Omg I didn't even think about that! I don't know much about tax credits tbh. Is there an income limit for the Earned Income Credit? And do I need any special documentation to claim it beyond what I'd need for claiming my nephew as a dependent?

Yes there's an income limit but at $42k with a qualifying dependent you should be under the threshold. For 2025 filing season the limit is around $46,000 for Head of Household with one qualifying dependent. You don't need any additional documentation beyond what you'd already gather for claiming your nephew as a dependent. The same proof that he lives with you and that you provide more than half his support works for both. Just make sure when you file your amended return you complete Schedule EIC along with your 1040-X. The credit could be worth anywhere from $1,500-$3,500 depending on your exact income and situation.

This is great advice! And another thing - amended returns can't be e-filed. You have to print and mail them, which means they take forever to process (like 4+ months minimum). Just be prepared for a wait.

Thank you so much for this clear explanation! So I should download the current form labeled "2024" to report my 2023 non-deductible contributions, correct? And then do I just mail it in by itself, or do I need to include anything else with it?

Yes, you should use the current form labeled "2024" for your 2023 non-deductible contributions. You can mail just the completed Form 8606 by itself to the same IRS address where you'd normally send your tax return. No need to include a 1040 or other paperwork since this is a standalone form for your non-deductible IRA contributions. Just make sure to sign and date it, and keep a copy for your records. The IRS may assess a small penalty for filing it late, but it's much better to file late than not at all.

I had to file 3 years worth last year. I sent them all in separate envelopes to make sure they wouldn't get confused or lost together. Each year needs the correct form (so 2022 form for 2021 contributions, 2023 form for 2022 contributions, etc). I also wrote the tax year very clearly at the top of each form to avoid confusion.

Does the FBAR thing apply if I don't have my name on any foreign accounts but I'm still sending/receiving money to family abroad? My parents in the Philippines use their local account but sometimes send me money from it.

FBAR filing requirements typically apply when you have a financial interest in or signature authority over foreign financial accounts that exceed $10,000 in aggregate at any time during the calendar year. If the account is solely in your parents' names and you don't have signature authority, you generally wouldn't need to file an FBAR just for receiving transfers from their account. However, you still need to report any income you receive from abroad on your tax return, regardless of FBAR requirements. The nature of the transfers matters - if they're genuine gifts from your parents, different rules apply than if they're income or business distributions.

Absolutely this! I had a similar setup with my uncle's business in Brazil and it turned into a nightmare during an audit because we had nothing in writing. The IRS ended up treating all the money I sent as gifts (which hit gift tax limits) and all returns as pure income. Documenting everything properly from the start would have saved me thousands.

Thank you all for the amazing advice! I definitely need to formalize the arrangement with my grandfather. I hadn't considered that without proper documentation, the IRS might interpret our arrangement differently than intended. I'll work on creating a written agreement that clearly specifies my contribution is an investment and outlines the expected returns. I've started tracking all transfers in a detailed spreadsheet as suggested. Would it be better to classify this as a loan with interest rather than an equity investment to simplify the tax treatment? I'm wondering which approach would be cleaner from a reporting perspective.

This is exactly what I needed - thank you! So if he's primarily moving his household and family, those expenses aren't deductible even if the reason for the move is business-related. But if he's also moving actual business property, that portion could potentially be deductible?

That's correct. The expenses for moving actual business property (like specialized equipment, inventory, business furniture, etc.) to the new location could potentially qualify as legitimate business expenses. Those would be reported on the business tax return. The personal household moving expenses remain non-deductible regardless of the business motivation behind the move. This is a common area where business owners often blur the lines, but the IRS is quite clear on maintaining the distinction between personal and business expenses. Your friend should keep meticulous records and separate receipts for anything that might qualify as a legitimate business expense versus personal moving costs.

Sorry you had to learn this the hard way. How did the audit go overall? Was it just a matter of paying the additional tax or were there penalties too?

This is really good advice. Different payroll systems handle the transition differently. I work in HR (not a tax expert though) and we've had tons of questions about this exact issue. Some systems use a "behind the scenes" conversion while others actually require you to fill out both the old and new formats.

Exactly! It's even more complicated because some of these systems were updated in phases. For my company, employees hired before 2023 still see the allowances language while newer employees get a different interface entirely. The most important thing is to make sure your actual withholding amounts align with your tax situation, regardless of how the form presents it. When in doubt, the payroll or HR department can usually provide a withholding calculator or estimate specific to their system.

Try using the IRS Tax Withholding Estimator (it's free on the IRS website). It's way more accurate than just guessing with allowances. You can adjust throughout the year too if your situation changes.