Do you know where I can find info about tax treaties? My in-laws are from India and I've wondered about this too.

You can find tax treaties on the IRS website - search for "United States Income Tax Treaties A to Z" and you'll find a list of all countries with treaties. For more detailed information, look for IRS Publication 901 (U.S. Tax Treaties). For India specifically, there is a tax treaty, but dependency rules are complex. The treaty mainly covers things like double taxation of income, but personal exemptions and dependent status are usually determined by the regular IRS rules I mentioned earlier.

Good point! I think the substantial presence test is 183 days (about 6 months) in a calendar year, so at 8 months she'd likely meet that. Would that make her ineligible as a dependent?

Thanks for this detailed list! We actually have most of these documents already because of the custody situation. The court order is definitely the strongest piece, but I hadn't thought about keeping a calendar of the actual days. That's really smart, especially for the first half of the year when he was with us most nights but not all. Do you know if there's a specific form I need to fill out to claim him since he's not my biological child? Or do I just list him as a dependent when filing?

You'll list him as a dependent on your tax return just like you would any other dependent. There's no special form required specifically because he's not your biological child. The regular dependency forms (Form 1040 and the associated schedules) are all you need. When you're entering his information in your tax software or forms, you'll need to specify your relationship to him. Since he's not related to you by blood or marriage, you would typically select "Other" and might need to write in something like "girlfriend's child" or "member of household" depending on the tax software you're using.

You also might qualify for the Earned Income Credit if your income is within the eligible range. Having two qualifying children (your daughter and potentially your girlfriend's son) could significantly increase that credit compared to just claiming one child.

Thanks for explaining! Do you know if there's a way to check if they've received any information returns for me? Like the 1099-INT forms from my bank etc?

Yes, you can request your Wage and Income Transcript from the IRS, which shows all information returns filed under your SSN or ITIN, including 1099-INT forms from banks. You can request this online through the IRS website if you have an account set up, or by mail using Form 4506-T. Keep in mind that information returns for 2023 might not all be processed yet, as companies have until late January to file them. But you should definitely be able to see 2022 forms by now if they were submitted.

This isn't exactly right. Non-resident aliens have different filing requirements than US citizens/residents. Even if all US tax was properly withheld, you might still have a filing requirement to report the income. The rules around effectively connected income vs FDAP income are complex.

Good point! I just double-checked my statements and there was actually a small cash payment of $37.42 for a fractional share. But the CP2000 is claiming I owe taxes on the entire value of all converted shares, not just this tiny cash amount. Could this small cash payout be why the entire transaction got flagged?

Yes, that's exactly what probably happened! The cash-in-lieu payment triggered a report to the IRS, but then the entire transaction got mischaracterized. This is super common. Your response to the CP2000 should acknowledge this small taxable amount (the $37.42) but explain that the remainder of the transaction was a tax-free reorganization. Include your Morgan Stanley statements showing both the share conversion and the small cash payment. The IRS should adjust their proposed assessment to only tax the cash portion, which would be a much smaller amount than what they're currently claiming.

This is such a good point. I went through an acquisition with Exxon back in 2019 and completely lost track of my original basis. Had to pay an accountant $500 to reconstruct everything when I sold some shares last year. Save yourself the headache!

That's really helpful! Do you know if I can have both a Solo 401k and a SEP IRA for the same business? And does the contribution limit apply across both plans or separately?

You can have both types of plans, but the contribution limits overlap - they're not separate. The total combined employer contributions across all defined contribution plans (401k, SEP IRA, etc.) can't exceed the annual limit ($61,000 for 2022 or $67,500 if you're eligible for catch-up contributions). If you've already made employer contributions to your Solo 401k for 2022, you'd need to subtract those from the maximum SEP IRA contribution you could make. It gets complicated quickly, which is why having a tax pro run the numbers is usually worth it. The key advantage is that you can still set up and fund a SEP IRA now for 2022, whereas the Solo 401k needed to be established by Dec 31, 2022.

I did this last year. C-corps have some advantages for retirement planning (like the ability to create defined benefit plans with much higher contribution limits), but the tax situation gets WAY more complicated. You're looking at potential double taxation issues that can offset the retirement benefits.