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One thing to consider that nobody's mentioned yet - if you're doing a lot of crypto gambling, make sure you're keeping detailed records of your deposits and withdrawals. I got audited last year because the IRS saw large movements of crypto into my wallet but couldn't identify the source. Had to prove it was gambling winnings and not unreported income from selling services or goods. The annoying part was showing the trail from gift cards to gambling site to crypto withdrawal. Take screenshots of everything!
This is why I always take the extra step to get a win/loss statement from gambling sites that offer them. Does your crypto gambling site provide any kind of statement or summary you can download for tax purposes?
Most legit crypto gambling sites do offer some form of win/loss statement or transaction history you can download. It's not always as detailed as traditional casinos, but it's better than nothing. For sites that don't provide good documentation, I've started keeping a spreadsheet with dates, amounts, screenshots of balances before and after significant wins/losses, and the withdrawal transactions. The more documentation you have linking the gambling activity to the crypto you received, the easier it is if questions come up later.
Quick technical note - when you record this in most tax software, you'll want to enter it as: 1. Gambling income (which you've done) 2. A "buy" transaction for the ETH with a cost basis equal to the USD value of your withdrawal at that exact time 3. Any subsequent sales of that ETH would then generate capital gains/losses Your $101 loss means the ETH decreased 10.1% in value since you received it (assuming you withdrew about $1000 worth). Seems reasonable depending on when this happened and market conditions.
Thanks for breaking it down like this! The gift card to gambling site to ETH withdrawal path had me so confused. And yes, it was about $1000 worth when I cashed out, so the 10.1% decrease tracks with the market dip after I withdrew. I'm going to double check the exact date and ETH price to make sure my software has it right.
I just called the IRS Practitioner Priority Service about this exact question last week! The agent confirmed that Form 8809 doesn't require a 2848 for preparers to sign. They explained that information return extensions are considered "ministerial acts" that don't require formal representation authorization.
For what it's worth, I've been filing 8809 extensions for clients for years without a 2848 and never had an issue. The IRS is mostly concerned that the extension gets filed on time. Just make sure you have your EFIN or PTIN on the form as required. Also, remember that Form 8809 gives an automatic 30-day extension for 1099-NEC now - you don't even need to provide a reason for the extension request!
Thanks everyone for the helpful responses! This definitely clears things up for me. I'll go ahead and file the 8809 without the 2848 since I already have a service agreement with this client. And I'll look into getting 2848 forms for all my clients going forward as a best practice. Really appreciate all the insights!
The W-4 change in 2020 really messed a lot of people up. My wife and I had a similar issue last year. What fixed it for us was: 1) We both checked the box in Step 2(c) on our W-4s that says "If there are only two jobs total, you can check this box" 2) We each put an extra $75 per paycheck in Step 4(c) as additional withholding After making those changes mid-year, our tax situation evened out. This year we're getting a small refund of about $200, which is perfect. The IRS withholding calculator is helpful but honestly kind of confusing to use.
Did both of you need to check the box in Step 2, or just one of you? I've read conflicting things about this and don't want to withhold too much either.
We both checked the box, but I've since learned that was actually withholding too much. The correct approach is for only one spouse to check the box, not both. We ended up over-withholding a bit which is why we got that small refund. The safest approach is to use the IRS Tax Withholding Estimator online. It will give you specific instructions for each spouse's W-4. Usually it tells one person to check the box and the other not to, plus suggests additional withholding amounts if needed.
Has anyone used TurboTax's W-4 withholding calculator? My tax preparer recommended it over the IRS one but I'm not sure if its worth paying for when the IRS one is free.
I've used both and honestly the IRS one is better. The TurboTax one tries to upsell you on their paid tax prep services and doesn't give you as detailed instructions for filling out the W-4. Save your money and just use the free IRS Tax Withholding Estimator.
Don't forget state taxes in this equation! California is extremely aggressive about taxing worldwide income. I worked for a Japanese company remotely from CA for 3 years and my state tax bill was brutal compared to what colleagues in Nevada paid (zero state tax). If you're making $127K equivalent, CA will take roughly 9.3% of that. Have you considered relocating to a no-income-tax state before taking this position? Could save you $10K+ annually.
I actually have been thinking about that! How hard was the process of working with a foreign employer while in California? Did they handle the state tax withholding properly or did you end up with surprise tax bills?
The foreign employer had no idea how to handle California taxes. They didn't withhold anything for state taxes, so I had to make quarterly estimated tax payments to the California Franchise Tax Board to avoid penalties. I got hit with an underpayment penalty the first year because I didn't realize I needed to do this. If you stay in California, definitely set up quarterly estimated payments right away. The FTB is much more aggressive than the IRS about collecting penalties! Also, document everything about where you physically work - California has been known to audit people who claim they've moved to Nevada but still actually work in California.
Has anyone addressed the currency exchange risk yet? I worked for a UK company from the US and the salary looked great until the pound dropped 18% against the dollar over 6 months. Suddenly I was making way less than expected.
Good point. I negotiate a USD equivalent with my foreign employer that gets adjusted quarterly. Protects against big swings. Swiss franc is usually pretty stable tho.
Ethan Taylor
My dad is an estate attorney and deals with this all the time. Here's what he always tells clients: The bank is following proper procedure - they literally cannot deposit a check made out to an estate into a personal account. It's not a matter of them being difficult; it's banking regulations. What you need is: 1) Apply for an EIN for the estate (free on IRS website) 2) Take EIN and death certificate to bank 3) Open estate account 4) Deposit check 5) Transfer money to heirs 6) File final 1041 for estate showing $0 tax (inheritance not taxable) 7) Close account The confusion comes from mixing up banking requirements vs tax implications. You need the estate account to deposit the check, but that doesn't make the money taxable.
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CosmicCruiser
ā¢Thank you so much for breaking it down like this!! This makes perfect sense now. I was getting so confused because our accountant kept saying "inheritance isn't taxable" (which seems correct) but wasn't addressing the actual problem of how to deposit the check. I just got the EIN online following your steps and have an appointment with the bank tomorrow to open the estate account. Will the final 1041 be complicated to file? Or is it pretty straightforward since there's no tax due?
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Ethan Taylor
ā¢The 1041 for this situation is very straightforward. Since there's no income being generated by the estate (just passing through the inheritance), it's basically just identifying information and zeros for the income portions. Many people do it themselves for simple cases like yours. The form asks for the EIN, estate name, when it was opened/closed, beneficiaries, and income details. Since inheritance isn't income, you'll show the money coming in and going out to the heir(s) with no taxable amount. It's mainly filing it to show the IRS that the estate was opened and closed properly. Your accountant can do this very simply, or there are templates online if you want to DIY.
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Yuki Ito
Just wondering - has anyone used TurboTax to file the 1041 for an estate? I'm in a similar situation and trying to figure out if I need to pay an accountant or if I can DIY it.
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Carmen Lopez
ā¢I used TurboTax Business for my mother's estate last year. It worked fine for a simple estate situation. The software walks you through all the questions and it's pretty straightforward if you're just dealing with passing inheritance through. Make sure you get the Business version though, the regular TurboTax doesn't do 1041s.
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