1 Thanks for mentioning this! I just checked and her unemployment benefits were about $3100, so it looks like we'll need to use Form 8615 after all. When I use her total income ($2600 earned + $3100 unearned) to figure out her tax bracket, do I use that combined amount? Or does the kiddie tax calculation separate them?

7 The kiddie tax calculation does separate earned income from unearned income. Her $2600 from the mall job is taxed normally at her own tax rates. For the unemployment benefits of $3100, the first $1,150 is tax-free, the next $1,150 is taxed at her rate, and only the remaining $800 would be taxed at your parents' rate. Form 8615 walks you through this calculation step by step. You'll need your parents' tax info though, specifically their taxable income and tax amount from their return, to complete the form. This is why it gets complicated - you're essentially calculating part of her tax using their information.

8 The regular unemployment benefits count as unearned income and would be reported on Form 8615. However, the stimulus payments (economic impact payments) were technically advance tax credits and are NOT considered income at all - neither earned nor unearned. Those don't get reported as income on the tax return.

What kind of documentation works best to prove residency date? I'm moving next month and want to make sure I save everything I need.

The most accepted documentation usually includes lease agreements or home purchase documents showing the exact move date, utility connection/disconnection records, and updated driver's license with the new address. Some states also accept voter registration changes, bank statements showing your new address, and even moving company receipts. Keep digital copies of all these documents organized by date. I created a simple folder with all my "proof of move" documents which made it super easy when the state questioned my residency timeline. Also don't forget to file a change of address with USPS which creates another official record of your move date.

New York and Pennsylvania don't actually have reciprocity. You'll have to file returns in both states, but Pennsylvania will give you a credit for taxes paid to New York to avoid double taxation. It's different from true reciprocity like what PA has with some other states.

Thanks for this suggestion! Did you have to provide any special documentation when you submitted Form 911? And did you end up getting your refund in a reasonable timeframe after the advocates got involved?

You need to provide a copy of the 5071C letter and explain your unsuccessful attempts to resolve through normal channels (keep notes of dates/times you tried calling). I also included copies of my photo ID and Social Security card, which sped things up. I did eventually get my refund, but it wasn't quick - took about 10 weeks after the Taxpayer Advocate got involved. Still better than not getting it at all! They told me identity theft cases require extra processing time even after verification. The important thing is they stopped the fraudulent return and protected my tax account from further issues. They also added extra security to my account for future years.

I second this approach! I had a CP01A identity verification issue (similar to 5071C) and my Senator's office was incredibly helpful. They have dedicated staff who deal with IRS issues all the time. Just go to your representative's website and look for "constituent services" or "casework" - most have an online form specifically for federal agency issues.

This is the best advice here! Companies make mistakes all the time with these forms. If you were an employee when you earned this bonus, they should be reporting it on a W-2, not a 1099-NEC. Self-employment tax is no joke - it's an extra 15.3% you shouldn't have to pay if you were an employee!

It's $8,750. So yeah, not a small amount. The self-employment tax would be around $1,300 extra from what I calculated, which feels really unfair since this was literally just a bonus for being a good employee during the transition, not me running a business or doing freelance work.

At $8,750, you're looking at approximately $1,340 in self-employment tax you wouldn't have paid if it had been properly included on a W-2. That's definitely worth addressing. Since the company won't correct the form, you have two main options: (1) File it on Schedule C as they reported it, but maximize any legitimate business deductions to reduce the taxable amount, or (2) Report it as "other income" which avoids self-employment tax but could trigger a mismatch notice from the IRS since it doesn't match how the company reported it. Option 1 is safest but most expensive, while option 2 saves money but carries some audit risk.

I did charge a small interest rate (like 2%) but I never actually reported it on my taxes since he never made any payments. Should I go back and amend those previous returns to show the interest I SHOULD have received, even though I didn't get it? Would that help my case or just complicate things?

You don't need to amend previous returns to report interest you never received. In fact, doing so might raise red flags. What matters is that you had a legitimate expectation of being repaid with interest, which your loan agreement should show. The IRS follows the concept of "constructive receipt" - you only need to report income when you actually receive it or have unrestricted access to it. Since you never received any interest payments, there was nothing to report. Just focus on documenting that this was a genuine loan with the expectation of repayment, and that the debt has now become worthless.

Yes, that's right. Non-business bad debts are treated as short-term capital losses, which means they're subject to the capital loss limitation ($3,000 per year against ordinary income). However, if OP has any capital gains in the same year, the loss would first offset those gains. Any remaining loss can be carried forward indefinitely to future tax years. So if OP has no capital gains, it would take about 16 years to fully utilize the $47,000 loss. But if they have capital gains in future years, they could use more of the loss carryforward each year to offset those gains without the $3,000 limitation.