How difficult was it to get your ITIN? I'm helping my cousin who just moved to the US and needs to file taxes next year.

The ITIN application process wasn't super difficult, but it did take some time. You need to complete Form W-7 and provide original documents or certified copies from the issuing agency (like a passport). You can submit it with your tax return or in advance. The processing time was about 7 weeks for me, but I've heard it can take longer during busy periods. One tip for your cousin: if possible, use an IRS-authorized Certifying Acceptance Agent instead of mailing original documents. That way they don't have to part with their passport for weeks while the IRS processes the application.

What about for a trust? My parents set one up and I'm trying to figure out the tax situation.

That's really helpful! I know she did a kitchen renovation about 10 years ago and replaced all the windows. I'll have to see if she kept the receipts. Does TurboTax have a specific section for entering these improvements or do you just add them to the original purchase price?

Yes, TurboTax does have a specific section for this. After you enter the original purchase price, it should ask if you made any improvements to the home. There will be a place to itemize and enter each major improvement separately. If she doesn't have all the receipts, reasonable estimates are generally acceptable - just be prepared to justify them if ever questioned. Make sure to only include capital improvements (things that add value, prolong the home's useful life, or adapt it to new uses) - not repairs or maintenance. So the kitchen renovation and window replacement definitely count, but something like painting or fixing a leaky faucet wouldn't.

This is so important! I'm in California and got hit with state capital gains even after applying the federal exclusion. Totally wasn't expecting that extra 9.3% tax on the gain that exceeded the federal exclusion.

Would it also be smart for OP to get something in writing from the relatives stating it's a gift with no strings attached? Or would that actually look worse to the IRS since it shows they discussed the tax implications?

That's a thoughtful question. I don't think a formal gift letter is necessary for smaller amounts like this, and you're right that it might actually draw more attention to the arrangement. For larger gifts (especially those approaching the annual gift tax exclusion amount), having a simple gift letter is common practice and wouldn't raise eyebrows. But for a $375 gift, normal documentation like a check or bank transfer record showing it came from the relatives to you personally should be sufficient. The key is making sure there's nothing in writing that indicates a requirement to donate the money.

I used FreeTaxUSA and they handled this fine too. They specifically had a help article about this exact scenario that explained it's legitimate as long as you have full control of the money before donating it. Definitely cheaper than TaxAct or TurboTax if you're looking to save some money.

Do you think it would be better to just take the whole cost as a business expense? Like can't I just say it's 100% for the dog sitting since that's what ruined it? The living room is where all the dogs hang out during the day.

I wouldn't recommend claiming 100% business use if you actually use it for personal purposes too. The IRS specifically looks for people trying to deduct personal expenses as business ones. If you're honestly using it almost entirely for the business, you might be able to justify a higher percentage like 90%, but you should be truthful about any personal use. Better to take a slightly smaller legitimate deduction than risk problems with an audit by overreaching.

That approach doesn't actually change the tax treatment. Whether you use a business account or personal funds later reimbursed, the deductibility still depends on the business use percentage. The IRS cares about the actual use of the item, not which account you used to buy it.

Oh man, another form I need to worry about? Is Form 5471 something I can handle myself or is this definitely something I should have my accountant prepare? And are there any specific schedules within Form 5471 that relate to Subpart F income reporting?

I strongly recommend having your accountant prepare Form 5471. It's one of the most complex IRS forms with multiple schedules and detailed reporting requirements. Schedule I specifically reports Subpart F income and is where you'll need to break down those passive investment earnings. Schedule J tracks your E&P balances which affect future distributions. And don't forget Schedule P for tracking previously taxed earnings. Even experienced accountants sometimes struggle with this form, so it's definitely not something I'd suggest handling yourself, especially with the significant penalties for errors or omissions.

Does making a 962 election make sense if most of the foreign income is already NOT Subpart F (like the consulting income mentioned)? Seems like it might create more complications than benefits in that case.