This whole situation is exactly why the tax code needs to be simplified. It's ridiculous that getting married can actually increase your tax burden. I've been using a really thorough spreadsheet to project my taxes each year since getting married in 2021. I can share it if anyone wants it - it lets you compare Single vs MFJ vs MFS side by side so you can see the differences. The most important thing I learned is that withholding and filing status are completely separate things. You can have your employer withhold at the higher single rate even when you're married by completing your W4 correctly. This has saved me from owing at tax time.

I completely understand your frustration - this is such a common shock for newlyweds! The marriage penalty is real and hits hardest when both spouses earn similar incomes in certain brackets. Here's what's happening: When you were single, your income got its own trip through the tax brackets. Now married, even filing separately, the tax brackets for MFS are exactly half of the MFJ brackets - which often works out worse than the single brackets you used to enjoy. It's like the tax code is designed assuming married couples will always file jointly. A few practical things that might help: - Since you keep finances completely separate anyway, definitely run the numbers for both MFJ and MFS. Sometimes MFJ comes out better overall even if it feels wrong given your separate financial lives - The Child Tax Credit phases out at different income levels for MFS vs MFJ, which could be affecting your calculations - Consider having additional tax withheld from both your paychecks going forward (line 4c on the W4) to avoid this surprise next year The tax software is correct that you can't file as Single - your marital status on Dec 31st determines your filing options. But don't give up! Sometimes there are deductions or credits available to married filers that can help offset the penalty. Have you tried itemizing vs taking the standard deduction?

Quick clarification question - I'm a US citizen working in Japan and visit home for about 3 weeks every Christmas. For Form 2555, do I need to prorate my foreign housing exclusion for those days I'm in the US, or can I claim the full amount?

Great question! As someone who's been helping expats with Form 2555 for years, I can confirm that you should use 365 days as your qualifying period. Since you've been a bona fide resident of Spain since 2012, your 22-day visit to the US for your mom's surgery doesn't disrupt that status. The key factors the IRS looks at for bona fide residence are: 1) Your permanent home is in Spain, 2) You have no definite plans to return permanently to the US, and 3) Your temporary visit had a clear purpose (family emergency) with intent to return to Spain. You're correctly reporting those US days in Part II Question 14 - that's just for documentation. But for your qualifying period calculation, you remain a bona fide resident for all 365 days of 2024. This means you can exclude the full amount of your foreign earned income (up to the annual limit), regardless of those 22 days spent in the US. The IRS Publication 54 specifically addresses this scenario. After 12+ years of residence in Spain, brief visits for family emergencies absolutely don't change your bona fide residence status. You're good to go with 365 days!

Has anyone used TurboTax for reporting rental property sales? I'm in a similar situation and wondering if it handles depreciation recapture correctly or if I need to go to a professional.

One thing I haven't seen mentioned yet is the Net Investment Income Tax (NIIT). Since you're married filing jointly with income around $83k, adding the $255k capital gain will likely push you over the $250k threshold for NIIT. This means you'll owe an additional 3.8% tax on the investment income portion that exceeds the threshold. So in addition to the regular capital gains tax and depreciation recapture we've discussed, you'd be looking at roughly 3.8% on about $88k of the gain (the amount over $250k threshold), which is another $3,340 or so. Also, don't forget about state taxes if you're in a state that taxes capital gains. This can add significantly to your total tax bill depending on where you live. Make sure you're setting aside enough money - between federal capital gains, depreciation recapture, NIIT, and potential state taxes, you could be looking at a substantially higher tax bill than just the federal calculations alone.

I'm currently going through this exact same situation! I noticed the 970 code appeared on my transcript about 10 days ago with absolutely no other information, and like many of you, I immediately started panicking about what it meant for my refund. Reading through all of these experiences has been incredibly reassuring - it's clear that getting just the 970 code alone is much more common than I thought, and most people seem to get resolution within 3-4 weeks. I was especially helpful to see the variety of reasons people got the code (education credits, identity verification, random reviews, etc.) because it shows that it's usually routine verification rather than a serious problem. I've been guilty of checking my transcript way too often (sometimes multiple times per day!), but based on everyone's advice here, I'm going to limit myself to checking once a week and just wait for the letter to arrive. It sounds like that's really the key - waiting for the IRS to tell you specifically what they need rather than trying to guess from the codes. Thanks to everyone who shared their timelines and outcomes - it really helps reduce the anxiety of not knowing what's happening with your refund!

I just wanted to add my experience to this thread since I went through the exact same thing about 4 months ago. The 970 code appeared on my transcript all by itself, and I was convinced something was seriously wrong with my return. After about 3 weeks of checking my transcript daily (which I don't recommend - it just increases the anxiety!), I received a letter asking me to verify some information about the Child and Dependent Care Credit I had claimed. Turns out they just wanted to confirm my daycare provider's information and the amounts I paid. I was able to respond to their request entirely online through the IRS website, and my refund was released exactly 7 days later. The whole process from when the 970 code first appeared to getting my refund took about 5 weeks total. What I learned from the experience is that the 970 code by itself really is just the beginning of their review process - it doesn't mean there's necessarily anything wrong. The specific reason for the review usually becomes clear when you get that follow-up letter. Try to be patient (easier said than done, I know!) and don't let it stress you out too much. Based on everything I've read here and my own experience, the vast majority of these situations resolve smoothly once you provide whatever information they're looking for.

Does anyone know if tax loss harvesting software actually helps avoid these wash sale problems? I've been looking at some of the robo-advisors that claim to do this automatically and wondered if its worth it.

I had a similar situation last year and it really threw me for a loop! Here's what I learned that might help: The wash sale disallowed amount ($3,400 in your case) doesn't mean you owe taxes on money you didn't make. It just means those specific losses can't be deducted this year. The key question is: are you still holding the replacement shares you bought within those 30-day windows? If yes, then those losses get added to your cost basis in those shares and you'll be able to claim them when you eventually sell (as long as you don't trigger another wash sale). If you actually sold everything by December 31st and your true economic loss for the year was $2,800, then that should be what shows up on your return. The problem might be that TurboTax isn't properly accounting for all your transactions or you might still be holding some replacement shares without realizing it. I'd recommend double-checking your year-end positions against all the trades that triggered wash sales. Sometimes people forget about partial sales or don't realize they're still holding shares that are preventing them from claiming the losses.