Wait really?? I do have some freelance income on the side of my regular job. So you're saying even though I'm extending my 2024 tax return, I still need to make my first quarterly payment for 2025 by April 18th? How do I even figure that out when I haven't completed last year's taxes yet??

Yes, that's exactly right. The extension only applies to your 2024 return, not to your 2025 estimated payments. It's super confusing and trips up a lot of people. For figuring out your 2025 quarterly payment, you can use last year's income as a basis (the safe harbor rule). If you pay 100% of what you owed last year (or 110% if your AGI was over $150,000), spread across your quarterly payments, you'll avoid penalties even if you end up owing more. You can always adjust later payments up or down as you get a better picture of your 2025 income.

This is technically true but still not a great idea. If you don't file or extend and then discover you actually DID owe money (like if you made a calculation error), you'll get hit with both failure-to-file AND failure-to-pay penalties, which add up fast. Plus, the statute of limitations for the IRS to audit you doesn't start until you file.

We don't actually have a formal custody agreement filed with the court. Everything has been verbal between us so far. I've been trying to avoid court involvement, but maybe I need to get something official in place?

Without a formal custody agreement, the IRS residency rules definitely apply. This means you, as the custodial parent with the child living with you most of the year, have the right to claim him. I would strongly recommend getting a formal custody agreement in place. This protects both you and your child by clearly defining visitation schedules, decision-making authority, and yes, tax claiming rights. Without documentation, these disputes can become "he said/she said" situations that often escalate unnecessarily. A formal agreement can specifically address who claims the child in which tax years, and can be structured in various ways (alternating years, splitting different tax benefits, etc.) if you choose to share this benefit.

This is accurate. My cousin had this exact situation and the judge split the tax benefits - she got odd years and he got even years, even though the kid lived with her most of the time. Judges have a lot of discretion with this stuff.

That's an interesting point! I've owned exactly 50% since the beginning with no changes to the ownership structure. The only change in my situation was becoming a US tax resident 4 years ago (I filed the 5471 that first year as required when acquiring stock as a US person). After that, there have been zero changes to ownership percentages or corporate structure.

Given there haven't been any ownership changes since your initial filing, your analysis looks even more solid. That initial filing when you became a US resident was correct (Category 3 for acquisition), but the ongoing yearly filings wouldn't be required if you don't meet any of the other categories. One more thing to consider - has the foreign corporation ever made any distributions or dividends to you during these years? Sometimes CPAs file Form 5471 if there are distributions because it provides a cleaner way to report them, even if technically not required. Might explain why they've been insistent on filing it.

I work with international business structures and this is 100% correct. The control test for Category 4 requires MORE than 50% ownership, not exactly 50%. This is a common misconception among accountants who don't specialize in international taxation. That said, there's a specific rule for closely held companies where two 50% owners might both be considered to have "control" in certain circumstances. This usually applies when both owners are actively involved in management decisions. Is that the case with your foreign corporation? Do you and the other owner make joint decisions, or does one of you have more operational control?

Does filing an extension because of a late K-1 increase your chances of being audited? I've always heard you should avoid extensions if possible.

Filing an extension does not increase your audit risk at all. That's a common myth. In fact, tax professionals file extensions for many of their clients as standard practice. The key is making sure you pay any estimated tax due when you file the extension. Penalties are for not paying on time, not for filing the actual return later. As long as you make a good faith estimate of what you owe and pay that amount with your extension request, you're completely fine.

This is great advice! I had the same issue with a wrong EIN and it was a nightmare to fix. I'd also recommend comparing the K-1 you receive with any estimated K-1 info your brother might have given you during the year. If there are big differences, ask why before filing.

That's really good to know about the account freezes! Do you know if other payment platforms like Venmo or Cash App have similar issues? Or would you recommend something completely different?

Venmo is actually owned by PayPal so they have similar policies. Cash App can be more flexible but still has its limitations. Many content creators use platforms specifically designed for their industry that have built-in payment processing - these tend to be much more stable since they're designed for that purpose. Some also use multiple payment methods to diversify risk. Another option is to set up a proper business entity (like an LLC) and get a business bank account. This provides an additional layer of separation between your personal finances and business activities, and gives you more professional payment options. It costs a bit to set up but provides much better protection and legitimacy.

Is there a minimum amount you need to earn before worrying about quarterly payments? I do some freelance work but it's pretty irregular and not a ton of money.