Don't forget about local taxes too! Some cities and counties have their own income taxes that you need to withhold for employees working there. I completely missed this for my employee in Ohio and had to deal with penalties. New York City, Philadelphia, San Francisco, and many Ohio and Pennsylvania municipalities have local income taxes. It's not enough to just register with the state - you need to check if there are local tax obligations too.

This is incredibly helpful information! I had no idea about the local tax requirements - that's definitely something I need to research for my remote employees. One thing I'm curious about is timing. If I have employees who started working remotely in different states earlier this year, but I haven't set up the state withholdings yet, what's the best way to handle catching up? Do I need to go back and calculate what should have been withheld from previous paychecks and make up those payments to the states? Or is there a way to just start fresh from the current payroll period going forward? I'm worried I might already be behind on some compliance requirements and want to make sure I handle this correctly to avoid penalties.

The exact same thing happened to me last year! It was for that Facebook data privacy settlement. Got like $78 and a 1099 with a note saying don't report it. I freaked out too, but my brother who's an accountant explained that certain settlements are considered non-taxable by the IRS - especially ones related to data breaches, privacy violations, or returning money that was wrongfully taken from you. I didn't report it and had zero issues with my return. The 1099 is just the company covering their bases for their own accounting purposes. As long as you keep the documentation showing it said not to report it, you're covered if there are ever any questions.

I'm dealing with something similar right now! Got a $45 settlement check from some consumer protection lawsuit I barely remember signing up for. The paperwork was super confusing - it had a 1099 but also said "this payment may not be taxable income depending on your circumstances." After reading through all these responses, I'm feeling more confident about not reporting it. The key seems to be keeping all the documentation that came with it. I took photos of everything including the envelope it came in, just in case I need to prove what instructions they gave me. One thing that helped me feel better was looking up the actual settlement online. Most of these class action websites have FAQ sections that explain the tax implications. Mine specifically said payments under $100 for consumer harm/restitution are typically not taxable income since they're just making you whole for losses, not providing additional income.

Don't forget to look at your state tax rules too! In my state (Virginia), the rules for who can be claimed as a dependent follow federal rules, but the tax benefits can be different. My daughter works part-time while in college, and I claim her federally, but there's a special deduction in our state that she can claim on her state return even while being my dependent.

Just want to emphasize something that might save you stress later - make sure you and your dad are on the same page about who's claiming you BEFORE you both file. If you accidentally file as independent and your dad also claims you as his dependent, the IRS will send notices to both of you asking for documentation to prove who has the right to claim the exemption. This happened to my friend last year and it delayed both of their refunds by months while they sorted it out. The IRS basically freezes both returns until you provide proof of support. Since your dad is paying tuition and most expenses, he should definitely claim you, but just coordinate so you both file consistently from the start. Also, even though you're filing as a dependent, you might still be eligible for the Earned Income Tax Credit if your income is low enough, which could increase your refund beyond just getting back withheld taxes.

Something I don't see mentioned is that sometimes these billionaires DO sell stock. Musk has sold billions in Tesla stock at various points. When they do need to sell, they often offset gains with losses elsewhere in their portfolio (tax-loss harvesting) or time sales to coincide with charitable donations that provide tax deductions. They might also time some sales for years when they have business losses to offset the gains. It's not that they never sell - they just do it strategically and as a last resort, preferring to use the loan strategy for most of their cash needs.

One thing that's worth mentioning is that this strategy also depends heavily on having assets that consistently appreciate over time. The "buy, borrow, die" approach works great when your stock portfolio is growing at 7-10% annually, but it can become problematic during extended bear markets. If someone borrowed heavily against their portfolio and then the market crashed (like in 2008 or early 2020), they could face margin calls requiring them to either put up more collateral or sell assets at exactly the wrong time. This is why most wealthy individuals using this strategy maintain conservative loan-to-value ratios and have diversified asset bases. For billionaires like Musk, they often have multiple revenue streams and can weather market volatility, but it's not a risk-free strategy. The timing and amount of borrowing is crucial to avoid forced liquidations during market downturns.

Make sure you file as Head of Household if you're eligible! If you're unmarried, paid more than half the cost of keeping up your home for the year, and your daughter lived with you for more than half the year, you qualify. The HOH filing status gives you a higher standard deduction and better tax rates than filing as Single.

Document everything now while it's fresh! Keep records of: - School enrollment showing your address - Medical records with your address as primary contact - Daycare receipts and records - Any text messages where he acknowledges she lives with you - Bank statements showing you pay for her expenses - Utility bills showing she lives at your address Also, consider filing early if possible. While the IRS will sort out duplicate claims, getting your return in first can help avoid delays. If he does try to claim her and your e-filed return gets rejected, you can always mail in a paper return with all your supporting documentation. The stress is real, but you're clearly the custodial parent here. Your ex paying sporadic child support doesn't give him the right to claim her when she lives with you full-time. Stay strong and don't let him bully you into signing away your legitimate tax benefits!