Thank you for bringing up the state tax issue! I hadn't even considered that. Do you know if I should contact the state tax department now or wait until I resolve things with the IRS first?

In your situation, focus on resolving the federal CP2000 issue first. Most states won't take action until after the IRS assessment is finalized, which gives you some time. Once you've submitted your response to the IRS and have a resolution, then you can be proactive with your state tax department if needed. Just keep copies of all documentation and correspondence with the IRS, as you'll likely need the same information for the state. This approach lets you handle one tax authority at a time rather than juggling both simultaneously.

Is it better to call early morning or late afternoon to get through? I've heard conflicting advice about this.

Can you explain more about what this means? My unfiled return is just from last year, so does that affect anything?

Since your unfiled return is only from last year, you're well within the 3-year assessment period. This means the IRS has 3 years from the date you file to audit your return and assess additional taxes if they find issues. The 10-year collection statute doesn't start until taxes are assessed, which happens after you file. Once assessed, the IRS has 10 years to collect. For most people with straightforward tax situations and relatively small balances like yours, audits are unlikely. The important thing is just getting current with your filings, which you're planning to do.

Wait, I thought the nanny tax was just for household employees like babysitters and housekeepers? Would that apply to someone helping with my actual business? It's a small woodworking operation if that makes a difference.

You're right - I should have been more clear. The nanny tax specifically applies to household employees, not business employees. For a woodworking business, your helper would be considered a regular employee. In your case, you'll need to follow standard employment tax procedures, including getting an EIN, filing quarterly 941 forms for federal tax withholding, and annual W-2/W-3 forms. Most states also require quarterly unemployment tax filings. Since you mentioned woodworking, make sure you have proper workers' compensation insurance too - it's especially important in trades with injury risks.

I use Square Payroll for my small business with 2 part-time employees. It's about $35/month plus $5 per employee. Totally worth it IMO. They handle all the tax calculations, filings, and W-2s automatically. You just enter hours and pay rate, and it does everything else. Much better than trying to figure out all the withholding calculations yourself.

Thanks for the explanation! Would you happen to know which form I need to use to amend last year's return? And do you know if this is something that might trigger an audit?

You'll need to file Form 1040-X to amend your previous return. You'll have to submit it by mail (can't e-file amendments for 2022 returns anymore), and you should include a corrected Form 8839 and any other schedules that were affected by the AGI change. Filing an amended return doesn't automatically trigger an audit. In fact, correcting the error yourself is better than having the IRS discover it later. Make sure to clearly explain in Part III of Form 1040-X that you're correcting an error in how the adoption credit was applied - it was incorrectly used to reduce AGI instead of being properly applied as a credit against tax liability. Just be aware that the higher AGI on your corrected return might affect other income-based calculations, so you may need to adjust other credits or deductions that depend on AGI.

I've had good experience with H&R Block software for adoption credits. Their interview process specifically asks about special needs adoptions and walks you through the credit and carryforward process. Might be worth trying if TurboTax gave you issues.

Wait, there's ANOTHER form beyond FBAR and 8938?? How many of these things do we need to file for foreign money? And does the $100,000 threshold apply to inheritances too or just gifts?

Yes, Form 3520 is specifically for reporting large foreign gifts and inheritances exceeding $100,000 from a nonresident alien (like your foreign father). It's separate from the FBAR and Form 8938, which are specifically for reporting the foreign accounts themselves. The $100,000 threshold absolutely applies to inheritances as well as gifts. Many people miss this form because they focus on the FBAR requirements but don't realize gift/inheritance reporting is separate. The penalty for not filing can be 5% of the gift amount per month up to a maximum of 25%, which on your inheritance could be substantial.

I used H&R Block's expat services for an inheritance from Ireland, and it was decent but expensive (around $800). They were familiar with FBAR and Form 8938 but honestly didn't seem super knowledgeable about the specifics of Irish inheritance rules.