I've been following this thread closely as someone who went through a similar US-Germany tax transition in 2022, and there's one important aspect I haven't seen mentioned yet: the potential impact of state tax treaty benefits. While the federal US-Germany tax treaty is comprehensive, some US states don't automatically honor federal treaty provisions. Since your rental property is in California, you'll definitely need to file a California non-resident return (Form 540NR), and California has its own rules about recognizing foreign tax credits. California generally doesn't provide the same treaty benefits that federal taxes do, so you might end up with some level of triple taxation (US federal, California state, and German) on your rental income that can't be fully eliminated through credits. The good news is that California's tax rates are typically lower than German rates, so your German foreign tax credits on your federal return should still provide substantial relief. Also, make sure you understand the difference between the Foreign Tax Credit and Foreign Earned Income Exclusion. For your rental income, you'll want the Foreign Tax Credit since rental income doesn't qualify for the exclusion. But for future German employment income, the exclusion might be more beneficial depending on your situation. One practical tip: consider keeping separate bank accounts for your rental property income and expenses. This makes record-keeping much easier when you're dealing with currency conversions and different tax year reporting requirements between the countries. The learning curve is steep initially, but once you establish good systems and find the right professionals, it becomes much more manageable!

I went through a very similar situation when I moved from the US to Germany in 2020, and I can definitely relate to the sticker shock of those professional fees! Here are a few practical steps that helped me navigate this without breaking the bank: First, take advantage of the IRS Taxpayer Advocate Service - they have specialists who can help explain treaty provisions over the phone for free. I found them incredibly helpful for understanding how Article 23 of the US-Germany treaty applies to specific situations like ours. For the German side, look into local Lohnsteuerhilfeverein offices - these are non-profit tax assistance organizations that charge much lower fees (typically €200-400) compared to private Steuerberater. Many have staff who understand basic US-Germany tax coordination. One thing that saved me significant time and stress: I created a simple spreadsheet tracking all my income sources, tax payments, and relevant dates in both USD and EUR. This made it much easier to complete forms like 1116 for foreign tax credits and helped me catch potential issues early. Also, don't forget to check if your employer offers any expat tax assistance as part of your benefits package. Some German companies provide this support for international employees, even if it's not explicitly advertised. The €4000 quote you received is definitely on the high end. With some preparation and the right resources, you should be able to handle this for well under €1500 total. The first year is always the most challenging, but it gets much easier once you understand the process!

I went through identity verification in January 2024 and can share my exact timeline to help ease your anxiety! Here's what happened: Jan 8: Received 5071C letter Jan 10: Called verification line (got through after 2 hours of redials) Jan 10: Completed phone verification (took about 20 minutes once connected) Jan 24: Transcript updated with refund date Jan 29: Refund deposited So 14 days from verification to transcript update, 19 days total to money in account. The verification itself was straightforward - they asked for my SSN, filing status, refund amount, and a few line items from my return. Since you mentioned urgent medical expenses, definitely emphasize this when you call. The IRS has expedited processing for financial hardship cases. Also, call first thing in the morning (7-8 AM) for shorter wait times. One thing that helped my peace of mind was checking my online account transcript every few days after verification. You'll see the 570 "additional account action pending" code clear, then 971 "notice issued" will appear, followed by 846 "refund issued" with your actual deposit date. The waiting is the hardest part, but most people get their refunds within 2-3 weeks of verification. You've got this!

I went through identity verification just last month and wanted to share my experience to help calm your nerves! Here's my timeline: Dec 15: Filed return electronically Dec 28: Received 5071C letter in mail Jan 2: Called verification number (took 3 attempts to get through - kept getting busy signal) Jan 2: Completed phone verification in about 25 minutes once connected Jan 18: Checked transcript and saw code 846 with refund date Jan 22: Direct deposit hit my account So exactly 16 days from verification to transcript update, and 20 days total to getting my money. The agent was actually very helpful and walked me through each step. A couple things that made the process smoother for me: - I had my prior year AGI written down (they always ask for this) - Made sure to call from the phone number that matched what was on my tax return - Had my ID, Social Security card, and tax return spread out in front of me Since you mentioned urgent medical expenses, definitely lead with that when you call. I've heard they can flag accounts for expedited processing in hardship situations. The verification process itself really isn't as intimidating as it sounds - they're just confirming basic info from your return and ID. You'll get through this and have your refund soon!

Has anyone used the "regular method" vs "simplified method" for calculating the home deduction for childcare? I'm watching 2 kids in my apartment and trying to figure out which one would give me a better deduction.

One thing to keep in mind is that you'll want to separate business and personal expenses very clearly. Since your wife is providing childcare in your family home, the IRS can be particular about what constitutes a legitimate business expense versus personal family expenses. For meals and snacks, you can only deduct the portions provided to the childcare child - not what your own kids eat during the same time. I recommend keeping a simple log of what you buy specifically for the childcare child versus family groceries. Also, don't forget that if your wife earns over $400 in self-employment income, she'll need to make quarterly estimated tax payments starting next year to avoid penalties. Since this is her first year, she won't owe penalties for 2024, but she should start planning for quarterly payments in 2025 if she continues providing childcare. The good news is that even though she has to pay self-employment tax (about 15.3% on the net profit), she's also earning Social Security and Medicare credits that will benefit her later in retirement. Many people don't realize that stay-at-home parents can build up their own Social Security benefits this way.

Has anyone considered Section 179 deduction for some of the more expensive components? I found that for some of the higher-end networking equipment I keep on hand (like $500+ items), my accountant suggested using Section 179 instead of supplies or CoG since they have a longer useful life.

This has been such a helpful thread! I'm dealing with a similar situation with my small tech consulting business. Based on all the discussion here, it seems like the key is whether your business is primarily service-based (which it sounds like yours is) and whether the parts are incidental to your services rather than merchandise for sale. From what I've gathered, since you're an MSP providing services and the components are a small percentage of revenue (5%) and often not separately billed, treating them as supplies expense on line 22 of Schedule C seems appropriate. The fact that you're under the gross receipts threshold mentioned earlier also helps with simplified accounting methods. One thing I'd add is to make sure you document your reasoning - keep records showing the percentage of revenue from parts vs services, and note when parts are included in service fees vs separately billed. This will help if you're ever questioned about your classification choice.

Great discussion here! Just wanted to add one more consideration that might be relevant to your situation. Since you mentioned you're in the 32-35% tax bracket, you should also think about whether you expect to be in a higher or lower tax bracket in retirement. The whole point of a Roth conversion is that you pay taxes now at your current rate to avoid paying taxes later at whatever rate applies when you withdraw. If you think tax rates might be higher in the future (either because of policy changes or because you'll have more retirement income than expected), then paying the 32-35% now could still make sense even without the capital loss offset. Also, don't forget about Required Minimum Distributions (RMDs). Traditional 401ks force you to start taking distributions at age 73, but Roth accounts don't have RMDs during your lifetime. This can be a huge advantage for estate planning if you don't need the money right away in retirement. Given your capital losses, this might indeed be the perfect storm of circumstances to do at least a partial conversion. Just make sure to run the numbers on how the conversion affects your overall tax picture for the year!

Just wanted to share my experience from a similar situation last year. I had about $40k in a traditional 401k and roughly $50k in capital losses from some tech stock disasters (painful lesson learned!). After reading through all these excellent comments, I ended up doing a partial conversion strategy over two years. Year one, I converted $20k and used $3k of my capital losses against ordinary income. Year two, I'm planning to convert the remaining $20k and again use another $3k of losses. What I didn't expect was how much the tax software struggled with this scenario. I ended up having to manually override several calculations because the software wasn't properly accounting for the interaction between the conversion income and capital loss carryforwards. If you go this route, definitely consider getting professional tax help or using one of the specialized tools mentioned here. One other tip - I found it helpful to do the conversion early in the year (I did mine in February) so I had flexibility to adjust my tax withholdings throughout the year. Doing it late in the year can create estimated tax payment headaches. The peace of mind of having that money in Roth and not worrying about future RMDs has been worth the temporary tax hit. Good luck with your decision!