Thanks so much for mentioning this! I've been so focused on my current filing situation that I haven't really thought ahead to next year. Do you recommend any specific resources for learning about the tax treaty between US and Japan? And did you end up needing professional help once you moved abroad?

The IRS has a decent page explaining tax treaties, but it's pretty technical. I found the Expat Tax Blog by Greenback Tax Services had clearer explanations about the US-Japan specific provisions. As for professional help, I did end up using a tax preparer my first year abroad because the learning curve was steep. After that first year, I went back to doing them myself with tax software that specifically handles expat situations. The key forms you'll need to understand are Form 2555 (for FEIE), Form 1116 (for FTC), and FinCEN 114 (FBAR). Also, Japanese tax forms if you'll be working there, which are a whole different challenge!

I used TurboTax last year with my Canadian husband. It does let you enter "NRA" instead of an SSN/ITIN, but it was a bit confusing to find. You have to go through the spouse section, indicate they're a non-resident alien, and then it gives you the option. I'd recommend using the desktop version rather than online for this situation - it seemed to have better handling of international scenarios.

Is it different if you're in a golf-related business? I sell custom golf accessories and have display items in my office that are technically usable but mainly for showing clients.

For your situation it's completely different since those items directly relate to what you're selling. That's a clear business purpose - they're essentially product samples or demonstration items. You could likely deduct those as ordinary and necessary business expenses. In the original poster's consulting business that's unrelated to golf, it's harder to show a direct business purpose for an expensive putter beyond general office decor or client entertainment. That's where the documentation becomes more important to demonstrate regular business use.

Actually, Section 179 lets you deduct the full cost in year one rather than depreciating it - that's the whole point of the provision. But you're right that it would apply here if the putter qualifies as business equipment.

Thanks for bringing this up! I should've mentioned this is definitely in a taxable brokerage account, not an IRA or anything tax-advantaged. So it sounds like I do need to adjust the cost basis on Schedule D. Now I just need to figure out if Fidelity already adjusted it on the 1099-B or if I need to do it manually.

Since it's a taxable account, then yes, you'll need to adjust the cost basis on Schedule D. Check your 1099-B carefully - there should be some indication whether the basis has been adjusted. Sometimes they'll have footnotes or codes that indicate this. If you're still not sure, calling Fidelity directly might be the best bet - specifically ask if the cost basis on your 1099-B already reflects the nondividend distribution adjustment.

I used TurboTax last year with a similar situation. If you import directly from your brokerage, it usually gets it right, but double-check that the cost basis matches what you expect after the adjustment. Sometimes I've had to manually override the imported basis.

Some of us do our taxes by hand or on paper forms. It's not always "10 seconds" to figure out which line something goes on or how to report it properly. Not everyone uses fancy tax software.

Fair point. If you're filing by hand, I recommend using the free fillable forms on the IRS website instead of paper. For interest income, you'd report it on Schedule B if your total interest is over $1,500. If it's under that amount, you just put the total on line 2b of Form 1040. Even if you're doing it by hand, reporting a single 1099-INT is still pretty straightforward compared to other tax situations. And my main point stands - the potential headache from ignoring it far outweighs the effort to just report it correctly.

What happens if you do get flagged? Does the IRS come after you with the full force of the law for a tiny amount like this?

Is there any time limit on how long you can carry over capital losses? I've had some for about 4 years now and wondering if they expire at some point.

There's no time limit on capital loss carryovers - they continue indefinitely until they're used up. You can carry them forward for your entire lifetime if necessary. The only way they "disappear" is if they're used to offset capital gains or that $3,000 of ordinary income per year. One thing to note though - capital losses can't be transferred to heirs upon death. So from an estate planning perspective, it's beneficial to utilize them during your lifetime if possible.

Yes, this can work well! I did this last year. The Roth conversion creates ordinary income, and then you can use your $3k capital loss deduction against that income. It effectively reduces the tax cost of the conversion. Just remember the $3k limit still applies for offsetting ordinary income, but it's a good strategy to consider if you're doing Roth conversions anyway.