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Anyone else feel like the whole tax system is just designed to be confusing af? Like, why do we even need to 'verify' our identity to the people who already have all our info? š
Quick question - does anyone know if this identity verification thing affects your refund if you're expecting one? I'm still waiting on mine and wondering if this is why
Yeah, it can delay your refund. They won't process it until the verification is complete. Happened to me last year.
Ugh, that's what I was afraid of. Guess I better get on this asap. Thanks!
Have you considered using a tax software that specializes in expat taxes? I've been using TaxAct Premium for filing with my Canadian spouse. It walks you through all the foreign spouse questions step by step and costs way less than a CPA. The key forms you'll need to know about are: - Form 8840 (Closer Connection Exception Statement) - Form 8833 (Treaty-Based Return Position) - Form 1116 (Foreign Tax Credit) - FinCEN Form 114 (FBAR for foreign accounts) The software prompts you for all of these and explains when they're needed. Just make sure you read each section carefully.
Thanks for the suggestion! Does TaxAct handle the resident vs. non-resident alien distinction well? And did you find it easy to understand whether your spouse's foreign income needed to be reported? I'm worried about missing something important and getting flagged for audit.
TaxAct does handle the resident vs. non-resident alien distinction pretty well. It asks a series of questions to determine which status applies to your spouse and then guides you through the appropriate forms based on your answers. The software has improved significantly in this area over the last few years. Regarding foreign income reporting, it was straightforward once I understood the basic principles. The software prompts you about foreign earned income and walks you through Form 2555 (Foreign Earned Income Exclusion) or Form 1116 (Foreign Tax Credit) depending on your situation. I found their explanations clear enough that I could make informed decisions without needing an expensive CPA.
Don't forget about FBAR requirements! My wife is Brazilian and we got hit with a $10,000 penalty for failing to report her foreign bank accounts that had over $10,000 combined. The threshold is surprisingly low. Also, make sure you understand FATCA requirements (Form 8938) which is separate from FBAR but has similar purposes. The thresholds are different though - for married filing jointly living in the US, you need to report if the total value of foreign assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the year.
Did you try to get the FBAR penalty abated? I've heard they can be reasonable if it's your first offense and you can show it wasn't willful neglect.
Don't forget to check your lease agreement! My lease for my fitness studio had specific language about tenant improvements and who owns what after lease termination. In my case, anything attached to the structure became landlord property, which affected how I could depreciate those costs. My accountant said the character of these expenses (whether they're truly "improvements" or just "modifications") can depend on lease terms. This affected whether I could use the shorter 15-year recovery period or had to use a longer one.
That's a great point - I need to go back and re-read my lease. I think there was something in there about improvements becoming property of the building owner. Does that change how I can deduct things? Would it be better if items remain my property?
If improvements become the landlord's property after the lease ends, they're generally still treated as leasehold improvements that you can depreciate over the 15-year period (or potentially expense using Section 179 if you qualify). It's usually more advantageous for items to remain your property because you might have more flexibility in how you depreciate them, and potentially recover some value if you can take them with you later. However, for fixed elements like walls or built-in fixtures, the tax treatment is generally the same regardless of who will ultimately own them when the lease ends. The key is that you paid for them for use in your business.
Has anyone used the "safe harbor" for small taxpayers to simplify all this? I think if your business is below certain revenue thresholds, you can just expense repairs and improvements under $2,500 per invoice immediately instead of depreciating. My CPA used this for my yoga studio buildout last year and it saved me tons of headaches with categorization.
The de minimis safe harbor is amazing for small purchases, but be careful - it only applies to individual items under the threshold (usually $2,500 per item). The IRS can reject your safe harbor election if they determine you're artificially breaking up larger expenses into smaller invoices to qualify.
Something nobody's mentioned yet is that you should request a copy of the partnership agreement if you don't already have it. When you inherited your share, it should have come with documentation about the partnership terms. Some partnership agreements actually restrict distributions and require capital reserves to be built up to certain levels before making distributions. This could explain why you're seeing income on the K-1 but not getting much in distributions. Also, check if there's a partnership meeting you can attend. As a partner, you generally have rights to information about the business operations and financial status. You might discover they're planning major renovations or have other reasons for retaining earnings.
Would the partnership agreement actually help with tax reporting though? I'm in a similar situation and trying to figure out if requesting all this extra documentation is worth the hassle or if I should just hire a CPA.
The partnership agreement won't directly help with tax preparation, but it will help you understand if what you're experiencing is normal based on the terms you agreed to. It might reveal that they're required to maintain certain capital reserves or explain the conditions under which distributions are made. Having this information could help you decide whether to keep your interest or try to sell it. Some partnership agreements also specify how tax items should be allocated, which could be relevant if you think the K-1 allocations seem unfair. If the amounts involved are significant, hiring a CPA who specializes in partnerships would definitely be worth considering.
Check out line 19 (distributions) of your K-1 and compare it to line 2 (real estate income). If line 19 is consistently lower than line 2, that means the partnership is retaining earnings rather than distributing them. This is common but can create tax headaches. Also, make sure you're tracking your "basis" in the partnership. Your basis increases when you report income from the K-1 and decreases when you receive distributions. This tracking is SUPER important because: 1) If you ever sell your interest, your basis determines your gain/loss 2) If your basis ever goes to zero, distributions become taxable 3) Certain losses can be limited based on your basis Most tax software doesn't handle basis tracking well, so you might need to maintain a separate spreadsheet or get professional help.
Mateo Perez
Has anyone tried reaching out to their congressperson? I've heard that can sometimes help with IRS issues.
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CosmicCrusader
ā¢How do you even do that? Just call their office?
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Aisha Rahman
ā¢Yep, just look up your rep's website and there should be a 'Contact Us' section. They usually have staff dedicated to helping with federal agency issues.
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Ethan Brown
Anyone else think its crazy that we have to jump through so many hoops just to get our own money back? The whole system needs an overhaul smh
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Yuki Yamamoto
ā¢Preach! š It's like they forget it's OUR money in the first place.
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