Yikes, that's exactly what I'm worried about. He's suggesting we file jointly but says he can't pay me his portion until he gets his tax refund from a previous year that's still processing. Did you find that you lost a lot of tax benefits by filing separately? I'm worried about losing my education credits.

That's a huge red flag! If he's waiting on a prior year refund, there's a good chance the IRS is holding it for some reason - maybe prior tax debt, child support, or other government debt. That refund he's counting on might never arrive or might be much smaller than he expects. I did lose some tax benefits filing separately. The biggest hits were lower thresholds for certain deductions and credits and losing the ability to contribute to a Roth IRA (my income was too high for separate filing but would have qualified under joint). However, my education credits actually worked out better filing separately because they have income limits that are easier to stay under with just my income. In your case, with a significant income difference and you being a student, filing separately might actually preserve more of your education credits. The American Opportunity Credit and Lifetime Learning Credit both start phasing out at lower combined income levels.

This is super helpful! One more thing to add - if you file separately and your spouse itemizes deductions, you CANNOT claim the standard deduction. My ex itemized without telling me, and I had to redo my whole return. Also, the income threshold for education credits drops dramatically for married filing separately - I think it's around $10,000 for some credits, which might be below your income.

Thanks for this perspective. I'm worried the IRS might see it that way too. Do you think I should consult with a tax attorney before selling? I'm concerned about potential penalties beyond just calculating the basis wrong.

Consulting with a tax attorney would definitely be a good idea in your situation. They can review the specific details of your transfers and advise you not just on the correct basis calculation but also on any potential exposure you might have regarding the transfers themselves. A good tax attorney can also help you understand the statute of limitations that might apply to your situation and develop a strategy for how to properly document and report the sale to minimize your risk of problems down the road. The peace of mind alone is probably worth the consultation fee.

That's a really good point. For transfers of real estate without consideration, you're supposed to file a Form 709 (Gift Tax Return) even if no gift tax is owed because of the lifetime exemption. If those weren't filed, that could be another issue to address.

Thank you for this perspective. My husband's company is pretty small (only 15 employees) and I think they're just not sophisticated with their accounting. When I asked him about it, he said they just direct deposit this extra amount every month with a note saying "travel" and have never asked for any kind of documentation. Should he just start tracking his miles anyway even if they don't require it?

Yes, he should absolutely start tracking his miles regardless of what the company requires. Use an app or a mileage log that records the date, business purpose, starting point, destination, and total miles for each business trip. This documentation will be invaluable if you're ever audited. With a small company, it's worth having a conversation with whoever handles payroll. They might genuinely not know the proper way to handle this. Many small businesses try to help employees with these stipends without realizing they're creating tax problems. You could suggest they implement a simple accountable plan where employees submit mileage logs monthly. This would make the stipend non-taxable when handled correctly, which benefits both the employee and employer (they wouldn't have to pay payroll taxes on properly documented reimbursements).

That's not entirely correct. You can't deduct both the standard mileage rate AND car payments. You have to choose one method - either standard mileage OR actual expenses. And with actual expenses, you can only deduct the interest portion of the car payment, not the principal, plus depreciation. And once you choose actual expenses for a leased vehicle, you have to use that method for the life of the vehicle.

But is the Saver's Credit refundable? Like if I had $0 tax liability could I still get the $406?

The Saver's Credit is non-refundable, which means it can only reduce your tax liability to zero, but not below zero. So if your tax liability was only $200 before credits, you'd only benefit from $200 of the $406 credit, not the full amount. This is different from refundable credits like the Earned Income Credit or Additional Child Tax Credit, which can give you money back even if you don't owe any tax.

Make sure you told H&R Block about any retirement contributions you made (401k, IRA, etc.). The software won't show the Saver's Credit option unless you've entered qualifying contributions. It's usually in the "Deductions & Credits" section under "Retirement & Investments" or something similar.

That makes sense, but wouldn't you need the 1099 to have their tax ID number? Or is that not really necessary when you're filing?

Great question! You actually don't need their tax ID number to report self-employment income on your Schedule C. You'll list your income in total rather than breaking it down by each payer. The tax ID number is more important for the company issuing the 1099 for their reporting requirements. If you're dealing with 1099-MISC or 1099-NEC forms, you'd typically just report the total income on your Schedule C without needing to list each company's ID. Now, if you're dealing with other types of 1099s like interest or dividends, those might require more specific reporting. But for standard freelance/contractor work, you're good to go with just accurately reporting the amount you earned.

Is there any downside to filing that substitute form? Like does it trigger an audit or anything?