Omg that's terrifying! Did she try getting help from the Taxpayer Advocate Service? I've heard they can sometimes intervene in these penalty situations especially if there was genuine confusion about the requirements.

She did contact the Taxpayer Advocate Service, and they were helpful in getting the IRS to actually review her reasonable cause argument. The process is still ongoing, but they've at least gotten the collection activities paused while they review her case. The TAS representative explained that the IRS considers several factors for reasonable cause: whether she tried to learn about filing requirements, if there was a history of compliance with other tax obligations, and if this was her first time dealing with international tax issues. Having documentation of her efforts to understand the requirements has been crucial to her case.

Thank you for bringing this up. The property isn't currently being rented out, but I might want to do that in the future. Is there a good resource you found that explains all these different forms? I feel like I'm discovering new requirements every day.

The IRS has a decent publication called "U.S. Citizens and Resident Aliens Abroad" (Publication 54) that covers many of these requirements. There's also a specific section on their website about international taxpayers that lists the various forms. I found the most comprehensive help came from a tax attorney who specializes in international taxation. It was expensive, but worth it for the initial setup year. Once I understood all the requirements, I was able to handle most of it myself in subsequent years using tax software that supports international situations. Just be aware that not all tax software handles these specialized international forms well - you might need to use one of the more comprehensive packages.

Wait, what if I already contributed to my employer's 401k? Does that reduce how much I can put in my Roth IRA? And do rollovers from previous employer 401ks count against the contribution limits?

Contributing to your employer's 401k doesn't reduce how much you can put in your Roth IRA. The limits are completely separate, so you can max out both if you have the funds. For 2022, you could contribute up to $20,500 to your 401k AND still put $6,000 in your IRA. Rollovers from previous employer 401ks to an IRA don't count against your contribution limits at all. You can roll over any amount without affecting your ability to make your annual IRA contribution. That's actually a great way to consolidate your retirement accounts without using up your yearly contribution space.

So true! My Vanguard account defaults to the current year unless I specifically select the previous year. Does anyone know if there's a way to fix this if you realize the mistake after a few months? Like if I contributed in February but just now realized it went to the wrong tax year?

If you catch the mistake within the same tax year, you can usually get it fixed by calling your brokerage. They have a process for redesignating contributions to the correct tax year. But there's a deadline - you can't redesignate after the tax filing deadline (April 18th this year). If you discover it after the deadline passed, it gets much more complicated. You might face excess contribution penalties if the mistaken designation put you over the limit for a year. Some brokerages will work with you on this issue, but it's always best to triple-check the year designation when making contributions between January and April!

But wouldn't the gift cards just be considered the "buy-in" for gambling? Like if I take $100 cash to a casino, that's not a gambling loss until I actually gamble with it and lose, right? I'm confused how this works with gift cards as an intermediary step.

That's a good question! The gift cards in this situation are essentially your "buy-in" or your stake in the gambling activity. The IRS considers your gambling losses to include the money you spent to gamble - so yes, the gift card purchases would count as part of your gambling losses. The key difference from your casino example is that with cash, you're just converting one form of money to chips and back. With gift cards purchased specifically for gambling, those purchases are documented gambling expenses. Just make sure you keep good records of all gift card purchases since you'll need to substantiate your gambling losses if you're audited. Also remember you can only deduct losses up to the amount of your winnings, and only if you itemize deductions rather than taking the standard deduction.

Which software are you using? I had this issue with CoinTracker but fixed it by manually adding a "buy" transaction at the exact time I received the ETH from the gambling site, with the USD value at that moment. Then I deleted the incoming transaction that had no cost basis.

Thanks for mentioning the Form 8879! I completely forgot about that requirement from my tax classes. Do you have any recommendations for good record-keeping systems? Are you using something digital or just physical folders?

I use a combination of both actually. I keep physical folders with hard copies of all documents (W-2s, 1099s, receipts, signed 8879 forms, etc). But I also scan everything into a secure cloud storage system and organize it by tax year and client name. I also keep a simple spreadsheet log of all the returns I prepare with dates, basic info (no SSNs or financial details), and notes about any unusual situations or questions that came up. It's helped me a few times when someone came back months later with questions and I could quickly refresh my memory about their situation.

I used TaxSlayer Pro last year and it was decent for basic returns but struggled with some business stuff. If you're doing Schedule C, rental properties, etc. I'd say go with Drake instead. And YES get them to sign something! I made a simple one-page letter stating they provided all info and reviewed the return before filing.

Thanks, that's really helpful! I think I'll invest in Drake then since I know my cousin's business return will be complicated. Good call on the liability letter too - I hadn't thought about that but it makes total sense to protect myself.

This is so important! My company had me set as "Single" for my first 3 paychecks despite me telling HR I was married with kids. When they finally fixed it, the difference was huge. OP should definitely double check this!

Absolutely right! The difference between "Single" and "Married Filing Jointly" withholding can be substantial. In my case, it was almost a 15% difference in take-home pay. I'd also recommend looking at the actual pay stub carefully. Sometimes there are other deductions beyond just taxes - health insurance, retirement contributions, or other benefits that might be reducing the take-home amount. These can be especially confusing when you're new to the US system since benefit packages work differently than in many other countries.

That tool is super confusing for non-citizens though. It doesn't account for visa status at all and some of the questions don't even apply to people who just moved to the US. I tried using it last year and ended up more confused.

That's a fair point. The tool does assume a lot of prior knowledge about the US tax system that newcomers wouldn't have. I found I had to research several terms before I could even answer the basic questions. When I used it, I had already been in the US for about a year, so I had some understanding of how things worked. For someone completely new to the system, you're right that it might create more confusion than clarity.