How does a QCD work? My parents are over 70 and take RMDs but they don't get any tax benefit from their charitable donations anymore since the standard deduction increased.

A QCD allows people who are 70½ or older to direct up to $100,000 annually from their IRA directly to qualified charities. The distribution counts toward their Required Minimum Distribution (RMD) but doesn't get added to their taxable income. This is much better than taking the distribution, paying tax on it, and then donating (especially when taking the standard deduction). With a QCD, they effectively get a tax benefit from charitable giving even without itemizing. The charity gets the same amount, but your parents keep more money by reducing their tax bill on the RMD. It's completely legitimate and specifically encouraged by the tax code.

That makes sense. So basically don't create an explicit quid pro quo in texts or emails? Would verbal agreements be just as problematic if discovered?

Can you explain more about those education tax credits? I've heard of them but don't really understand how they work or if I'd qualify.

The American Opportunity Credit is the bigger one - worth up to $2,500, and you can claim it for the first 4 years of college. You get 100% of the first $2,000 you spend on qualified education expenses, and 25% of the next $2,000. The best part is that it's partially refundable - meaning you can get up to $1,000 back even if you don't owe any taxes. The Lifetime Learning Credit is worth up to $2,000 (20% of the first $10,000 in qualified expenses), but it's not refundable. However, you can use it for any year of education, including graduate school or professional courses. You generally qualify if you're paying for college expenses and your income isn't too high. For 2024, the AOTC starts phasing out at $80,000 for single filers, and the LLC at $59,000. Both have their own requirements, but most traditional college students will qualify for at least one of them.

You need to look at your student account statement from your school - it should show how much you paid for tuition and fees separately from housing, meal plan, etc. Compare that to your total scholarship amount. If your scholarship exceeds the tuition/fees/required books, then the excess is taxable. Your school's financial aid office can also help break this down if the statements aren't clear.

Does title insurance play any role in owner financing? I'm about to sell a small lot and wondering if I should require the buyer to get title insurance even though there's no bank involved.

Absolutely - title insurance is still important in owner financing situations. I typically recommend that the buyer purchase an owner's title policy to protect their interest. As the seller/lender, you might want to get a lender's title policy to protect your interest until the loan is paid off. This ensures that if any title problems emerge during the financing period (like previously unknown liens or easements), there's protection in place. Without a bank involved, it's even more important to make sure these details are handled properly since you don't have a mortgage company's legal team making sure everything is in order.

That's a great point I hadn't considered. Since my family member will still technically be the legal owner while the financing is in progress, they'd be the one getting the tax bills I assume? Would you recommend having the buyer pay the taxes directly to the county, or having them pay my family member who then pays the tax bill?

Thanks for clarifying this! I'm the contractor and my client asked me to complete this form so they can pay me and report it properly. So I'll put my full legal name and address in Box C. Just to double check - this isn't the W-9 form, right? Because I filled one of those out already.

You're welcome! If you already filled out a W-9, then this is probably a different form. The W-9 is what contractors fill out to give to clients (it provides your taxpayer info), while the 1099-NEC is what the client sends to both you and the IRS reporting how much they paid you. It's a bit unusual for a client to ask you to fill out your own 1099-NEC since they typically prepare that form based on the W-9 you already provided. They might be asking you to verify the information they have, or they could be confusing which form they need from you. Might be worth asking them to clarify which specific form they need you to complete.

This is actually not entirely accurate. The IRS does accept standard USPS abbreviations in addresses. I work in payroll and we use standard abbreviations all the time without issue.

I hadn't considered Innocent Spouse Relief - I'll look into that, though I'm not sure if it applies since we haven't filed jointly before. Yes, we did start the green card process, which is why I know they don't have an ITIN or SSN. I'll have to dig through those old immigration papers to see what identifying documentation I might have access to. That's a really good point - there might be copies of their passport or birth certificate in those files that I could use for the ITIN application.

Innocent Spouse Relief might not be the best fit then, since it's mainly for situations where you've already filed jointly. But definitely check those immigration papers! They often include copies of birth certificates, passports, etc. - exactly what you'd need for an ITIN application. Also, don't forget that if you do manage to get the documentation you need, you can file Form W-7 (the ITIN application) attached to your tax return. You don't need to wait for the ITIN to be issued before filing your return. This is a common scenario for non-resident spouses.

Education credits are explicitly not allowed for MFS filers, unfortunately. I learned that the hard way last year. There are actually a ton of credits you can't get with MFS status, which is why it's usually so much worse than MFJ or HoH.