Wait, there's ANOTHER form beyond FBAR and 8938?? How many of these things do we need to file for foreign money? And does the $100,000 threshold apply to inheritances too or just gifts?

Yes, Form 3520 is specifically for reporting large foreign gifts and inheritances exceeding $100,000 from a nonresident alien (like your foreign father). It's separate from the FBAR and Form 8938, which are specifically for reporting the foreign accounts themselves. The $100,000 threshold absolutely applies to inheritances as well as gifts. Many people miss this form because they focus on the FBAR requirements but don't realize gift/inheritance reporting is separate. The penalty for not filing can be 5% of the gift amount per month up to a maximum of 25%, which on your inheritance could be substantial.

I used H&R Block's expat services for an inheritance from Ireland, and it was decent but expensive (around $800). They were familiar with FBAR and Form 8938 but honestly didn't seem super knowledgeable about the specifics of Irish inheritance rules.

Thanks for the explanation! Would you happen to know which form I need to use to amend last year's return? And do you know if this is something that might trigger an audit?

You'll need to file Form 1040-X to amend your previous return. You'll have to submit it by mail (can't e-file amendments for 2022 returns anymore), and you should include a corrected Form 8839 and any other schedules that were affected by the AGI change. Filing an amended return doesn't automatically trigger an audit. In fact, correcting the error yourself is better than having the IRS discover it later. Make sure to clearly explain in Part III of Form 1040-X that you're correcting an error in how the adoption credit was applied - it was incorrectly used to reduce AGI instead of being properly applied as a credit against tax liability. Just be aware that the higher AGI on your corrected return might affect other income-based calculations, so you may need to adjust other credits or deductions that depend on AGI.

I've had good experience with H&R Block software for adoption credits. Their interview process specifically asks about special needs adoptions and walks you through the credit and carryforward process. Might be worth trying if TurboTax gave you issues.

Would the CNC status affect her credit score or have other downsides we should be aware of? And does the debt continue accumulating interest and penalties during that time?

CNC status itself doesn't directly impact credit scores, but the unpaid tax debt can still appear on credit reports. The biggest downside is that interest and penalties continue to accrue during this period, so the total debt grows over time. Also, the IRS will review her financial situation periodically (usually every year or two) to see if she can begin making payments. They may also place a lien on any property she owns, which would affect her credit. But if she truly can't pay right now, CNC status prevents immediate levies and gives her time to stabilize financially. Many people use it as a temporary solution while working toward a more permanent resolution like an Offer in Compromise or installment plan when their finances improve.

I tried the OIC route and it was rejected. The IRS is really strict about their calculations - they look at potential future income, not just current circumstances. They also take forever to process these applications. My advice is to get on an installment plan immediately to stop collection actions, THEN explore an OIC as a secondary option if you qualify.

Wait, I thought the nanny tax was just for household employees like babysitters and housekeepers? Would that apply to someone helping with my actual business? It's a small woodworking operation if that makes a difference.

You're right - I should have been more clear. The nanny tax specifically applies to household employees, not business employees. For a woodworking business, your helper would be considered a regular employee. In your case, you'll need to follow standard employment tax procedures, including getting an EIN, filing quarterly 941 forms for federal tax withholding, and annual W-2/W-3 forms. Most states also require quarterly unemployment tax filings. Since you mentioned woodworking, make sure you have proper workers' compensation insurance too - it's especially important in trades with injury risks.

I use Square Payroll for my small business with 2 part-time employees. It's about $35/month plus $5 per employee. Totally worth it IMO. They handle all the tax calculations, filings, and W-2s automatically. You just enter hours and pay rate, and it does everything else. Much better than trying to figure out all the withholding calculations yourself.

Do you know if VITA volunteers are actually good at finding deductions? I'm always worried free services might miss something that would save me money.

VITA volunteers are actually really well-trained - they're certified by the IRS and many are accounting students or retired tax professionals who volunteer their time. In my experience, they're very thorough about finding deductions and credits. The main limitation with VITA is they can't handle super complicated tax situations like multiple rental properties or complex business returns. For a typical W-2 worker with some basic deductions and credits, they're excellent and often catch things people miss when filing themselves.

Do they have a good review process at the end? TurboTax has that "accuracy guarantee" thing that always made me feel safer using them, even though it's expensive.