year I had the same issue but it sorted itself out by the 15th. Just gotta be patient unfortunately
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Freya Larsen
ā¢patient?? its OUR money they sitting on š
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Axel Far
I'm in the same situation! Filed early and was expecting my Michigan refund today too. Really frustrating that they don't communicate these system issues better upfront. At least now I know it's not just me - thanks for posting about this! Guess we're all stuck waiting until after the 13th š¤
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