Omg I didn't even think of that - my parents have always claimed me as a dependent but I moved out last May and have been supporting myself since then. How do I know if they can still claim me or not for 2024 taxes?

There are specific tests the IRS uses to determine if someone can be claimed as a dependent. The main ones are the support test (did you provide more than half of your own financial support for the year?) and the residency test (did you live with your parents for more than half the year?). Since you moved out in May, you lived with them for less than half of 2024, but the support test is the bigger factor. You need to calculate all your living expenses (rent, food, utilities, medical, education, etc.) for the entire year and determine if you provided more than 50% of that total yourself. If you did, your parents can't claim you. If they provided more than 50% (including while you lived with them), they can still claim you even though you moved out.

This is correct but keep in mind you might still need to file a state return if you earned any money in another state during the year (like if you had a summer job somewhere else). The tax software will ask you questions to determine this.

Lenders often have some flexibility with the timing, especially if you're proactive in discussing it with them. While they have reporting requirements, they sometimes can work with you on structuring the forgiveness. For example, some lenders might be willing to split a large debt cancellation across two tax years (December/January) if you explain your tax situation. It really depends on the lender and your relationship with them, but it's definitely worth having that conversation well before the planned cancellation.

That's a really helpful suggestion about timing it with medical expenses. I do have some procedures I've been putting off that would probably hit the threshold for medical deductions. Do you know if lenders are usually open to negotiating the timing of debt cancellation? I wasn't sure if I had any control over when they issue the 1099-C.

Good point! Also, some states follow federal insolvency rules and some have their own. I live in California and they have slightly different rules for cancelled debt than the IRS does.

That's a fair point about the amount. My gym is actually $95/month because it has some specialized equipment I use for training. So it would add up to over $1,100 a year, which seems worth deducting if it's legitimate. But I definitely see your point about weighing the potential hassle against the benefit!

$95/month changes things for sure! That's over $1,100 annually, so the tax savings would be more significant. At that price point, it sounds like a premium gym with specific equipment beneficial to your work. Just make sure to document how you use the specialized equipment for referee-specific training. Take photos of yourself using equipment that helps with referee movements, keep a training log showing how your workouts connect to referee requirements, and save any communications from assigning bodies that mention fitness standards. With that kind of documentation and the higher expense amount, the deduction makes more sense.

This is super important advice. The IRS definitely looks at allocation for mixed-use expenses. But how would they even know what percentage you use for business vs personal? It's not like they follow you around the gym...

Wait, I hadn't even thought about state taxes! Thank you for bringing this up. So even though I was only in Texas for a few months as a baby, if it had been a state with income tax, I might have needed to file there too? That's wild! Do you know if there's a similar "streamlined" process for state tax compliance?

You generally only need to worry about state taxes if you have current ties to that state (property, income from there, voting registration, driver's license, etc.). Since you left as a baby and have no connections, most states wouldn't consider you a resident. State tax amnesty programs vary widely by state. If you had been born in a high-tax state like California, you might have needed to address it, but their Voluntary Disclosure Program typically looks at fewer years than the federal program. Again, for your Texas situation, it's not a concern, which is one small piece of good news in this complicated situation!

The exit tax typically applies if your net worth is over $2 million or your average annual net income tax for the 5 years ending before the date of expatriation is more than $172,000 (2021 figure). The $50k investment alone wouldn't trigger covered expatriate status.

22 Is it too late to file 8606 forms for previous years? I've done backdoor Roth conversions for the past 3 years but I'm not sure my tax guy filed these forms. Should I go back and amend all my previous returns?

14 It's not too late to file Form 8606 for previous years. You can (and should) file an amended return for any year where you did a Backdoor Roth conversion but didn't include Form 8606. The IRS generally allows amendments going back 3 years. This is really important because Form 8606 establishes your non-deductible basis in the IRA, which prevents the money from being taxed twice. Without this documentation, you might end up paying taxes on money that should be tax-free when you eventually withdraw from the Roth IRA. I'd recommend reviewing your past returns and filing amendments as needed - it's worth the effort to avoid potential tax issues down the road.

11 thx for explaining! so does the code 2 vs code B actually affect how much tax i would pay? or is it just a technical difference?