That's a really good point I hadn't considered! So even though she has to file her own return for the interest income, I can still claim her as a dependent if she meets the other tests? She definitely meets the support test - she just graduated last May and moved back home, and I'm covering most of her expenses while she's job hunting.

Exactly! The 5-month student rule applies to dependent status, and since she was a full-time student for at least 5 months during 2024, she can be your dependent if she meets the other tests. The support test is key - if you're providing more than half her total support for the year, you can claim her. Being a dependent will affect how she files her own return though - she'll need to check the box indicating someone else can claim her as a dependent, which affects her standard deduction for her own filing.

This is a really good point. Last year my son had about $1,800 in dividends from some stocks his grandpa gifted him, and I ran the numbers both ways. It was definitely cheaper for him to file his own return since his tax rate was effectively zero, while adding it to my income pushed some of it into my 22% bracket!

Exactly! The convenience of Form 8814 often comes with a stealth tax increase. I found for my daughter's case, we saved nearly $400 by having her file her own return instead of using Form 8814. The kiddie tax rules still apply either way, but there's usually still a benefit to filing separately. The only hassle is the extra paperwork, but for a few hundred dollars in savings, it's worth the 20 minutes it takes to file a simple return for a kid with just interest or dividend income.

Thanks for bringing this up - I definitely had over $10K in those foreign accounts. What documentation did you need to provide for the FBAR filings? And did you go through a tax attorney or handle it yourself?

You'll need account statements showing balances, account numbers, financial institution information, and maximum value during each year. For crypto exchanges, you'll need documentation showing your wallet values and transaction history. I tried handling it myself initially and that was a huge mistake. After receiving the first penalty notice, I hired a tax attorney who specialized in offshore compliance. The attorney was expensive ($350/hour) but worth every penny because they negotiated my penalties down significantly by proving my non-compliance wasn't willful. For your situation with both crypto and traditional foreign accounts, I'd definitely recommend getting professional help rather than trying to navigate it alone.

Which tax software did you end up using for all the crypto-to-crypto transactions? I've been using TurboTax but it seems terrible for handling anything beyond basic crypto.

Thanks for mentioning this! My program was 4 years (2019-2023), but that's really good to know about the difference between undergrad and grad programs. Do you know if there's an easy way to tell from the tax forms if they claimed the AOC versus the Lifetime Learning Credit? I'm still a bit confused about how to interpret all these numbers.

You can tell which credit was claimed by looking at Part I of Form 8863. If there are numbers on lines 1-8, that's the American Opportunity Credit section. If there are numbers on lines 9-19, that's the Lifetime Learning Credit section. Some people might claim both credits in the same year if they have multiple students in the family (like one in undergrad and one in grad school). That's why you'll sometimes see numbers in both sections, which can definitely add to the confusion!

Getting transcripts online is great advice but not everyone can pass the identity verification process. My parents tried for weeks and couldn't get through it. They ended up having to request them by mail which took forever. Just a heads up that it might not be as quick as it sounds!

I didn't claim any recovery rebate credit that I know of, and I wasn't on unemployment in 2022. I work full-time and just did a standard tax return with some basic deductions for mortgage interest. The payment came with a notice that has a bunch of codes on it that I don't understand. I'm going to check my online account like someone suggested and see if there's more info there.

If the payment came with a notice that has codes, those codes are the key to understanding what happened. Typically, CP12 notices indicate math error corrections, CP49 might be for overpayment adjustments, and CP21C often relates to changes made to your account. Check your online account at irs.gov as that will likely have more details than what's visible on the physical notice. If you look at the top right of the notice, there should be a notice number (CP followed by some numbers) - that will tell you exactly what type of adjustment this is. Most of these unexpected payments are legitimate adjustments in your favor due to calculation errors or tax law changes.

That's actually a good point. A legitimate IRS check will be from the US Treasury, not the "IRS" directly. It should be drawn on the Treasury account. And if you deposit it, wait at least 30 days to make sure it clears properly before spending the money just to be safe.

Thanks for pointing that out! So since I caught it in February 2025 and requested removal right away, does that mean I'm still within the window to avoid the 6% penalty for 2023 contributions? Does the "plus extensions" part mean I actually have until October 2024?

Unfortunately, you're outside the window to avoid the penalty completely. For 2023 contributions, you needed to remove any excess by the tax filing deadline plus extensions - so by October 15, 2024. Since you removed it in February 2025, you'll likely owe the 6% excise tax for 2023. When you amend your 2023 return, you'll need to include Form 5329 to calculate this penalty on the excess amount. The good news is you won't owe this penalty for 2024 since you removed it early in 2025. The earnings portion ($350) will be reported on your 2024 tax return when you receive the 1099-R from Fidelity, and those earnings will be subject to income tax plus a 10% early distribution penalty if you're under 59½.

Yes, sorry for the typo! I meant Form 5329. The tax software prompted me to complete this when I started looking into amending my return. Thanks for catching that!