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I think everyone's overcomplicating this. If the amount is small enough (less than $200 loss), the IRS isn't going to care one way or the other. I had a similar situation with Euros and just didn't bother reporting it.
Thanks for your input, but I'm actually dealing with a larger amount - the refund was around 3,800 CAD, and the exchange rate has changed enough that the loss is more than $300. I'd prefer to do things by the book, especially since I'm planning to apply for citizenship in a couple years and don't want any tax issues to complicate that.
Fair enough. For amounts over $200, it's probably worth reporting correctly. Just wanted to point out that sometimes the tax benefit isn't worth the extra paperwork, but in your case it makes sense to get it right.
Has anyone considered that there might be a way to time the conversion to minimize the loss? I mean, currency markets fluctuate. Maybe watching the CAD/USD exchange rate for a better moment to convert could be worthwhile?
One thing nobody's mentioned yet - keep track of how long it takes you to do your taxes yourself. Then multiply your hourly wage by that time and see if it's actually worth it. If your tax situation is simple like you described, it probably is worth DIYing. But if it gets complicated, sometimes paying a pro actually saves money in the long run!
But that assumes you'd otherwise be working during that time. If you're doing taxes on a weekend when you'd just be watching Netflix anyway, isn't the calculation different?
You make a fair point about the weekend time value! I hadn't considered that angle, and you're right that if it's time you wouldn't be earning money anyway, the calculation changes. My main point was just to be mindful that sometimes we focus so much on saving the prep fee that we don't consider the value of our time or potential mistakes. But for a simple return like OP described, I agree it's likely worth it regardless of when you do it.
Has anyone tried FreeTaxUSA? I keep hearing it's good for people with simple returns like yours and WAY cheaper than TurboTax.
I've used FreeTaxUSA for 3 years now and love it. Federal filing is free and state is like $15. Interface isn't as slick as TurboTax but it does everything you need. I have W-2, mortgage interest, and retirement contributions too - worked great.
7 One thing to be careful about when mailing returns - make sure you send it CERTIFIED mail with tracking! My brother had his identity stolen too and had to mail in his return. He just put it in a regular envelope with stamps and it apparently got lost. Took him over 8 months to sort out the mess. The extra $4-5 for certified mail is totally worth the peace of mind. Plus you'll have proof the IRS received it if they try to hit you with a late filing penalty (which happened to my brother initially).
22 Do you need to go to the post office for certified mail or can you do it online somehow? I'm trying to avoid standing in those crazy post office lines.
7 You do need to go to the post office for certified mail, unfortunately. There's no way to do it completely online since they need to give you the tracking receipt in person. But here's a tip - you can use the USPS website to pre-fill all the certified mail forms and pre-pay, then just drop it off at the counter. Much faster than waiting in the regular line. If you absolutely can't make it to the post office, you could use a private service like UPS or FedEx which also provides tracking, and you can schedule those pickups online. Just make sure you're sending it to the correct IRS mailing address if you use a private delivery service.
5 Just a quick tip for anyone in this situation - when you print your return from TurboTax or FreeTaxUSA, make sure you also print a second copy for yourself! When I had to mail mine in last year, I forgot to keep a copy and then had questions about something months later and had no reference.
Just want to add one important thing about the joint filing election - if you go this route, make sure your wife has either a Social Security Number or an ITIN (Individual Taxpayer Identification Number). You can't make the election without a tax ID number for her. If she doesn't have either one yet, you should apply for an ITIN using Form W-7 when you file your return. Just be aware this will delay your processing time. Also, think carefully about whether joint filing is actually beneficial in your situation. Sometimes it's better tax-wise to file separately if your non-resident spouse has significant foreign income that would become taxable in the US under the election.
Thanks for pointing this out! My wife does have an SSN since she's been working with her F1 OPT. Do you know if making this election means we'd have to keep filing jointly every year going forward? Or can we choose differently next year?
That's good she already has an SSN - that will make the process much smoother. Regarding future years, the election remains in effect for all future tax years until it's terminated. You can terminate it in several ways: either spouse can revoke it by filing a statement, it automatically terminates if either spouse dies, you get legally separated under a decree of divorce or separate maintenance, or the IRS can terminate it with notice to either spouse if they determine that information to determine tax liability is inadequate. So yes, you're essentially committing to joint filing going forward unless one of those termination events occurs. That's why it's important to consider the long-term implications before making the election.
Random question - but does anyone know if TurboTax can handle this kind of situation with the Section 6013(g) election and manually entering capital gains that aren't on any tax forms? Or is this the kind of situation where you need a specialized tax preparer?
I tried doing this in TurboTax last year and it was a nightmare. It technically can handle it, but you have to know exactly what you're doing. The software doesn't really guide you through the 6013(g) election process clearly. For the capital gains, you can manually enter them in TurboTax, but again, you need to know exactly where to put everything.
Nia Watson
Tax credits can be confusing! Think of them as gift cards the government gives you to reduce your tax bill. Here's a super simple way to think about it: 1. First, calculate how much tax you actually owe for the entire year 2. Subtract the tax credit amount from what you owe 3. Compare that result to what you already paid through withholdings If you paid more than your final bill (after the credit), you get a refund of the difference. If you paid less, you owe the difference. The key thing with the EV credit is that it can only reduce your tax bill to zero, not below zero. So if your total tax bill for the year is only $6,000, you'd only get $6,000 of the $7,500 credit.
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Alberto Souchard
ā¢In your example, if I only can use $6,000 of the credit, do I lose the other $1,500 forever or can I carry it to next year?
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Nia Watson
ā¢Unfortunately, you lose the remaining $1,500 forever. The EV tax credit cannot be carried forward to future tax years. If you don't have enough tax liability to use the full credit in the year you purchase the vehicle, the unused portion is simply lost. This is why it's so important to understand your tax situation before making a purchase decision based on the credit.
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Katherine Shultz
I'm still confused about one thing - does income matter for getting the EV credit? Like if I make $40k a year vs $100k, does that change how much of the credit I can get?
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Danielle Mays
ā¢Income itself doesn't directly determine your EV credit, but it does affect your tax liability, which determines how much credit you can use. If you make $40k, your federal tax liability might only be around $3-4k (depending on deductions, filing status, etc.), so you could only use that much of the $7,500 credit. At $100k income, your tax liability would likely exceed $7,500, meaning you could use the full credit.
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