I'd also recommend your friend check if he needs to file FinCEN Form 114 (FBAR) in addition to the tax forms already mentioned. If the Canadian trust account holding the settlement money had a balance over $10,000 at any point during the year, he's required to report it even if he wasn't the direct owner of the account. This is separate from his regular tax filing but has serious penalties if missed. The FBAR deadline is usually October 15th (with automatic extension) rather than April 15th like regular tax returns. Given the complexity of this situation - international taxation, indigenous rights, treaty settlements, and potential trust reporting - I'd strongly suggest your friend consult with a CPA who specializes in both international tax law and indigenous taxation. The cost of professional advice upfront will likely be much less than dealing with penalties or audit issues later. The IRS has been increasingly focused on international compliance, so getting this right the first time is really important.

One important aspect that hasn't been mentioned yet is the potential impact on your friend's US immigration status, if applicable. If he's in the US on a work visa or has any pending immigration applications, receiving a large foreign settlement could potentially affect his status or future applications. Immigration authorities sometimes view large foreign financial windfalls as changing someone's intent to remain temporarily in the US versus permanently. While this shouldn't affect the tax treatment of the Robinson Huron Treaty settlement, it's something to keep in mind for his overall situation. Also, regarding record keeping - make sure your friend keeps detailed records of all the settlement documentation, any tax advice received, and copies of all forms filed. Given how unique this situation is, there's a higher chance of IRS questions or audit, so having everything well-documented from the start will be crucial. The combination of Canadian indigenous treaty rights, US tax residency, and international income reporting makes this a textbook case for needing specialized professional help. The upfront cost of getting proper tax and legal advice will likely save significant money and stress in the long run.

Just went through this process myself about a month ago! The key things that helped me: 1) Called ahead to make an appointment (saved SO much time), 2) Brought extra copies of everything just in case, and 3) Had my last few years of tax returns with me even though they didn't ask for them. The IRS agent was actually really helpful and walked me through each step. Whole thing took about 30 minutes once I was called back. Don't stress too much - it's way more straightforward than it seems!

I had my appointment last month and it went smoother than expected! Make sure to bring the original verification letter, two forms of photo ID, and your Social Security card. They also asked me about my filing status and dependents from my return. Pro tip: if you've moved recently, bring proof of your current address too - saved me from having to reschedule. The whole thing took about 25 minutes once I got called in. You got this! 👍

Has anyone had experience with the IRS questioning donation amounts? I'm in a similar situation (donated about 15% of income) and worried about audit risk.

Great question! At 11% of your income, your donations are well within normal ranges and shouldn't raise any red flags. The IRS generally becomes more interested when charitable deductions exceed 20-30% of income without corresponding documentation. For your situation, definitely run the numbers on itemizing vs. standard deduction. With $8,200 in donations, you'd need about $6,400 more in other itemized deductions (mortgage interest, state/local taxes, medical expenses) to exceed the $14,600 standard deduction for single filers. Since most of your donations were likely under $250 each, your email confirmations should be sufficient documentation. Just make sure they show the charity name, date, and amount. For any single donations of $250 or more, you'll need a written acknowledgment from the charity stating whether you received anything of value in return. One tip: Consider setting up a simple spreadsheet to track donations throughout the year - it makes tax time much easier and helps with planning future giving strategies like the "bunching" approach others mentioned.

If you're filing online with tax software, you don't usually need to worry about this worksheet stuff. Tax software handles all this behind the scenes. Just make sure you enter your 1099-DIV information correctly and the software should apply the correct tax rates to your qualified dividends.

I had this exact same confusion when I first started receiving dividend income! The key insight that helped me was understanding that Form 1040 line 3a (qualified dividends) and line 3b (ordinary dividends) work together - line 3a is essentially a "subset" of line 3b. Here's the flow: Your total dividend income goes on line 3b and gets included in your total income calculation. But some portion of those dividends (the qualified ones) get special tax treatment. That's why line 3a exists - to identify how much of your line 3b dividends qualify for the lower capital gains tax rates. The worksheet then separates your income into two buckets: regular income taxed at ordinary rates, and qualified dividends taxed at the preferential rates (0%, 15%, or 20% depending on your tax bracket). This is actually beneficial to you because qualified dividends are taxed much lower than regular income! So you're not missing anything - the form design is just confusing because it doesn't clearly show that line 3a is part of line 3b. Both amounts are already included in your taxable income, but they get different tax treatment.

I've been through this exact situation and can confirm what everyone else is saying - you absolutely need to file those missing 8606 forms, and yes, you'll likely need to amend your 1040s too. The blank lines 4a/4b are definitely problematic. Even though your conversions were non-taxable, the IRS matching system expects to see those 1099-R amounts reported somewhere on your return. When they don't find them, it creates a mismatch that could trigger unwanted attention. Here's the approach that worked for me: First, I filed all missing 8606 forms separately by mail with "Filed pursuant to Section 301.9100-2" written at the top for penalty relief. Then I waited about 6-8 weeks before filing 1040X amendments to add the missing conversion amounts to lines 4a (full distribution) and 4b ($0 taxable portion). The good news is that since you made non-deductible contributions and never took improper deductions, this should be tax-neutral. You're just cleaning up the paperwork trail to properly document what already happened. Your old preparer was completely wrong - Form 8606 isn't optional when you make non-deductible IRA contributions. It's the ONLY way to establish basis and prove to the IRS that you already paid tax on those dollars. Without it, their default assumption is that all conversions are fully taxable. Don't delay on this - the longer you wait, the more complex it gets. Find a CPA who actually understands retirement account rules and get this squared away. The process is straightforward once you know what needs to be done!

I've been through this exact same situation and want to echo what everyone else is saying - you absolutely need to file those missing 8606 forms ASAP, and yes, you'll almost certainly need to amend your 1040s given the blank 4a/4b lines. The consensus here is spot-on: file the missing 8606 forms first with "Filed pursuant to Section 301.9100-2" at the top for penalty relief, then follow up with 1040X amendments to properly report those conversions. The blank 4a/4b lines are a real red flag - the IRS matching system expects to see those 1099-R amounts reported even when the taxable portion is $0. I used the same timeline approach others mentioned: filed all my missing 8606s by mail first, waited about 6-8 weeks for processing, then submitted the 1040X amendments. The key is that the 8606 forms establish your basis, which then supports showing $0 taxable on line 4b of your amended returns. Your old preparer's advice was dangerously wrong. Form 8606 isn't optional - it's literally required by law for non-deductible IRA contributions and is the ONLY way to prove those were after-tax dollars. Without proper documentation, the IRS default assumption is that everything is taxable. The good news is this should be tax-neutral since you never took improper deductions. It's just paperwork cleanup, but critical paperwork that protects you from potential audit issues down the road. Don't delay - get those forms filed and find a CPA who actually understands retirement account rules!