Just a heads up - I'm not a tax pro but I went thru something similar. If ur settlement included any interest (like if the discrimination happened years ago and they added interest to the settlement), that part is DEFINITELY taxable and should be reported as interest income. My settlement had like $5k in interest and I missed it initially. Had to amend my return.

One thing to keep in mind with discrimination settlements is that the IRS has been increasingly scrutinizing these cases, especially larger amounts like yours. They're looking for proper documentation that supports the tax treatment you claim. Make sure you keep detailed records of everything - your settlement agreement, any correspondence with your attorney about the tax implications, and documentation of what portions relate to different types of damages. If the IRS ever questions your filing, you'll want to be able to show exactly how you determined what was taxable vs. non-taxable. Also, since you mentioned this was age discrimination, be aware that the EEOC has specific reporting requirements for employers on discrimination settlements. This means the IRS likely already knows about your settlement, so make sure you report it correctly rather than trying to minimize it inappropriately. Given the complexity and the amount involved, it might be worth investing in a consultation with a tax professional who specializes in settlement income. The cost of getting it right up front is usually much less than dealing with IRS problems later.

Has anyone dealt with reporting a deceased person's mortgage interest deduction on a partial year return? My brother passed away last spring and I'm trying to figure out if I need to prorate the mortgage interest or just take the full amount shown on his 1098.

I'm sorry for your loss and understand how confusing this must be while handling your father's estate. As others have mentioned, the OMP discrepancy is likely just a system reporting error since you have documentation showing the mortgage was paid off and were able to sell the house without issues. For the final tax return, you'll want to report the mortgage interest that was actually paid during the time your father was alive (January through November). The key document here is that "paid in full" letter you mentioned - keep that with the tax records as supporting documentation. The IRS understands that 1098 forms sometimes contain errors, especially in situations involving payoffs or deceased taxpayers. If you're concerned about potential questions from the IRS, you might consider attaching a brief explanation to the return noting that the mortgage was paid off in August (with the paid-in-full letter as proof) and that the OMP figure on the 1098 is incorrect. This kind of proactive documentation can save headaches later if there are any audit questions.

Has anyone used TurboTax for a situation like this? I'm in the same boat (husband W2, me 1099) and wondering if the basic version will handle self-employment taxes or if I need to upgrade to the more expensive version.

This is exactly the situation I found myself in last year! Your husband is absolutely right - his W2 withholding only covers income taxes, not your self-employment taxes. I learned this the hard way when I got hit with a huge tax bill. One thing that really helped me was setting up a separate savings account just for taxes on my freelance income. I put aside about 25-30% of each payment I receive (to cover both self-employment tax and income tax). It prevents that shocking bill at the end of the year. Also, since you're in Florida, you might want to look into quarterly estimated payments for this year if you plan to continue freelancing. The IRS can hit you with penalties if you don't pay as you go and you owe more than $1,000 at filing time. I use the 1040ES forms to calculate what I should pay each quarter - it's actually not as complicated as it sounds once you get the hang of it.

Quick question - does Saudi Arabia have an income tax? I thought they didn't tax income which would make this easier since you wouldn't be double taxed, right?

As someone who went through a similar dual citizenship tax situation, I'd strongly recommend getting professional help sooner rather than later. The complexity of US tax law for expats is no joke, especially when you factor in FBAR requirements, potential FATCA reporting, and making sure you're properly claiming exclusions. One thing that wasn't mentioned yet - make sure you understand the "bona fide residence test" vs the "physical presence test" for the Foreign Earned Income Exclusion. Since you're living in Saudi Arabia as a Saudi citizen (not just working there temporarily), you'll likely qualify under the bona fide residence test, which can be more flexible than the physical presence test that requires you to be outside the US for 330 days out of 365. Also, even though Saudi Arabia doesn't have personal income tax, you still need to be careful about other types of income (investments, rental properties, etc.) that might not qualify for the FEIE. The US tax code doesn't care which passport you used to open accounts or earn income - your US citizenship creates the obligation regardless. Don't panic about past years - the Streamlined Procedures really are designed for situations like yours where people genuinely didn't know about their filing requirements. But definitely get started on this soon!

One more important thing: if you deducted any medical expenses in previous years that were later reimbursed by this settlement, you may need to report that reimbursement as income in the year you receive the settlement (called the "tax benefit rule").

Based on your breakdown, you're on the right track! The $6,500 for lost wages is definitely taxable income that you'll need to report. The medical expenses ($14,500) and pain/suffering ($8,000) portions are not taxable since they're compensating for physical injuries. For the $3,000 car repair portion, as long as it doesn't exceed what you originally paid for the car (minus any depreciation), it's typically not taxable income either - it's just making you whole for your property loss. One thing to watch out for: if you itemized deductions in previous years and deducted any of those medical expenses that are now being reimbursed by the settlement, you might need to include that reimbursed amount as income under the tax benefit rule. Also don't forget to check your state tax requirements - while federal rules are fairly clear on settlements, some states have different approaches to taxing settlement proceeds. Keep all your settlement documentation organized. The IRS likes to see clear records showing how the settlement amount was allocated between the different categories when there are questions.