Thank you for the practical advice. When you say "gathering all financial records" - what about for years where we might not have complete records anymore? Especially for the crypto stuff, I don't think she's kept detailed records of trades from years ago.

For missing records, you'll need to reconstruct as much as possible. For traditional income, you can request wage and income transcripts from the IRS that show reported W-2s and 1099s. For bank accounts, most banks provide at least 7 years of statements if you request them. For crypto, this is trickier but not impossible. Major exchanges like Coinbase, Binance, etc. usually maintain your transaction history even from years ago. She should log into all platforms she's used and download complete transaction histories. There are also specialized crypto tax services that can help reconstruct trading histories by analyzing blockchain transactions if you know the wallet addresses. Some of these can even identify trades across multiple platforms and calculate proper cost basis. The key is to make a good faith effort to reconstruct everything. The IRS understands that records might be incomplete, but they'll expect you to make reasonable attempts to recreate them. This is definitely an area where professional help is worth the cost.

This is exactly what happened to my cousin. He moved several times and wasn't filing, so he never got the notices. By the time they finally tracked him down, the penalties and interest had nearly tripled the original amount owed. The IRS doesn't just "forget" about people - they're just working through their backlog.

7 I tried TurboTax last year with my Korean husband. It works but you have to know what you're doing. When it asks for your spouse's SSN, you can't just leave it blank - you have to type "NRA" and then it'll let you proceed. It also gets confused about the residency test questions so you might need to override some of their recommendations.

15 Thanks for the tip about typing "NRA" in the SSN field! I didn't know that was an option. Did you have any issues with state taxes as well, or just federal? I'm in California which seems to have its own complicated rules for everything. I'm a bit concerned because my wife might have some minimal US-source income from an investment account we opened together last year. Does that complicate things further?

18 Wait really? I didn't know about losing all those benefits! I've been filing separately from my Ukrainian husband for 3 years now and I claim both student loan interest AND education credits. Are you sure about this?

Is this still true with the changes to the child tax credit? I thought they made some modifications recently and wasn't sure if non-working parents still qualify the same way.

Yes, this is still true even with recent changes. For 2023 tax filing (which happens in 2024), the Child Tax Credit is $2,000 per qualifying child under 17. The credit is partially refundable even for non-working parents - up to $1,500 per child can be received as a refund through the Additional Child Tax Credit. Even with just SSI income and no other earnings, the mother in this situation would likely qualify for the refundable portion if she's the custodial parent. There were temporary expansions to the credit during COVID that have expired, but the basic structure allowing non-working custodial parents to benefit still exists.

This is what my sister had to do. Her ex claimed their kids even though they lived with her. She filed by paper, got letters from school showing the kids' address, and eventually got her refund. Took forever though - like 8 months. But at least she got the money eventually.

Oh my god, thank you! I had no idea that option existed. I was literally about to enter 156 separate transactions manually. When you say "same characteristics" - does that mean I can group all my long-term VOO purchases together, and then do a separate group for VTI, etc? Or do they need to all be the same stock to use this method?

Yep, exactly! You can group by security type - so one group for all your VOO long-term transactions, another for VOO short-term, another for VTI long-term, etc. Just make sure within each grouping they all have the same tax characteristics (same term length and whether basis was reported to IRS). The summary method is actually what most professional tax preparers use for clients with lots of trades. The IRS doesn't need to see every individual $10 fractional share purchase!

Thanks for this! I was literally losing my mind thinking about manually entering thousands of $0.03 transactions. Monthly aggregation sounds way more reasonable. Do you know if the monthly totals need to be reported as "Other Income" or as interest income? I've seen conflicting advice online.

The IRS hasn't given super clear guidance on staking specifically, but most tax professionals treat it as "Other Income" on Schedule 1, not interest income. Interest income is generally for fixed returns from lending, while staking is more like mining rewards (which the IRS has clearly stated is Other Income). Just make sure you're also tracking these rewards as your cost basis for when you eventually sell those tokens! That's where a lot of people mess up and end up paying double tax.

I never filed an amendment because I didn't realize the mistake until recently when I was going through old tax documents. Would it be worth filing one now even though it's past the 3-year window just to have it on record? Would the Tax Benefit Rule apply to capital gains from a home sale? I'm not super tax-savvy and trying to figure out if I should hire someone to help me fight this.

Filing an amendment now even though it's beyond the refund window could potentially help establish your good faith efforts to comply with tax law. While you won't get the refund, having it documented could support your case if you request penalty abatement for the current issue. The Tax Benefit Rule typically wouldn't apply directly to capital gains from a home sale in your situation. It's more relevant when you take a deduction in one year and then recover that expense in a later year. For your specific case, I'd recommend consulting with a tax professional who specializes in IRS disputes since there might be other strategies available based on your full tax history.

I used OIC last year for a similar situation and got my tax debt reduced by about 70%. But you have to qualify based on your income, assets, and ability to pay. It's not just available because you disagree with the assessment. And you'll need to be current on all your other tax filings to qualify.