1 Thank you for this list! The only thing that might apply to me is that I did start doing some side gig work and claimed a few business expenses, but nothing major - maybe $1,200 total on a side income of about $8,000. Could that be what she was referring to? Or is that ratio pretty normal?

18 That expense-to-income ratio is completely reasonable for side gig work and wouldn't raise any red flags by itself. 15% expenses on self-employment income is actually quite conservative by most standards. What's more likely is that your preparer may have been using scare tactics to justify their fee or to encourage you to purchase audit protection services, which is unfortunately common practice among some tax preparation businesses. Some preparers use audit warnings to upsell clients on representation services they likely won't need.

1 Oh my god, she actually did! She mentioned their "audit defense package" for $79 right after making those comments, but I declined because I was already paying quite a bit for the preparation. I didn't even make the connection until you mentioned it. That makes me feel both better and worse at the same time - less worried about an audit but annoyed I was manipulated.

This is super confusing! So if I've been claiming standard mileage for my Uber driving, and I trade in my car, I might owe taxes even if I lost money on the trade-in? How do I figure out how much "deemed depreciation" I've taken if I never actually calculated it myself?

Exactly - you might owe taxes even if you took a loss on paper. The standard mileage rate includes a component for depreciation (it changes yearly but was about $0.27 per mile for 2023). The IRS considers you to have "taken" this depreciation whether you calculated it or not. To figure out your deemed depreciation, multiply your business miles each year by the depreciation component of the standard mileage rate for those years. Add these up for all years you've owned the vehicle. This total is subtracted from your original basis to get your adjusted basis, which is what you use to determine gain/loss.

That's completely wrong advice that could get the OP audited. Vehicle trade-ins for business assets absolutely need to be reported correctly. The standard mileage rate simplifies tracking expenses but doesn't eliminate the need to properly handle asset disposition. Please don't spread misinformation on tax matters if you're not certain.

Thanks for the suggestion! I actually did check his student portal but the transaction history only goes back 12 months. I'll have to request a complete statement from them. He didn't mention any refunds hitting his account, but it's totally possible something was processed that he didn't notice or understand was related to tuition. He had a small scholarship that only covered about 30% of his costs, but maybe there was some adjustment to that amount.

Is there a time limit on when schools have to make these adjustments? My daughter left college 3 years ago and I got a 1098-T with Box 4 filled out this year. Seems weird!

1 That's really helpful - I didn't realize the AOTC had different enrollment requirements than the dependent status rules. Does this mean I could potentially claim the AOTC even if I'm only considered part-time for tax purposes?

10 Yes, that's exactly right! For the AOTC, you only need to be enrolled at least half-time for one academic period during the tax year. So even if you don't meet the 5-month full-time rule for dependent purposes, your 6-credit semester (which is typically considered half-time) would still qualify you for the AOTC as long as you meet the other requirements like pursuing a degree and being within your first four years of higher education. The enrollment requirements are different for different tax benefits - that's why it gets so confusing when trying to figure out your "student status" more generally.

18 I used TurboTax last year with a similar situation. It specifically asks about the number of months you were enrolled full-time, not just whether you were a student. As long as you know that magic "5-month rule" the others mentioned, you should be fine with any tax software.

Thank you for this breakdown! One question - how detailed does the non-willful statement need to be specifically about Form 5471? Should we just generally say we didn't know about US filing requirements as an expat, or specifically mention we didn't know about foreign corporation ownership reporting?

Your non-willful statement should be specific about Form 5471. Don't just make a general statement about being unaware of US filing requirements - address why you didn't know about the specific requirement to report foreign corporation ownership. For example, explain that you formed the company for a small side business, had minimal profits, and had no knowledge of the complex international reporting requirements for US citizens with foreign business interests. Make sure to explain your wife's background (never lived in the US as an adult), how you learned about the requirement, and the steps you're taking to become compliant once you discovered it. The more specific you are about the Form 5471 requirements, the more convincing your non-willful claim will be.

I went through the Streamlined program in 2019 for my German GmbH where I failed to file Form 5471 for 4 years. Properly documented everything, filed all 3 years of returns with the required 5471s, and submitted a detailed statement explaining my non-willful failure. Never got audited or questioned. Just received confirmation that my submission was accepted. Zero penalties. The key is being thorough and honest in your documentation.