That's actually a really good point I hadn't considered. My freelance work is for a completely different company than my main employer - they're not related at all. They're in the same industry but totally separate businesses. Does that still raise red flags?

You should be fine if they're completely separate companies. The IRS is mainly looking for situations where someone is getting both W-2 and 1099 income from the same business entity or related entities (like subsidiaries or affiliates). Since your freelance work is for a different company in the same industry, that's a common and legitimate arrangement. Just make sure the work arrangements are clearly different - like the freelance company doesn't control when or how you do the work the way an employer would.

There's no minimum income requirement to qualify for the QBI deduction! Your $3,000 in freelance income would be eligible for the 20% deduction, giving you about $600 off your taxable income. It's not a huge amount but definitely worth claiming. The main requirements are that it's qualified business income (which freelance work on a 1099-NEC typically is) and that you're under the income thresholds (which at $3,000 you definitely are). Make sure you're reporting it on Schedule C even for that small amount.

Do they really count retirement accounts? I thought those were protected. I have about $45k in my 401k but didn't think that would count against me for an OIC calculation.

Yes, they absolutely consider retirement accounts in your OIC calculation. While you're right that they can't directly seize most retirement accounts, they still view them as assets that could be used to pay your tax debt. The IRS typically includes a percentage of retirement account values in your "reasonable collection potential" calculation. They don't necessarily expect you to cash them out (especially given the penalties), but they do factor them into what they think you could potentially pay. This is one of the most common misunderstandings that leads to OIC rejections.

They apply any payments you've made toward your tax debt, they don't just keep the money. So if your offer gets rejected, that 20% payment (or whatever payments you've made) will reduce your overall tax debt. It's not lost money.

That's a really good point about currency risk that I hadn't considered! Do you know if there are any tax-efficient ways to manage currency conversion when sending money back to the US? I'll still have some student loans and a car payment in USD.

There aren't specific tax advantages for currency conversion, but you might want to look into services like Wise (formerly TransferWise) or OFX for better exchange rates than banks offer. The conversions themselves aren't tax events unless you're actually trading currencies as investments. For your US debts, you might consider keeping a US bank account open and periodically transferring larger sums to minimize conversion fees, rather than monthly smaller transfers. Some expats also maintain US credit cards for US-based recurring payments while living abroad, which can simplify things.

This is so important and often overlooked! I worked in Canada for 7 years and then moved back to the US. When I applied for Social Security benefits, they initially calculated without my Canadian work history. I had to specifically request they consider the totalization agreement, which increased my monthly benefit by about $300!

Thank you for this suggestion! I hadn't thought about requesting a contribution history statement. Did you have to specifically ask for the "contribution history statement" by that exact name, or was there another term for it? And how long did it take them to provide it?

I asked specifically for a "contribution history report showing the breakdown between pre-tax and after-tax contributions." Some plan administrators call it different things - contribution history statement, basis statement, or non-taxable investment summary. Be very clear that you need documentation showing your after-tax contribution basis. It took about a week for them to generate the report in my case. They initially tried to tell me they couldn't provide it, but when I mentioned I needed it for tax filing purposes to correctly report the rollover, they found a way to generate it. Be persistent - this documentation exists somewhere in their system, even if the frontline customer service reps don't immediately know how to access it.

This is a really good point about the earnings! How do you determine what portion was earnings if the 1099-R doesn't break it down correctly? Is it something you can calculate yourself from statements?

Thank you for this advice! Do I need to get the court order notarized again or is my regular copy sufficient? And should I highlight the relevant parts about the tax arrangement or just send the whole document?

A regular copy of the court order is sufficient - no need for a new notarization. It's a good idea to highlight the relevant sections about the tax arrangement so the IRS agent can easily find the important parts, but also include the entire document so they can see it's part of an official court order. I also recommend including a brief cover letter explaining the situation, referencing the attached documents, and politely requesting they review the custody agreement that shows it's your year to claim the child. Keep the letter factual and to the point.

Wait, is this true? My ex and I have been fighting over this exact issue. I thought if I signed Form 8332, I couldn't claim ANY benefits related to our son on my taxes. You're saying I can still file as Head of Household even if I let my ex claim him as a dependent?