Not the specialist, but I dealt with this last year. Pretty sure the gift isn't taxable for the recipient until they sell. But the gifter might have gift tax implications if it's over the annual exclusion amount (which I think is like $18k per person now).

When you gift cryptocurrency, you don't trigger an immediate tax event for yourself (the giver) or your nephew (the recipient). However, there are a few important considerations: If your gift exceeds the annual gift tax exclusion amount ($17,000 per recipient for 2024, and likely higher for 2025), you would need to file a gift tax return (Form 709). This doesn't necessarily mean you'll pay gift tax, as it would just count against your lifetime estate and gift tax exemption. The most important aspect is that your nephew inherits your cost basis and holding period. This means when he eventually sells the Bitcoin, he'll calculate his gain or loss based on what you originally paid for it, not the $550 value when you gifted it. Make sure to provide him with documentation of when you acquired the Bitcoin and what you paid for it.

The IRS doesn't have a specific crypto voluntary disclosure program like they do for offshore accounts. Your best bet is probably to file amended returns (Form 1040-X) for those years. I did this last year for some missed 2020 transactions and just had to pay the tax plus interest, no penalties.

I filled it out last week for a similar situation. For small foreign tax amounts from dividends or mutual funds, you only need to complete a few key parts: At the top, check the box for "Passive Category Income" Part I: Enter your foreign income (dividend amount) on line 1a Part II: Put your foreign tax amount ($67) in column j Part III: Complete the limit calculation (your limit will likely be higher than your tax, so you'll get the full credit) Part IV: You can probably skip this for simple situations Then carry the amount from line 38 to Schedule 3, line 48. The trick is that your mutual fund foreign tax is considered "passive category income" which makes things simpler than other types of foreign income.

Thank you! That breakdown makes it seem much less intimidating. I wasn't sure what category my mutual fund dividends would fall under, so knowing it's "passive category income" is super helpful. Do I need to do any special calculations for Part III or just follow the form instructions? And for Part II, do I need to specify the country or can I just put the amount in column j?

That's a clever hack! I just tried it with my return and it actually worked. I put my foreign tax amount on Schedule B (even though it doesn't belong there) and then was able to enter it on Schedule 3 line 48. After I confirmed it worked, I went back and removed it from Schedule B. The system kept the entry on Schedule 3! Thanks for sharing this workaround!

Thank you all so much for explaining! I was so confused about why the number was so high compared to my income. It actually makes me feel better knowing I'm not the only one who's been confused by this. So even though the deduction seems way higher than my income, I should just go with it?

Absolutely go with the standard deduction! The higher your deduction, the less of your income gets taxed. Since your standard deduction ($13,850) is higher than your income ($6,450), you'll end up with $0 taxable income. This is exactly what you want! The system is designed this way to help people with lower incomes. Think of the standard deduction as the government saying "everyone gets to earn this much before we start taxing you.

This is super important! If your parents are claiming you as a dependent on their taxes, you need to check the box that says someone else can claim you as a dependent. It changes things.

Thanks for pointing this out! We've actually been taking the standard deduction because we don't have enough itemized deductions to exceed it. But I hadn't considered the student loan interest factor - that's definitely important for us. Is there a certain income threshold where filing separately starts to make more sense? Or is it really just about those specific situations with medical expenses and student loan repayment plans?

There isn't a specific income threshold where filing separately automatically makes sense. It's almost always situation-specific rather than income-specific. The most common scenarios where filing separately can be beneficial are: When one spouse has income-based student loan payments, filing separately can sometimes keep those payments lower, which might outweigh the tax benefits of filing jointly. This requires calculating the long-term loan forgiveness benefit versus immediate tax savings. The other main scenario is when one spouse has very high medical expenses compared to their individual income. Since medical expenses must exceed 7.5% of AGI to be deductible, separating incomes can sometimes allow one spouse to exceed that threshold when they couldn't jointly.

This is such an important point! I live in Wisconsin and we have to file the same status for state as federal. Made that mistake one year and had to amend everything.

So if OP files with the new W-2 info, will they get flagged for audit since the IRS has the old numbers?

It's not an automatic audit trigger, but it does create a mismatch that could result in a notice from the IRS. Their systems will show the original W-2 amounts reported by your employer, while your tax return will show different figures. This discrepancy typically results in a CP2000 notice (proposed tax adjustment) rather than a full audit. The IRS will basically say "We have different numbers than what you reported" and ask for an explanation. You'd then need to respond with copies of your new W-2s and explain the situation. It's manageable but definitely an unnecessary headache that proper W-2 C forms would avoid.

This is terrible advice. The IRS absolutely notices these discrepancies and it's not about them "having bigger things to worry about" - their automated systems flag mismatches between what employers report and what individuals report. I do tax prep professionally and have seen numerous clients get notices because of exactly this situation.

Maybe I just got lucky then! I guess everyone's experience is different. I was just trying to reassure OP that it might not be the end of the world if they can't get proper W-2 Cs.