Did they convert all your foreign currency amounts or did you have to do that yourself? And did you get asked for any kind of proof of the exchange rates you used?

I did the currency conversions myself using yearly average exchange rates from the Treasury Department's website. The auditor didn't ask for proof of the exchange rates I used, but I had included a note in my file explaining which conversion method I was using and why. If you're dealing with significant currency fluctuations, you might want to use monthly average rates instead of yearly, especially if that works in your favor. The key is being consistent and having a reasonable explanation for your method. They didn't scrutinize the actual conversion calculations much - they were more concerned with verifying the base expenses were legitimate.

Thanks for sharing this. So many of us expats are perfectionist rule-followers when it comes to taxes because we're already in such a weird situation filing from abroad. It's reassuring to hear that reasonable approaches are acceptable!

Thank you so much for breaking this down! Since I do pay my booking software company by credit card, sounds like I'm definitely in the clear. But I think I'll request a W-9 from them anyway just to keep good records. Is there any downside to having W-9s on file even if you don't end up needing to issue 1099s?

There's absolutely no downside to having W-9s on file for all your vendors - it's actually a best practice for good record-keeping. Many accountants recommend collecting W-9s from all service providers regardless of payment method or business type, just to have complete documentation. If you're ever audited, having those W-9s readily available shows you've done your due diligence in properly classifying vendors. It also saves you time if your payment method changes in the future (like if you switch from credit card to ACH payments), as you'll already know whether that vendor requires a 1099 based on their business structure.

This is such a good point that I rarely see mentioned. I always hear about the dangers of not filing required 1099s, but never about the problems caused by filing unnecessary ones. Thanks for sharing your experience!

I didn't even think about that! Do you know if I can have both a Simple IRA through my employer AND contribute to a separate Traditional IRA? Is there any impact to the deductibility of Traditional IRA contributions if you also have a workplace retirement plan?

You can definitely have both a Simple IRA and a Traditional or Roth IRA. However, being covered by a workplace retirement plan (like your Simple IRA) does affect the deductibility of Traditional IRA contributions based on your income. For 2023, if you're covered by a workplace plan, the deduction for Traditional IRA contributions starts to phase out at $73,000 for single filers and $116,000 for married filing jointly. If your income is above those thresholds, you might want to consider a Roth IRA instead (which has its own income limits) or a non-deductible Traditional IRA contribution that could potentially be converted to a Roth later (the "backdoor Roth" strategy).

My company does this too! We specifically asked about it a few years ago because several employees wanted to max out their retirement contributions, and now they just automatically process the last paycheck of the year earlier. It might be worth asking - the worst they can say is no.

That's a great idea! I just called my payroll department and asked about this. They said they normally don't change their schedule, but since there are several employees in my situation, they're going to bring it up with management to possibly process the final 2023 payroll on December 29th instead of waiting until January. Fingers crossed this works out - thanks for the suggestion!

You can request tax transcripts from the IRS for previous years. Go to irs.gov and search for "Get Transcript Online" - you'll need to create an account if you don't already have one. The transcript will show what you reported for interest income each year. Alternatively, if you used the same tax software in previous years, you might be able to access your old returns through that software. Most keep records for at least a few years.

Thanks for that info about the transcripts! I just logged in and was able to download my last 5 years of returns. I can see the interest income I reported each year, but it's not broken down specifically for savings bonds vs other interest. Is there a more detailed transcript that would show that breakdown?

I used TaxSlayer last year and they do have a specific section for savings bonds where you can enter previously reported interest. It's under "Federal → Income → Interest Income" and then there's a checkbox for US savings bonds that opens additional fields. Much more straightforward than FreeTaxUSA in my experience.

That's really helpful, thanks! I might make the switch then. Do you know if I can import my W-2 and other forms from FreeTaxUSA to TaxSlayer or would I have to re-enter everything manually?

Makes sense in theory, but isn't it a nightmare to track all those tiny staking deposits? I get rewards like every day or week depending on the platform. How do you possibly keep track of the cost basis for each one?

It would be an absolute nightmare to track manually, which is why I use specialized crypto tax software. It connects to your wallets and exchanges through APIs and automatically grabs all transactions, including those tiny daily or weekly staking rewards. Each reward is recorded with its fair market value at the time of receipt, establishing your cost basis. When you sell, the software can use methods like FIFO (First In, First Out) or specific identification to determine which batch of crypto you're selling and calculate the appropriate gain or loss. Worth every penny come tax season.

Yes, the same general principles apply. When you receive rewards in a different token, you'll be taxed on the fair market value of the rewards token at the time you receive it. This creates your cost basis for the rewards token. If you later sell that rewards token, you'll pay capital gains tax on any appreciation since you received it. The original staked ETH isn't directly part of this tax calculation (though of course it has its own separate cost basis and potential capital gains when you eventually unstake and sell it).