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Has anyone actually tried amending previous years' returns to claim education credits for past tuition payments? I'm in this exact situation and wondering if it's worth the hassle.
Important: Make sure the collections payments were specifically for qualified education expenses (tuition, required books, etc). If they included things like room and board, parking fees, or late payment penalties, those portions aren't deductible for education credits. You'll need to separate out the qualified vs non-qualified expenses.
This! I made this mistake and it triggered an audit. Had to provide detailed documentation showing what portion of my collections payment was actually for tuition versus housing charges. Ended up having to pay back part of the credit plus interest.
Absolutely right. The IRS is pretty specific about what counts as a qualified education expense. Tuition and required course materials are in, but optional expenses are out. Another thing to watch for is if your tuition was paid by any grants or scholarships (even in previous years). If the school applied those to your tuition and what went to collections was actually your housing bill, you might be out of luck for education credits.
I set up a Belize IBC for forex trading back in 2021 and wanted to share some practical advice. The regulatory benefits (higher leverage) worked great, but the tax situation was a NIGHTMARE. First, most "offshore experts" don't understand how GILTI works for trading entities. I ended up owing nearly the same US tax I would have without the structure, PLUS had $12K in annual compliance costs between the foreign registered agent, specialized tax preparation, and legal reviews. Also, be extremely careful about which foreign broker you use. Many won't accept entities from certain jurisdictions due to their own regulatory requirements. I had to switch brokers twice, which was incredibly disruptive to my trading strategy.
That's exactly what I'm worried about - spending all this money on the setup only to find out the tax benefits are minimal. Did you find any particular jurisdiction or structure that worked better than others? And any broker recommendations that actually accept these kinds of entities?
I eventually switched from Belize to a Seychelles structure which had slightly better terms for satisfying economic substance requirements with algorithmic trading. The key is finding a jurisdiction that clearly classifies algorithmic trading as "active business income" rather than passive investment income. For brokers, I had good experiences with two firms based in St. Vincent and the Grenadines that specifically work with trading companies. They had reasonable documentation requirements and stable platforms. Just be careful - many foreign brokers have great leverage terms but terrible execution quality or withdrawal issues. Always test with small amounts first.
Don't forget about banking issues! This is what killed my foreign trading entity setup. Even after properly forming the company and finding a broker, I couldn't find a reliable bank that would: 1) Open an account for a foreign entity with US beneficial ownership 2) Allow smooth transfers to/from forex brokers 3) Not charge excessive fees I went through 3 different banks in 2 years. First one suddenly closed my account after 6 months with no explanation. Second had 5-day holds on all incoming wire transfers. Third worked OK but charged $75 per outgoing wire transfer which ate into profits.
Did you try any of the digital banking solutions specifically for trading companies? I've heard there are some in Lithuania and Estonia that specialize in this.
This is slightly off topic but dont forget that your sister is probably eligible for a Social Security lump sum death benefit of $255. Its not much but its something. She should contact Social Security right away as there are time limits. Also if they were married for at least 9 months she might be eligible for monthly survivor benefits depending on her age.
One more thing to consider - if your sister and her husband had any joint accounts, the basis (original cost) of investments might get a "step up" as of the date of death. This can be SUPER important if they owned stocks or property together. Basically, the deceased's portion gets revalued to what it was worth on the day they died, which can save a ton in capital gains taxes later. Might want to look into this if they had any investments.
Have you looked into the Streamlined Domestic Offshore Procedures? If this was non-willful (meaning you didn't know about the requirement), this program might help reduce the penalties significantly. I made a similar mistake with not reporting my foreign pension from when I worked in Singapore. The standard penalty would have been about $45k, but through the streamlined program I ended up paying just under $10k. The key is documenting that you genuinely didn't understand the requirement. The fact that you took action immediately after discovering the requirement will work in your favor. Make sure your attorney is specifically experienced with the Streamlined program.
Thanks for this suggestion! I just looked into the Streamlined Procedures and it seems like I might qualify. My attorney mentioned something similar but called it by a different name and was talking about a much smaller reduction. Do you know if I need a specialized attorney for this or if it's something I can handle myself? The legal fees are adding up fast.
You don't absolutely need an attorney to apply for the Streamlined program, but I'd recommend at least a consultation with someone who specializes in international tax issues. The program requires a detailed narrative explaining why your failure to report was non-willful, and that narrative is critical to acceptance. If your current attorney isn't giving you clear information about the Streamlined program (it's very well-established), you might want to get a second opinion. Many tax attorneys offer free initial consultations, so you could shop around. The penalties at stake are significant enough that good representation is worth it, but you shouldn't be paying for an attorney who isn't experienced with exactly this type of situation.
whatever u do, don't ignore this!!! i made that mistake when i got hit with a 18k penalty for not reporting my overseas rental income. thought it would go away if i just didn't respond. BIG MISTAKE. they started garnishing my wages and put a lien on my property which destroyed my credit score. took 3 yrs to finally resolve and ended up paying way more in the end. at minimum set up a payment plan asap even while ur contesting the penalty. u can always get refunded later if u win the abatement but it shows good faith effort.
Liam O'Sullivan
One thing nobody mentioned yet - check if you qualify for Taxpayer Advocate Service help. If you're facing financial hardship because of this CP2000, they can sometimes intervene. They helped me when I was going to miss a rent payment because the IRS froze my refund.
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Amara Chukwu
ā¢How do you qualify for their help? Do you need to show proof of hardship or something? My CP2000 is for $4k and there's no way I can pay that right now.
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Liam O'Sullivan
ā¢You need to demonstrate that the tax issue is causing you significant financial difficulty or that the normal IRS processes aren't working correctly in your case. Examples would be if paying the amount would prevent you from affording necessary living expenses or if you've made multiple attempts to resolve the issue through normal channels without success. You can call them directly or fill out Form 911 (Request for Taxpayer Advocate Service Assistance). You'll need to explain your hardship situation clearly. For your $4k situation, if paying that would prevent you from paying rent, utilities, or medical expenses, that could qualify. They can sometimes help set up manageable payment plans or put a temporary hold on collection activities.
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Giovanni Conti
Has anyone used the official IRS payment plan option for CP2000? Mine is asking for $5k that I definitely don't have right now.
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Fatima Al-Hashimi
ā¢I used the payment plan last year. It was actually pretty straightforward. You can set it up online for smaller amounts or by phone/mail for larger ones. Interest still accrues but the penalties are much less. I did $100/month and it was manageable.
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