Thanks, this is super helpful. So if I understand correctly - transferring to Robinhood isn't taxable, but I need to make sure I have documentation ready for my cost basis when I do sell, since Robinhood won't have that info? Would it make more sense to sell on my current exchanges where at least some transaction history exists, rather than moving to Robinhood first?

That's exactly right - transferring isn't taxable, but you need to document your cost basis for when you do sell, since Robinhood won't have that information. As for whether to sell on current exchanges versus transferring to Robinhood first, that's a great question. There's a potential advantage to selling on exchanges where you have some transaction history, as you could potentially have more documentation to support your reported cost basis. However, if those are foreign exchanges, they might not issue U.S. tax forms, which could create other complications. If your current exchanges can provide transaction history reports that show your purchases, that documentation could be valuable regardless of where you ultimately sell. The key is having a defensible way to calculate and document your gains.

Is that true even for transactions that happened before they became a permanent resident? I thought you only had to worry about US taxes once you actually became a resident.

Wait really? I had no idea about quarterly payments! So even though I'm filing for 2024 now, I'm supposed to already be making payments for 2025? How do I even calculate how much to send if I don't know exactly what I'll make this year?

That's right! For 2025 income, you need to make four payments throughout the year. You have a couple of options for calculating how much to pay. The simplest is to take your total expected tax for the year and divide by 4. You can base this on what you expect to earn this year. Alternatively, you can use the "safe harbor" provision - if you pay either 90% of this year's tax or 100% of last year's tax (whichever is smaller) through withholding and estimated payments, you won't face penalties. So once you file your 2024 taxes, you could use that amount as your guide for 2025 payments. The IRS Form 1040-ES has worksheets to help calculate this. It seems complicated at first, but it gets easier after your first year!

Seconding FreeTaxUSA! The self-employment section is really straightforward. Plus it's way cheaper than TurboTax. They have good explanations about what counts as a business expense too. I was able to deduct part of my phone bill, internet, computer, camera equipment, editing software, and even some travel costs related to content I was making.

Thanks for this advice! I checked and the second form is dated 10 days after the first one. I'll definitely send it certified mail with tracking. Should I also include a copy of my payment confirmation with the signed form?

Yes, absolutely include a copy of your payment confirmation with the signed form. This creates a clear paper trail showing you've both agreed to the adjustment and paid the amount due. I'd also recommend writing your Social Security number and tax year on every page you send them. This helps ensure your documents stay together if they get separated during processing.

This happens more than you'd think. The IRS exam department sometimes issues preliminary findings before they have all information. Usually it's because they received additional third-party reporting after the first assessment. Likely something like a 1099 or K-1 that wasn't originally matched to the return.

Thanks for this detailed information! I've definitely been adapting my business approach to become profitable. Did you handle the IRS correspondence yourself or did you need professional help?

I started handling it myself but ended up hiring a tax professional who specializes in small businesses when it became clear the IRS was seriously questioning my business classification. It was worth the investment because they knew exactly what documentation would be most persuasive. The most important thing was having contemporaneous records - meaning documentation created during the actual business operations, not reconstructed later. Regular business planning documents, marketing strategies, and detailed expense records created during those loss years were extremely valuable in demonstrating business intent.

I used TurboTax for 3 years of business losses and it didn't provide any special warnings about hobby loss rules. It just asked standard Schedule C questions. When I switched to a real accountant, she pointed out several red flags in how I'd been documenting my business that TurboTax never mentioned.

That's really helpful to know! I've been using TurboTax too but maybe I should consider getting professional help if I'm worried about the hobby loss rules. The software definitely doesn't seem to dig into the documentation aspects that everyone's mentioning here.

I recommend FreeTaxUSA for beginners. It's much more straightforward than TurboTax and actually explains things in normal language. Federal filing is free and state is only like $15. I switched from TurboTax two years ago and it's so much easier to understand.

Did the IRS charge you a lot for the mistake? I'm worried about penalties if I screw something up.