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.

Does the scanner you mentioned work well with receipts? I have a regular printer/scanner but it doesn't handle small receipts well and they always come out crooked or unreadable.

The Brother scanner handles receipts extremely well! It has a dedicated receipt mode that adjusts the settings specifically for those narrow thermal paper receipts. Even faded receipts scan clearly, and it automatically straightens them. It also does batch scanning, so I can load a stack of different sized documents (receipts mixed with regular papers) and it processes them all correctly. The auto-feed feature is what makes it worth it for me - I just load everything in and walk away while it scans a stack of documents.

I do this and it works fairly well, but two important tips: 1) Make sure the entire receipt is visible and readable in the photo, and 2) Create separate albums for different categories (medical, business, donations, etc). Also, most smartphones timestamp photos which helps prove when the expense occurred. The IRS accepts digital copies of receipts as long as they're legible and show all the important information (date, vendor, amount, what was purchased). Just make sure you back up your photos somewhere in case your phone dies or gets lost!

Thanks for the tips! I'll definitely create separate albums by category - that makes a lot of sense. I was worried about the IRS not accepting digital photos, so it's good to know they're valid as long as everything is readable. I'll start backing them up to my cloud storage just to be safe.

That's a really good point I hadn't considered. Do you think the mortgage company would report that information directly to the IRS though? Or would they only discover it if they specifically investigated him for some reason?

Mortgage companies don't routinely report down payment sources directly to the IRS - that's not their job. However, they do file what's called a Mortgage Interest Statement (Form 1098) that shows the IRS your friend bought a property. If the IRS ever decides to audit your friend, they'd look at his income versus his expenses and assets. A $50K down payment that doesn't align with reported income would raise immediate questions. The IRS could then subpoena the mortgage application documents, which would reveal the source of funds. It's not about the mortgage company reporting him - it's about the paper trail created during the mortgage process that could be discovered during an audit. The bigger issue is your friend deliberately hiding taxable income, which has no statute of limitations for fraud.

What was the small exchange you used? Was it US-based? I'm wondering if offshore exchanges report to the IRS too or if they're safer.

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.

I didn't even realize there was a worksheet! I'll definitely look into that option. And yeah, the new form looks completely different from what I remember filing years ago - the elimination of allowances really threw me off. Thanks for the pointer about the worksheet!

Happy to help! The worksheet is actually on page 3 of the W4 form PDF from the IRS website. It's pretty user-friendly for simple situations like yours. Just be sure you're using the 2025 version of the form since they adjust the numbers slightly each year. Another tip: after you submit your W4, check your first couple of paystubs carefully to make sure the withholding looks reasonable. If it seems way off, you can always submit a new W4 to adjust. Most payroll systems let you update it anytime.

That's actually not how the new W4 works anymore. There's no place to put "0" since they eliminated allowances in 2020. The form is completely different now. You'd need to add an additional amount to be withheld on line 4(c) if you want extra withholding.