4 Has anyone considered a compromise? My ex and I alternate who claims our daughter as a dependent each year. In even years, I claim her and file HOH. In odd years, he claims her and files HOH. We found this works better for us than one person always getting the tax benefit. Just make sure you have a written agreement to avoid problems!

This is such a helpful thread - I'm learning so much! I'm in a similar situation with my partner, but we have two kids from different relationships. I claim my older daughter (she lives with us full time), and he claims his son who's with us every other week. We've both been filing as Single, but after reading through all these comments, I'm wondering if I could qualify for Head of Household since I claim my daughter and we split household expenses pretty evenly. The part about calculating ALL expenses really opened my eyes - I never thought to include things like school supplies, activities, and clothes in the support calculation. I think I might be providing more support than I realized. Has anyone else dealt with blended family situations like this where each parent has their own biological child they claim?

Just a quick reality check - what are your actual profits after expenses on that $800k? Entity selection matters way more if you're keeping a significant portion vs if you're reinvesting most of it back into growth. Also, make sure you've set aside enough for quarterly estimated taxes! I learned this the hard way with my app - got hit with a massive tax bill plus penalties because we were just keeping everything in that shared account and not making proper tax payments throughout the year.

With $650k in profit split between two people, you're definitely in territory where entity structure makes a huge difference. Here's my take as someone who's been through this: LLC taxed as S-Corp is probably your best bet, but don't sleep on the timing. You can make the S-Corp election for 2024 taxes if you file Form 2553 by March 15, 2025, or you might qualify for late election relief if you have reasonable cause. For the quarterly payments issue - yes, you're likely facing underpayment penalties, but it's not the end of the world. The IRS penalty is usually around 8% annually on the underpaid amount. Since this appears to be your first year with significant income, you might qualify for some relief. Quick action items: 1. Make a large estimated payment ASAP for Q4 2024 to minimize additional penalties 2. Set up your LLC and make the S-Corp election 3. Get that operating agreement drafted - with $650k in play, you need clear exit clauses 4. Start taking reasonable salaries immediately once you elect S-Corp status The salary vs distribution split will save you thousands in self-employment taxes. At your income level, you're probably looking at $120-140k salary each, with the rest as distributions. Don't try to DIY this - get a CPA who specializes in multi-state businesses and tech companies. The money you save in taxes and penalties will more than pay for proper professional help.

Has anyone actually succeeded in getting a partial refund during an EIC audit? I've been reading conflicting information about this. Some say it's technically possible but practically never happens, while others claim they've received the non-EIC portion while waiting. What's been your experience?

This is exactly what I went through in 2023! The chess game analogy is perfect - you really can't move any pieces until the audit clears. I was under a 420 code for 5 months and the entire $4,200 refund was frozen, including my Child Tax Credit portion. What helped me was getting my account transcript through the IRS website every few weeks to track any movement. The code changed from 420 to 421 when they started processing my submitted documents, then finally cleared to 846 when the refund was approved. Don't count on any partial payments - plan as if you won't see anything until it's fully resolved. The waiting game is brutal but hang in there! 🎯

Quick tip - make sure you're tracking payment processor fees separately. When I started my digital business last year, I didn't realize these were deductible expenses. Stripe, PayPal, etc. all take a cut + currency conversion fees for international payments. Those fees add up fast with global sales ($5k+ for me last year) and are fully deductible business expenses.

Based on your situation, I'd recommend starting with a tax professional who has experience in international digital commerce, but don't overlook getting direct guidance from the IRS too. The complexity of your situation definitely warrants professional help. For finding the right CPA, look for someone who specifically mentions "digital products," "e-commerce," or "international taxation" in their practice areas. Many traditional tax preparers haven't dealt with the nuances of digital product sales across multiple jurisdictions. One thing to consider - before you spend hundreds on a specialist consultation, you might want to get some baseline understanding of your obligations. The IRS has specific guidance on digital products and foreign income that could help you ask better questions when you do consult with a professional. Also, make sure you're keeping detailed records of sales by country/region. This will be crucial for any tax professional you work with, and it's required for proper compliance. The sooner you get organized, the easier (and cheaper) it will be to get compliant. The good news is that many other digital entrepreneurs have navigated this successfully - you're not breaking new ground here, just need the right guidance for your specific situation.

Has anyone looked into whether the IRS Fresh Start Program might also apply here? My understanding is that for tax debts under $50,000 there are simplified procedures, but for larger amounts like $390k, you might need to look at an Offer in Compromise or an Installment Agreement if the Innocent Spouse Relief isn't granted.

I'm so sorry you're going through this incredibly stressful situation. As someone who has dealt with similar IRS issues, I want to emphasize that you absolutely should NOT be liable for your ex's tax debt, especially given the circumstances you've described. The combination of filing separately, maintaining completely separate finances, having no involvement in his business operations, and the documented history of abuse creates a very strong foundation for Innocent Spouse Relief. The IRS specifically recognizes that abuse can prevent someone from questioning or having knowledge of their spouse's financial affairs. A few additional thoughts that might help strengthen your case: Document any instances where your ex actively concealed financial information from you or refused to discuss business matters. If you have any communication showing he insisted on keeping finances separate or made statements about "protecting" you from business concerns, those could be valuable. Also, the fact that he's now transferring assets and manipulating his apparent income actually works in your favor - it demonstrates a pattern of financial deception that supports your claim of having no knowledge of his true financial situation. Given the complexity and the amount involved ($390k is substantial), I'd strongly recommend working with a tax professional who specializes in Innocent Spouse Relief cases. The initial filing is critical, and having expert guidance could make the difference between approval and denial. Stay strong - you have legitimate grounds for relief and shouldn't have to pay for his financial misconduct.