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The way I understand it, the AOTC counts your years differently than your school does. For example, I was part-time for 3 years, but the IRS only counted that as 1.5 years of education for AOTC purposes. This might be why you're confused. Check out IRS Publication 970 for the exact rules. For the AOTC vs Lifetime Learning Credit decision, AOTC is almost always better if you're eligible because it's partially refundable.
Is there any official calculator or tool from the IRS to figure this out? I've read Pub 970 but it's still confusing with all the exceptions and special cases.
Unfortunately there's no official IRS calculator specifically for determining your year of education. Publication 970 is the main source, but you're right that it can be confusing. The basic rule is that you need to count academic periods when you were enrolled at least half-time in a degree program. If you're really unsure, the IRS Interactive Tax Assistant (ITA) on their website can help determine if you're eligible for either credit, though it won't specifically tell you what "year" you're in. TurboTax and other tax software also usually have built-in tools to help figure this out based on your answers to their questions.
Make sure you keep all your receipts for required textbooks and course materials too! Those count as qualified education expenses for both credits. I almost missed out on claiming an extra $800 in expenses because I forgot about all the access codes and online materials I had to buy that weren't included in my tuition.
Wait what? I thought only tuition and fees on the 1098-T counted! You're saying I can claim the $400 I spent on required textbooks too??
For what it's worth, I missed reporting a 1099-G on my 1040-NR back in 2019 and never amended. Nothing ever happened. The amount was only about $800 though, so maybe that's why? Not saying you shouldn't fix it, just sharing my experience.
That's incredibly risky advice. The IRS has up to 6 years to audit returns with substantial underreporting and potentially unlimited time if they consider it fraudulent. Just because nothing happened yet doesn't mean you're in the clear.
You're right - I wasn't trying to suggest OP should ignore the issue. I was just sharing what happened in my specific case. The statute of limitations is definitely 3 years for most situations, but as you said, it can be longer for substantial underreporting. In my case, the amount was small enough that it wouldn't have triggered the substantial underreporting threshold (which is typically 25% of gross income).
Quick tip: If you end up filing an amended return for the 1099-G, make sure you also look at your state tax situation. If your federal taxable income changes, you might need to amend your state return as well. Each state has different requirements for this.
Thank you so much for mentioning this! I hadn't even thought about the state implications. Would this apply even though I'm filing a 1040-NR for federal? Do non-residents generally need to file amended state returns too?
One thing to consider - does your sister get any government benefits based on having a dependent child? Like food stamps or housing assistance? That might be why she's still claiming him even though your parents are doing the real support work.
This is a really important point. I've seen families torn apart over this exact issue. Sometimes the parent is claiming the child for benefits even though grandparents are doing the caregiving. Worth having an honest conversation before tax time.
Don't forget that if your parents do claim your nephew, they might qualify for additional tax benefits besides just the dependent deduction - possibly Head of Household filing status (if unmarried), Child Tax Credit, Credit for Other Dependents, and maybe even the Earned Income Credit depending on their income. Worth talking to a tax pro who specializes in family situations.
Have you considered just using a third-party VAT service like Avalara or Taxamo? They specialize in international VAT compliance and can handle everything from registration to filing for multiple countries. Might be overkill for just one transaction, but if you plan to continue selling internationally, it could be worth it.
Would those services be cost-effective for a small business with just occasional international sales? I'm concerned about spending more on compliance than the actual value of the sales.
For very occasional international sales, most of these services might not be cost-effective since they typically charge monthly subscription fees designed for businesses with regular international transactions. For your situation with just one small transaction, you might want to look at per-country filing services that charge one-time fees, or consult with an accountant who specializes in international tax to weigh the cost of compliance against the risk of non-compliance. Some businesses choose to hold off on formal registration until they reach a higher volume of sales in a particular country, but this approach does carry some compliance risk.
Quick question - has anyone used KVasimple for Korean VAT? I've heard they're specifically for foreigners dealing with Korean taxes but couldn't find many reviews.
I used them last year for our company. Pretty decent service and they do handle everything in English. Their customer service is hit or miss though - sometimes took days to get a response. But they did get everything filed correctly and on time.
Axel Bourke
I've been doing this with my kids for years and here's what my accountant told me: the key is that the money is ACTUALLY THEIRS. Whether you pay for their stuff directly from their account or reimburse yourself doesn't really matter - what matters is that they did real work, got paid fair market value, and the money is being used for THEIR benefit. My accountant suggested keeping a ledger showing: - Work performed by child - Amount paid - Expenses paid from their account - Who benefitted from each expense This has worked great for us through multiple years of taxes!
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Dananyl Lear
ā¢This is super helpful! Do you keep physical receipts too or just the ledger? And has your accountant mentioned any specific percentage of their income that should remain in their accounts vs being spent?
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Axel Bourke
ā¢I keep digital copies of major receipts (like the big gymnastics/sports payments) but just note the small stuff in the ledger. My accountant never mentioned a specific percentage that needs to stay in their accounts. The key thing is the money should be used for their benefit - whether that's current expenses or saving for their future. There's no rule about how much needs to stay in the account. In fact, using a good portion for their current needs actually strengthens the case that this is legitimate income that belongs to them, not just a tax scheme.
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Aidan Percy
Warning for anyone doing this - make sure the work your kids do is AGE APPROPRIATE and that you pay them REASONABLE wages!!! My friend got audited because he was "paying" his 7-year-old $2000/month for "consulting" lol. The IRS agent literally laughed at him.
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Fernanda Marquez
ā¢This is so true! My tax guy says document EVERYTHING - take pics of your kids working, keep timesheets, and pay market rates. Nothing raises red flags faster than overpaying family members.
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