Does cash app let you import last years return if you used turbotax before? Or do you have to enter everything from scratch??

Thanks for the suggestion about education credits, but she's not in college right now. I think you're right about making sure she stays the full calendar year for next tax season though. Do I need any specific documentation to prove she's been living with me the whole time?

You don't need specific documentation upfront, but you should keep evidence in case of an audit. Things that help establish residency include mail addressed to her at your home, medical bills, school records, employment records showing your address, state ID with your address, or affidavits from people who can verify she lived with you all year. If she has a driver's license or state ID, having her update the address to yours early in the year provides good documentation. Also keep records of any support you provide like receipts for major purchases, utility bills, etc.

This is terrible advice. The IRS absolutely can and does check dependent claims, especially if the person you're claiming files their own return. They have automated systems that flag mismatches. Tax fraud over a dependent claim is not worth the hassle and potential penalties!

Thanks for mentioning this! My account is actually a Canadian TFSA (Tax-Free Savings Account). I've been trying to figure out if there's any special treatment under the tax treaty. Have you heard anything specific about Canadian TFSAs being exempt from PFIC reporting or getting better treatment?

The US-Canada tax treaty is complex regarding TFSAs. Unfortunately, the current interpretation by the IRS is that TFSAs generally do not qualify for the same beneficial treatment as Canadian RRSPs (which are recognized under Article XVIII of the treaty). Most tax professionals consider Canadian TFSAs to be regular foreign financial accounts for US tax purposes, which means the PFIC rules still apply if you have mutual funds in the account. There has been ongoing advocacy to change this treatment, but currently, you likely need to report the mutual funds as PFICs. One potential strategy some use is to move TFSA investments to more tax-efficient options (like individual stocks instead of mutual funds) to avoid the complex PFIC reporting, while maintaining the account itself.

Is there any way to argue "reasonable cause" to avoid the penalties? I mean, what regular person would ever know that their foreign retirement account needs all this crazy reporting?

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?

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.

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.

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.

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??

Not all education expenses qualify though. I tried to claim my laptop last year and got audited. Make sure it's required by your program and you have documentation from professors.