What if I plan to keep my house in my home state and rent it out while I'm gone? Does that mean I'll always be considered a resident there for tax purposes?

Keeping a house doesn't automatically make you a resident, but it does create a connection to the state that tax authorities might use to argue you've maintained your residency. If you rent out your house, you'll need to report that rental income to your state, but that doesn't necessarily make you a full resident. To strengthen your case for non-residency, make sure you have documentation showing you've established a genuine home in Dubai, like a long-term lease or utility bills in your name. Also keep records of your physical presence (entry/exit stamps, flight records) to demonstrate you're genuinely living abroad. Some states have specific requirements about maximum days you can spend there annually without triggering residency.

You can generally keep your retirement accounts as they are when moving abroad. For contributions, it gets tricky - you need US taxable income to contribute to an IRA, so if all your income is excluded via the Foreign Earned Income Exclusion, you might not be eligible to contribute. For 401k contributions, it depends on your employer - if you're working for a US company abroad, you may still be able to contribute, but if you're working for a foreign employer, you typically can't.

I'm in Dubai now and found that keeping my retirement accounts in the US was the easiest approach. Just make sure your financial institution doesn't have issues with foreign addresses - some do!

Thank you for the professional insight! Just to be clear - the fact that I'm essentially submitting the same form twice (once in January by mail and once now with my e-filed return) won't create any issues or confusion with the IRS?

No, submitting the form twice won't create issues. It's actually beneficial as it ensures your request is properly documented. The IRS systems will recognize both submissions are for the same taxpayer and tax year. When they process your return, they'll have the complete picture - both your standalone request and the form with your full tax filing. This redundancy works in your favor by creating multiple records of your waiver request.

Did the IRS eventually waive your penalty? I'm curious how long the whole process took from start to finish.

That sounds interesting but I've never heard of a spousal IRA. How does that work exactly? Does it come with the same tax benefits as a regular IRA?

A spousal IRA works just like a regular IRA - same contribution limits, same tax benefits. The difference is that normally you need earned income to contribute to an IRA, but the spousal IRA is an exception that allows a working spouse to contribute to an IRA for a non-working spouse. For 2024, you could contribute up to $7,000 to a spousal IRA for your wife ($8,000 if she's 50 or older). This gives you an additional tax deduction if you choose a Traditional IRA, or tax-free growth if you choose a Roth IRA. You'll need to file jointly to use this benefit, and your earned income must be at least equal to the total contributions you make to both your IRA and her spousal IRA.

This is a really good point. Do you use any specific tax software that made it easy to compare the two options?

Thanks so much for this! One question - my daughter lives with me 100% of the time, but her dad keeps claiming he's "entitled" to claim her some years because he pays child support. Is that true? The custody agreement doesn't mention taxes at all.

Child support payments do NOT give someone the right to claim a child as a dependent. The IRS has very specific tests for who can claim a child, and the main one is where the child lived for more than half the year (the residency test). If your daughter lives with you 100% of the time, you are the qualifying parent. Your ex might be thinking of the "dependent exemption release" (Form 8332) where the custodial parent can voluntarily release their claim to the non-custodial parent. But this is completely voluntary - you don't have to do this unless it's specified in your custody agreement. No custody agreement means you, as the parent with 100% physical custody, have the right to claim your child.

Did they end up penalizing your ex for filing incorrectly? I'm wondering if there are any consequences for the person who's been claiming my kid.

Yes, they did eventually! The IRS sent him a notice disallowing the child tax credit and earned income credit he'd claimed. He had to pay back all of that money plus interest and a 20% accuracy-related penalty. It took about 14 months from when I filed my paper return with documentation, but the IRS did resolve it in my favor. I also found out he'd been doing this for 3 years, so they went back and audited his previous returns too. Expensive lesson for him!

Thanks for bringing up state considerations! I'm in Michigan, so I'll have to look into what the fees are here. Do you know if the liability protection is significantly different between sole prop with good insurance vs an LLC?

Michigan is actually pretty reasonable - filing fee is around $50-75 and annual statement fee is just $25. Much better than California! Insurance and LLCs protect you differently. Insurance covers specific claims up to policy limits, while an LLC creates a legal separation between business and personal assets. Even with good insurance, as a sole prop, someone could still come after your personal assets if they win a judgment exceeding your coverage limits. The LLC creates a legal barrier they'd have to overcome (though not impossible). For graphic design, professional liability insurance is probably more immediately important than an LLC, but having both gives the strongest protection. Many designers start with good insurance, then form an LLC once profits justify the additional paperwork.

The QBI deduction phases out though, right? I think once you make over a certain amount it starts to disappear?