Is there any way to report these places? I'm pretty sure the guy who did my brother's taxes last year put a bunch of fake business expenses that got him an extra $3000 in refunds.

Absolutely - you can report suspected tax preparation fraud to the IRS using Form 14157 (Complaint: Tax Return Preparer). There's also Form 14157-A if you believe your own tax return was prepared incorrectly. The IRS takes these reports seriously as part of their efforts to combat preparation fraud. For your brother's situation, he should be aware that even if the preparer put fake information on the return, the taxpayer is ultimately responsible for what's submitted under their signature. It might be worth having a professional review that return to see what was claimed and possibly filing an amended return to correct it before the IRS catches it themselves.

Seven years is actually not that surprising. The audit rate is so low that people can get away with fraud for years. But when they do get caught, the IRS can go back and audit multiple years. Your neighbor is building a time bomb that's going to explode eventually.

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.

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.

I didn't claim any recovery rebate credit that I know of, and I wasn't on unemployment in 2022. I work full-time and just did a standard tax return with some basic deductions for mortgage interest. The payment came with a notice that has a bunch of codes on it that I don't understand. I'm going to check my online account like someone suggested and see if there's more info there.

If the payment came with a notice that has codes, those codes are the key to understanding what happened. Typically, CP12 notices indicate math error corrections, CP49 might be for overpayment adjustments, and CP21C often relates to changes made to your account. Check your online account at irs.gov as that will likely have more details than what's visible on the physical notice. If you look at the top right of the notice, there should be a notice number (CP followed by some numbers) - that will tell you exactly what type of adjustment this is. Most of these unexpected payments are legitimate adjustments in your favor due to calculation errors or tax law changes.

That's actually a good point. A legitimate IRS check will be from the US Treasury, not the "IRS" directly. It should be drawn on the Treasury account. And if you deposit it, wait at least 30 days to make sure it clears properly before spending the money just to be safe.

Thank you for the advice! I've been looking through my Google Maps timeline and I can actually piece together a lot of my driving history which is super helpful. I'm definitely reporting all the income - I'm just trying to figure out the right way to handle the expense side. Do you have any guidance on what percentage of expenses would trigger an audit? I want to be honest but also not raise any red flags.

There's no specific percentage that automatically triggers an audit. The IRS compares your expense ratios to industry averages, so what matters is whether your deductions seem reasonable for your type of work. For example, if you're doing handyman jobs, claiming 30-40% expenses might be reasonable, but claiming 80% would raise eyebrows. Focus on being accurate and honest rather than worrying about audit triggers. Document everything you can reconstruct, keep your tax records for at least 3 years, and you should be fine. Most small business audits happen because of unreported income or extremely disproportionate expense claims, not because someone claimed legitimate expenses without perfect documentation.

I prefer FreeTaxUSA for self-employment income. It's way cheaper than TurboTax and just as thorough for Schedule C filing. It also has good guidance on documentation requirements.