That's super helpful! I just checked my 1098-T and Box 7 IS checked. Does that mean some of the amounts might be for classes I'm taking this spring, but I paid for in December? I'm confused about when I can claim those expenses.

Exactly right! If Box 7 is checked, it means some of the amounts reported include payments for an academic period beginning in the first three months of the next year (January-March). The good news is that the IRS allows you to claim qualified education expenses in the year you actually pay them, not necessarily when you take the classes. So if you paid for spring semester classes in December 2024, you can claim those expenses on your 2024 tax return, even though the classes are in 2025. This is called the "prepaid tuition rule" and it can be really beneficial for your current year taxes.

I used IRS Free File last year with my 1098-T and it worked great. It asked all the right questions about education expenses and even prompted me to add my textbook costs. The interface isn't as fancy as TurboTax but it calculated my American Opportunity Credit perfectly.

Thanks for this info - I had no idea they were doing targeted letters like that. Did your friend actually get audited or just receive a letter? And do you know if he was using Coinbase specifically or some other exchange?

He didn't get a full audit, just a CP2000 notice that specified his crypto transactions. It listed specific dates and amounts that matched his Coinbase activity, so they definitely had his trading data. He was using both Coinbase and Kraken, but the letter only mentioned the Coinbase transactions. He tried ignoring it at first (bad move), which is why the penalties stacked up. Once he responded and paid, the matter was resolved. The scary part was how specific their information was - they knew exactly which coins he'd traded and when.

This is absolutely correct but be aware the rules might change soon. There's proposed legislation that would apply wash sale rules to crypto starting in 2023. I've been taking advantage of this loophole while I can!

Thanks for bringing this up! Do you know if there's any way to find out about Spain's exit tax policies? My broker hasn't mentioned anything about this, but they've been pretty unhelpful overall. Also, with the transfer-in-kind option, would that avoid triggering US taxes, or would the IRS still consider that a taxable event even though I'm not technically selling?

Your best source would be the Spanish tax authority website or calling them directly. Sometimes these exit taxes only apply if you've been in the country for a certain number of years or have investments over a specific threshold. In Portugal, it only applied to investments I'd held for more than 5 years and only on the appreciation portion. For the transfer-in-kind, if the securities are identical before and after the transfer (same ISIN number), the US generally doesn't consider it a taxable event. You're simply moving the same investment from one broker to another. However, this only works if the exact same fund is available on both platforms. Most European funds don't have US equivalents with identical ISINs, which is where the problem lies.

Is there any way around the PFIC classification? I have some Swiss funds I really don't want to sell but don't want the tax headache either.

So what happens if the company refuses to give me a corrected form? My former client insists they're right even though I know they're using the wrong form.

If they refuse to correct the form, document your attempts to get it fixed (keep emails or notes from phone calls). Report the income correctly on your tax return using Schedule C regardless of their error. You can also file Form 8919 "Uncollected Social Security and Medicare Tax on Wages" if you believe you were misclassified as an independent contractor when you should have been an employee. The IRS may contact the company directly once they see the discrepancy in reporting methods.

I used TurboTax last year with a similar issue. Just enter the 1099-MISC exactly as it appears, but when it asks what type of income it is, select "business/self-employment" rather than "rental income." The software will place it correctly on Schedule C. It might give you a warning about the mismatch, but you can add a note explaining the company issued it incorrectly.

Thanks for mentioning this! Do you know if the Foreign Tax Credit is worth claiming for such a small amount ($65)? Is there a minimum threshold where it makes sense to bother with Form 1116?

For just $65 of interest income, the Foreign Tax Credit might not be worth the additional paperwork. Form 1116 is pretty complex and time-consuming to complete correctly. As a general rule, I usually don't bother with Form 1116 unless the foreign tax paid is at least $300-400, given the time and complexity involved. However, there's no minimum threshold requirement - you can claim it for any amount. If your brother plans to have more significant foreign income in the future, it might be worth establishing the pattern now. It's really a judgment call based on how much Australian tax was actually paid on that interest and how much you value your time versus the small credit amount.

Is that $10,000 per account or total across all foreign accounts? My parents have a few small accounts in Mexico but I'm not sure if they add up to that much.