So wait, does that mean I should be rounding all the numbers on my tax return to the nearest dollar instead of including cents? I've been reporting down to the penny on everything for years!

Yes, the official IRS guidance is to round to the nearest dollar on your personal tax returns. If it's 50 cents or more, round up. If it's less than 50 cents, round down. This applies to Form 1040 and most related schedules. This is different from how the amounts might appear on your information returns like W-2s or 1099s, which sometimes include cents. But when you transfer those amounts to your tax return, you typically round each line to the nearest dollar. Most tax software does this automatically for you.

Yes, in some cases financial institutions are permitted to exclude de minimis amounts (very small values). There are specific thresholds for different types of income where reporting isn't required. For example, if interest income is less than $10, it generally doesn't need to be reported on a 1099-INT. For 1099-B forms specifically, there are complex reporting rules about small transactions. If your platform is zeroing out very small amounts, they're likely following applicable guidelines. Remember though, technically you're still supposed to report all income regardless of whether you received a form for it.

The IRS absolutely does catch these eventually through their matching programs. My brother ignored his excess contribution for 4 years thinking they wouldn't notice, and then got hit with the 6% penalty for all 4 years PLUS interest and an accuracy-related penalty. The IRA custodian reports all contributions to the IRS on Form 5498, and they cross-check that against your income on your tax returns.

That's good to know - definitely going to address this ASAP then. I was hoping maybe they had bigger fish to fry, but sounds like their systems eventually catch up to these issues. Better to pay the penalties now than wait for them to find it and potentially face even more penalties and interest.

This is actually super helpful. What specific items don't count toward MAGI for Roth contribution purposes? I'm wondering if I might have made the same mistake in my calculations.

Thanks for sharing your experience! That's really helpful to hear from someone in a similar situation. Did you have to fill out any special forms to document the support calculation, or did you just keep your own records in case of an audit?

We didn't have to submit any special forms with our tax return specifically for the support calculation. Our tax preparer just had us keep good documentation (basically a spreadsheet showing our household expenses and what portion went to our daughter). The most important thing was making sure our daughter's tax return properly indicated she could be claimed as a dependent on someone else's return. That way the systems don't flag a conflict. Keep records of major expenses you pay for your daughter in case you ever get questioned, but in our experience, this was a pretty straightforward situation once we understood the support test isn't about income but about who's paying for living expenses.

The kiddie tax only applies to unearned income (interest, dividends, capital gains, etc.), not earned income from actual work. Since OP's child is earning money from modeling/commercial work, that's considered earned income and would be taxed at the child's own rate, not the parents' rate.

Thanks, this is exactly what I needed to know! I pay about $6k in state income taxes, no mortgage, and minimal medical expenses. So it sounds like I'd need to donate around $8k worth of stuff to make itemizing worthwhile, which is definitely not happening this year lol. I'll just take the standard deduction and be happy the clothes are going to someone who needs them more than me.

Yep, you've got it right. In your situation with $6k in state taxes, no mortgage, and minimal medical expenses, you'd need about $8k in charitable donations to make itemizing beneficial. The good news is that even without the tax benefit, your donation will help others. And if your financial situation changes in future years (like buying a home with a mortgage), the equation might change too!

You're not wrong, but there are other tax benefits designed for lower/middle income folks that high-income people don't get. The tax code is complicated. Also, the standard deduction is basically a "freebie" deduction whether you donate or not, so at least there's that.

This hobby vs business distinction is worrying me now. I definitely intend to make a profit, but with only $360 in income for 2024 and thousands in expenses, will the IRS see this as a legitimate business? We had the property listed on several rental sites but just had bad timing with the market in our area.

Don't worry too much - the IRS looks at your intent and efforts, not just your initial results. Save copies of your rental listings, any advertising you did, and documentation of your efforts to rent the property. This shows you were genuinely trying to operate as a business. The IRS generally allows new businesses some time to become profitable. They use a guideline that if you show a profit in 3 out of 5 consecutive years, they'll presume you have a profit motive. Your first year being mostly preparation is very common in real estate. Just make sure you keep excellent records of all expenses and your efforts to rent the property. This documentation will be crucial if you're ever questioned about your business intent.

I had a similar situation last year. You need to allocate expenses based on both time and usage. For example, if your property was available for rent for 3 months out of the year, you'd allocate 25% of annual expenses like insurance, property taxes, etc. to the rental activity. Then within those 3 months, if it was only actually rented for 10 days, you need to keep personal use vs. rental use straight too. Publication 527 has worksheets for this. It gets complicated fast!