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Just want to add that your boyfriend should seriously consider getting into compliance ASAP using the IRS Voluntary Disclosure Program. My cousin thought the same "too small to notice" thing until the IRS froze his accounts and garnished his wages - they took 75% of his paycheck! He couldn't even pay rent. The penalties are so much worse when they come to you versus when you go to them voluntarily. The interest compounds daily too, so that debt is just growing every single day he waits.
This is what I'm afraid of! Do they really take that much of your paycheck? We'd be completely screwed if that happened. Do they give any warning before they start garnishing?
Yes, they can take up to 70-80% of your paycheck depending on your filing status and number of dependents. They do send multiple notices before taking action - usually at least 3-4 letters demanding payment or response. The problem is many people ignore these notices hoping they'll just go away, which only makes things worse. The garnishment itself comes with very little warning once they've sent all required notices. My cousin had received several letters over 6-8 months but ignored them all. Then suddenly his employer notified him that they received a garnishment order, and his next check was drastically reduced.
One thing nobody's mentioned yet is state taxes. If he's not filing federal, he's probably not filing state either. Some states are WAY more aggressive than the IRS about collections. My brother ignored California state taxes for just 2 years and they suspended his driver's license and professional license. Couldn't legally drive or work in his field until he set up a payment plan.
Exactly this. I work in construction too and my state's contractor licensing board suspended my license for unfiled state taxes. Lost my ability to legally work for 3 months while straightening it out. My advice - file back taxes even if you can't pay them all at once. The failure-to-file penalties are much worse than failure-to-pay.
5 One important thing nobody's mentioned yet is the Substantial Presence Test and potential tax treaty benefits. Even without a specific tax treaty, your father might benefit from filing Form 8833 (Treaty-Based Return Position Disclosure) if there's any applicable international agreement between the US and his country. Also, if he maintained a tax home in the Middle East and was physically present there for at least 330 days, he might qualify for the Foreign Earned Income Exclusion, which could exclude over $100,000 of foreign earnings from US taxation. But be careful - retirement income and investment income typically don't qualify as "earned income" for this exclusion.
3 I thought the Substantial Presence Test only applies to determining if someone is a resident alien or not? Doesn't having a green card automatically make you a resident alien regardless of physical presence?
5 You're absolutely right - I should have been more precise. Green card holders are automatically considered resident aliens for tax purposes regardless of physical presence, so the Substantial Presence Test isn't relevant in this case. My main point about the Foreign Earned Income Exclusion still applies though. Even without a specific tax treaty, there are provisions that could help reduce his US tax liability on foreign income. However, you're correct that retirement income typically doesn't qualify as "earned income" for the FEIE since it wasn't actively earned during the tax year.
22 Does your father own any property or investments back in his home country? That's another important consideration. If he owns rental property or has investment accounts there, he'll need to report that income too. And depending on the total value, there may be additional reporting requirements beyond just the income. Foreign mutual funds are especially complicated because they're often classified as PFICs (Passive Foreign Investment Companies) which have special reporting requirements on Form 8621 and can be taxed at higher rates.
I pay my teenage kids in my business (I own a retail shop) but I actually have them work - stocking inventory, helping with social media, etc. For really young kids like yours, the image rights approach can work but be SUPER careful with documentation. Make sure you: 1) Have a formal contract for the image rights 2) Pay market rates (research what others pay for similar usage) 3) Document EVERYTHING - when photos are taken, where they're used, etc. 4) Keep the money in accounts in their names Also consider setting up Roth IRAs for them with this earned income - amazing long-term tax benefits!
Doesn't the IRS get suspicious when they see really young kids getting paid? My accountant warned me that paying anyone under 7 would be a red flag.
The age itself isn't necessarily the red flag - it's whether the arrangement seems legitimate and reasonable. Many child actors and models are extremely young. The key is that you're paying for something with clear business value (the right to use their images in your marketing) and documenting the business purpose. Your accountant is right to be cautious though. The IRS does scrutinize family employment arrangements. That's why documentation is crucial - you need contracts, proof the images are actually used in your business, and evidence that the compensation is reasonable compared to market rates. Start modest with the amounts and keep everything professional and well-documented.
Just wanted to add another approach - we pay our kids (ages 6-11) as models for our home-based business that sells children's products. Instead of buying "image rights," we pay them as independent contractors for specific photoshoots. We complete W-9s, issue 1099s, and track hours/shoots carefully. We also worked with an attorney to draft simple model release forms and contracts. We pay about $100-150 per photoshoot which happens 2-3 times monthly. Pictures go directly to our product listings and social media marketing.
As someone with severe anxiety myself, getting a dedicated accountant changed my life. Not H&R Block, not a random CPA, but someone I actually connected with who understood my anxiety. I interview several until I found someone who didn't make me feel stupid for my questions.
How did you find your accountant? Did you just google local CPAs or was there a better way to find someone who specializes in working with anxious clients?
Have you considered having a friend or family member sit with you while you use one of the DIY software options? Sometimes just having moral support helps with the anxiety, and most tax software is actually pretty straightforward if you take it one step at a time.
Caleb Bell
I think we're overlooking an important area of growth in tax controversy - cryptocurrency compliance. The IRS is absolutely ramping up enforcement in this area. In the last 6 months, I've taken on 12 new clients with crypto-related tax issues. Many taxpayers either didn't report crypto transactions or reported them incorrectly. The IRS has been issuing CP2000 notices and initiating examinations specifically targeting these issues. Plus, with the new reporting requirements coming into effect, there's going to be even more compliance work and subsequent controversy representation needed. If you have expertise in this area (or are willing to develop it), it could be a significant growth opportunity within tax controversy practice.
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Danielle Campbell
ā¢Have you found any good resources for getting up to speed on crypto tax issues? I'm seeing more clients mentioning crypto but honestly don't feel confident handling the more complex situations yet.
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Caleb Bell
ā¢There are several excellent resources for getting up to speed on crypto taxation. The Taxation of Digital Assets course from the AICPA is comprehensive and regularly updated. I also recommend joining the Digital Asset Tax Policy Coalition which provides excellent technical updates and practical guidance. For case-specific questions, Tax Notes has an extensive library of articles on cryptocurrency taxation that I reference frequently. The blockchain alliance also hosts monthly webinars covering emerging issues. Start with understanding the basics of capital gain/loss treatment, then build knowledge on more complex areas like DeFi, staking, and NFTs where the guidance is still evolving.
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Rhett Bowman
I work for a mid-sized firm and we've actually been EXPANDING our tax controversy department despite the lower audit rates. Why? Because the audits that DO happen are getting more complex and high-stakes. The IRS is increasingly focusing on wealthy individuals, partnerships with complex structures, and international tax issues. These cases often involve multiple tax years, substantial documentation, and complicated legal questions. They're not the simple correspondence audits of yesteryear. Plus, with the new partnership audit regime, centralized partnership audit cases are becoming a specialty unto themselves. Fewer audits, yes, but the ones happening require more specialized expertise and representation.
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Abigail Patel
ā¢Interesting perspective! What kind of background or training would you recommend for someone wanting to specialize in these high-stakes audits? Are there particular areas of tax law that are most valuable?
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