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Just a heads up - even if your income was below the filing threshold, you might still want to file if you had any federal taxes withheld from your paychecks. You could be due a refund! The IRS only gives you 3 years to claim refunds, so 2018 would still be within that window if you file soon.
Oh that's a really good point I hadn't considered! I did have some taxes taken out of my paychecks that year. Do you know if I'd still be able to get that money back even though it's been a few years?
Yes, you can still get that money back! For 2018 returns, you have until April 15, 2022 to file and claim any refund owed to you. After that date, any unclaimed refund becomes property of the Treasury. If you're due a refund, there's actually no penalty for filing late. The penalties only apply when you owe taxes. So this might be a win-win - you comply with the IRS request and potentially get some money back at the same time.
For anyone else who runs into this situation - I learned the hard way that even if you're under the filing threshold, if you received the Premium Tax Credit (Obamacare subsidy) during that year, you ARE required to file a return regardless of income. The IRS came after me for this exact reason.
Also worth noting that if you had self-employment income over $400, you're required to file too, even if your total income is below the standard threshold. Made that mistake my first year doing gig work.
One thing that hasn't been mentioned yet - make sure to check if you need to file a Form 3520 (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts). The threshold for reporting foreign inheritances is pretty high though - $100,000 from a nonresident alien individual or foreign estate. Since your spouse was a US citizen, you likely don't need to file this form, but it's something to be aware of for others dealing with foreign inheritances.
Thanks for bringing this up! My understanding was that since my husband was a US citizen, I don't need to file Form 3520 even though the property is in the UK. Is that correct? Are there any other international forms I should be aware of besides FBAR and the Form 8938?
You're correct. Since your husband was a US citizen, you don't need to file Form 3520 for this inheritance, even though the property is located in the UK. The form is specifically for gifts or inheritances from foreign persons (non-US citizens/residents). Beyond FBAR (FinCEN Form 114) and Form 8938, you might want to be aware of Form 8833 if you're claiming benefits under the US-UK tax treaty, but that's typically not needed for straightforward inheritances. Also, if you maintain any financial accounts in the UK after settling the estate, remember you'll need to continue reporting those on FBAR and potentially Form 8938 in future years if they meet the threshold.
Just a heads up - I'm a dual citizen too and when I inherited from my UK family, I found that currency exchange rate timing can make a big difference. The IRS will want to see values converted to USD, but the rate fluctuates daily.
Umm, aren't we forgetting about the "economic substance doctrine"? The IRS can disallow transactions that don't have a real economic purpose beyond tax avoidance. If you sell and immediately rebuy the exact same crypto, they might argue there was no real economic purpose. I'm not a tax pro but I read about this somewhere. Maybe someone here knows more?
That's more applicable to complex corporate tax shelters than to individual investors making normal investment decisions. As long as you have a legitimate investment purpose (which it sounds like OP does - they believe in the long-term prospects), tax-loss harvesting is a widely accepted practice. Even traditional brokerages recommend it for stock portfolios. The key is having investment intent beyond just tax savings. The fact that OP genuinely wants to maintain investment in this crypto should be sufficient.
Don't forget another benefit - if your losses exceed your gains plus the $3000 limit for ordinary income, you can carry forward the unused losses to future tax years! I had $7500 in crypto losses last year, used $3000 against my income, and am carrying forward $4500 to use this year. It's not just a one-year benefit. Think of it as the government letting you spread a large loss over multiple tax years, which is actually pretty reasonable when you think about it.
Whatever you do, don't try to update your direct deposit info through email if anyone suggests that! My cousin got scammed this way last year - got an email claiming to be from the IRS about updating bank info for his refund. Turned out to be identity thieves. The IRS NEVER initiates contact through email about refunds or personal info. Just wait for the paper check like others have suggested. It takes a bit longer but it's the safest option at this point.
This happened to my mom too! She got a text message with a link to "update direct deposit info" and almost fell for it. These scammers know exactly when tax season is and target people waiting for refunds. The IRS will NEVER text or email you asking for bank information.
Has anyone had luck with calling the IRS Taxpayer Advocate Service instead of the main IRS number? I've heard they sometimes can help with refund issues if it's causing financial hardship.
The Taxpayer Advocate Service is really only for serious hardship cases or if you've tried multiple times to resolve an issue with the IRS without success. For a simple returned direct deposit that's being converted to a check, they probably won't take the case since the IRS has a standard procedure already in place.
Thanks for the clarification. Guess I'll just have to be patient and wait for the paper check to arrive. Seems like there's no way to speed up the process once the direct deposit has been rejected.
Emma Wilson
Have you considered checking if you qualify for the IRS Free File program? If your income is under $73,000, you might be able to file completely free using brand-name software. H&R Block doesn't participate anymore, but TurboTax, TaxAct and others do. Even if you don't qualify for Free File, most of the major software options are much cheaper than $405 for a straightforward return. I paid $49 for TaxSlayer this year for a return with W-2s, mortgage interest, and charitable donations.
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Yara Sayegh
ā¢Thanks for this suggestion! I didn't realize there was an income threshold for free filing options. My income is actually around $78,000 so I just miss that cutoff, but $49 sounds way more reasonable than what H&R Block quoted me. Did you find TaxSlayer easy to use? I'm not super tax-savvy but can follow clear instructions.
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Emma Wilson
ā¢TaxSlayer is pretty user-friendly with a straightforward interface. It walks you through everything step by step with explanations along the way. The questions are clear and it imports W-2s if you have your employer's EIN number. For mortgage interest, you just enter the information from your Form 1098. Even if you're not tax-savvy, these programs are designed for regular people. They have help sections and explanations for almost everything. And if you get stuck, most have support options where you can chat with a tax pro for specific questions.
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Malik Davis
I worked at H&R Block for two tax seasons and can tell you that $405 is their standard pricing for their "Deluxe" tier which they push on anyone with itemized deductions like mortgage interest. The problem is they automatically bundle in their "Peace of Mind" guarantee (basically audit protection) which adds about $100 to the bill without clearly explaining it's optional. If you do go with them, specifically ask to remove the Peace of Mind add-on and any other extras. The base price should be closer to $250-300 which is still high but more reasonable.
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Isabella Santos
ā¢Is the Peace of Mind guarantee even worth it? I've always wondered if these audit protection plans are just a way to scare people into paying more.
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