11 What kind of tax treaty benefits did you find with the UK? My wife is from Canada and I'm wondering if there are similar advantages. Also, what's the threshold for FBAR reporting? We have a joint account in her country but it's not a huge amount.

3 The UK-US tax treaty had specific provisions about pension contributions and certain types of investment income that were beneficial in our case. Every treaty is different though - the US-Canada one has its own unique aspects, so definitely look into that specifically. For FBAR reporting, the threshold is if your foreign accounts combined exceed $10,000 at any point during the year. Even if your individual account is small, if you have multiple accounts that together exceed that amount, you need to file. And remember, it's not just bank accounts but also investment accounts, certain pension accounts, etc.

13 I e-filed last year with my husband's ITIN. The trick is that you need to enter the ITIN exactly as it appears on the ITIN letter from the IRS, including any hyphens. I had problems at first because I was entering it without hyphens.

Thank you for mentioning that! I was worried about potential penalties too. So just to confirm: we'll only pay regular income tax on the $1,500.65 earnings portion (assuming we determine the 5-year rule wasn't met), but no additional 10% penalty because it's a death distribution. Is that right?

Yes, that's exactly right. The earnings portion would be subject to regular income tax only, with no additional 10% early withdrawal penalty. The death distribution code 4 provides an automatic exception to the penalty. If you do find out that your mother-in-law had established any Roth IRA more than 5 years before her passing (counting from the first tax year a contribution was made), then even the earnings would be tax-free.

Yes, you're right about Form 8606, but Part III is specifically for Roth IRA distributions. It walks you through the calculation to determine the taxable amount. It's fairly straightforward - you'll enter the total distribution, then your basis (the contribution amount), and it will calculate the taxable portion for you.

This is really helpful - I had no idea about the saving clause. Does this mean most treaty benefits don't even apply to US citizens? Are there any common exceptions that might help in a situation with income classification differences?

Most treaty benefits that would reduce US tax don't apply to US citizens because of the saving clause. You're right to be concerned. The common exceptions that might still help you typically include foreign social security benefits, certain pension income, students/teachers/researchers on temporary assignment, and diplomatic personnel. A few treaties have more generous exceptions. Unfortunately, general income classification differences usually aren't excepted from the saving clause, which means the US will likely tax the income according to US rules regardless of the treaty.

But aren't there exceptions to having to file Form 8833? I thought there were some common treaty positions where disclosure wasn't required? The instructions seem to list quite a few exceptions.

I completely agree! I have "Vol LTD" in box 14 and had no idea what it meant. Called my company's HR department and they explained it's "Voluntary Long-Term Disability Insurance" which apparently needs to be entered a specific way. The TurboTax dropdown actually had this as an option once I knew what to look for.

Wait, so if you select the wrong category in TurboTax for a box 14 item, could you actually end up paying wrong amount of taxes? Now I'm worried because I just picked "Other" for everything in my box 14 last year...

In some cases, yes! For items like taxable moving expenses, group term life insurance over $50,000, certain educational benefits, or taxable fringe benefits, choosing the wrong category could impact your tax calculation. These specific items need to be properly categorized because they might be included in your taxable income. For most other Box 14 items that are just informational (like state disability insurance payments or union dues), it typically won't affect your federal taxes, though it could still impact state tax calculations. If you're concerned about last year's return, you might want to double-check what those "Other" items actually were. You can always file an amended return if needed!

Do you know if this works if self-employment is just a side gig? I drive for Uber on weekends but have a regular W-2 job. Would I qualify for a solo 401k to do this rollover strategy?

Yes, this absolutely works with side gig self-employment! I was in exactly your situation - full-time W-2 job but also doing photography on the side with 1099 income. You can open a solo 401k with your self-employment income even if it's not your main job. There's no minimum income requirement to open a solo 401k, though you can only contribute based on your actual self-employment earnings. But for rollover purposes, you can roll in much larger amounts from your traditional IRAs regardless of how much you earn from your side gig. Just make sure you set up the solo 401k before the end of the calendar year.

I've heard horror stories like this! How much extra did you end up owing in taxes because of the mistake?