1 Thank you for this list! The only thing that might apply to me is that I did start doing some side gig work and claimed a few business expenses, but nothing major - maybe $1,200 total on a side income of about $8,000. Could that be what she was referring to? Or is that ratio pretty normal?

18 That expense-to-income ratio is completely reasonable for side gig work and wouldn't raise any red flags by itself. 15% expenses on self-employment income is actually quite conservative by most standards. What's more likely is that your preparer may have been using scare tactics to justify their fee or to encourage you to purchase audit protection services, which is unfortunately common practice among some tax preparation businesses. Some preparers use audit warnings to upsell clients on representation services they likely won't need.

1 Oh my god, she actually did! She mentioned their "audit defense package" for $79 right after making those comments, but I declined because I was already paying quite a bit for the preparation. I didn't even make the connection until you mentioned it. That makes me feel both better and worse at the same time - less worried about an audit but annoyed I was manipulated.

That's a great idea, I didn't even think about contacting the institutions directly! Would they have the same information that was sent to the IRS though? The notice mentions something about securities transactions but doesn't specify which company they're from.

Yes, they'll have records of exactly what was reported to the IRS. The 1099-B forms that investment companies file with the IRS (and the information that triggers CP2000 notices for unreported securities) come directly from these institutions. The CP2000 should list the payer's name somewhere in the notice (usually in a table showing the income that wasn't reported). If you can't find it, when you call the IRS to get your response deadline extended, ask them which financial institutions reported the income. They can tell you exactly where the information came from.

This happened to me too! I reported everything correctly on Schedule D, but my brokerage didn't report my cost basis to the IRS. Got a scary CP2000 saying I owed $6,400 in additional taxes. Once I sent in my documentation showing what I paid for the stocks originally, my additional tax ended up being only $320.

I did this calculation last year. The rental only makes sense in specific situations: 1. If you need the car very short term (1-3 months) 2. If you're doing HEAVY driving (like 50+ hours per week) 3. If you can't qualify for financing to buy 4. If you're testing whether rideshare works for you before buying For most people, buying even a $5k used car is better financially in the long run.

Makes sense. I guess there's value in having no maintenance costs or worries too, since everything is covered by the rental. But still seems like a huge premium to pay just for the convenience factor. I wonder if the tax deduction aspect changes the math at all.

What about car washes? I'm always getting my car washed because of the rating system. Can I deduct those too when using a rental?

Thanks for bringing this up - I definitely had over $10K in those foreign accounts. What documentation did you need to provide for the FBAR filings? And did you go through a tax attorney or handle it yourself?

You'll need account statements showing balances, account numbers, financial institution information, and maximum value during each year. For crypto exchanges, you'll need documentation showing your wallet values and transaction history. I tried handling it myself initially and that was a huge mistake. After receiving the first penalty notice, I hired a tax attorney who specialized in offshore compliance. The attorney was expensive ($350/hour) but worth every penny because they negotiated my penalties down significantly by proving my non-compliance wasn't willful. For your situation with both crypto and traditional foreign accounts, I'd definitely recommend getting professional help rather than trying to navigate it alone.

Which tax software did you end up using for all the crypto-to-crypto transactions? I've been using TurboTax but it seems terrible for handling anything beyond basic crypto.

That's a really good point I hadn't considered! So even though she has to file her own return for the interest income, I can still claim her as a dependent if she meets the other tests? She definitely meets the support test - she just graduated last May and moved back home, and I'm covering most of her expenses while she's job hunting.

Exactly! The 5-month student rule applies to dependent status, and since she was a full-time student for at least 5 months during 2024, she can be your dependent if she meets the other tests. The support test is key - if you're providing more than half her total support for the year, you can claim her. Being a dependent will affect how she files her own return though - she'll need to check the box indicating someone else can claim her as a dependent, which affects her standard deduction for her own filing.

This is a really good point. Last year my son had about $1,800 in dividends from some stocks his grandpa gifted him, and I ran the numbers both ways. It was definitely cheaper for him to file his own return since his tax rate was effectively zero, while adding it to my income pushed some of it into my 22% bracket!

Exactly! The convenience of Form 8814 often comes with a stealth tax increase. I found for my daughter's case, we saved nearly $400 by having her file her own return instead of using Form 8814. The kiddie tax rules still apply either way, but there's usually still a benefit to filing separately. The only hassle is the extra paperwork, but for a few hundred dollars in savings, it's worth the 20 minutes it takes to file a simple return for a kid with just interest or dividend income.