That's a smart approach. Do you have a template for that letter you could share? I think being more formal about it from the beginning might help.

I don't have a shareable template handy, but it's pretty simple. My letter includes: 1) A brief explanation that tax law requires me to collect their tax information before making payments, 2) A deadline for returning the completed W9, 3) A statement that I cannot process payments without a completed W9 on file, and 4) A reminder that I'll be sending them a 1099 form by January 31st for any payments over $600. I also explain that protecting their information is important to me and describe how I store their documents securely. Most contractors appreciate the professionalism and clarity. Having this as part of your onboarding process for any new vendor relationship sets the right tone from the start.

You're absolutely right! This is a common mistake. For foreign individuals, you need Form W-8BEN. For foreign entities/businesses, you need Form W-8BEN-E. These forms certify that they're not subject to US tax withholding because they're foreign persons. The reporting requirements are also different. Instead of 1099s, you might need to file Form 1042-S for certain types of payments to foreign contractors. The rules get complicated depending on what services they're providing and where they're located.

Does this apply if the parents file separately too? My parents are divorced and I'm claimed on my dad's return, but does my mom's income matter for Form 8615?

If your parents are divorced, you only need the taxable income from the parent who claims you as a dependent. So in your case, you only need your dad's information, not your mom's. For married parents filing separately, you'd need to use the taxable income of the parent with the higher taxable income. The IRS has specific rules for different filing situations that determine whose rate applies to your unearned income.

You might need to file by paper instead of e-filing. TurboTax won't let you e-file without completing all required forms, but you could print your return and mail it in without Form 8615. Just know that this might trigger a letter from the IRS later if they determine you needed that form.

Thanks for the suggestion. Would they actually come after me though if I paper file without that form? I really don't have access to my parents' info and need to file my taxes somehow.

What if you've already maxed out all retirement accounts? Any other straightforward strategies that don't involve loans?

If you've maxed out traditional tax-advantaged accounts, there are still several options worth considering. Look into 529 plans if you have education expenses for yourself or family members. Many states offer tax deductions for contributions. Charitable giving is another straightforward strategy - donating appreciated securities can be especially efficient as you avoid capital gains tax and get the deduction. Tax-loss harvesting in your investment accounts can offset capital gains. If you're a business owner or have self-employment income, you might qualify for a SEP IRA or Solo 401k with much higher contribution limits than standard retirement accounts.

Yes, portfolio loans/margin loans can be tax-efficient. Interest is potentially deductible as investment interest expense (subject to some limitations - you can only deduct up to your net investment income). The big advantage is avoiding capital gains tax and not disrupting your investment strategy. Just be careful about margin calls if the market drops.

Do you scan everything or make physical photocopies? I'm wondering which is better for record-keeping purposes.

I do both actually. I make physical photocopies that I keep in a folder for the current tax year, but I also scan everything into a single PDF that I store on my computer with a backup on an external drive. Physical copies are good for quick reference and if you need to mail something to the IRS in response to a notice. Digital copies take up less space and can't get damaged by water or fire. The IRS accepts either one as proof if they question something on your return.

Paper returns are taking 6+ months to process this year, especially if there's anything unusual like a non-resident alien spouse situation. The IRS is still catching up from the pandemic backlog. As long as your return was filled out correctly, your refund should eventually arrive. You can try calling the IRS refund hotline at 1-800-829-1954, but be prepared for a long wait. The Taxpayer Advocate Service might be able to help if it's been more than 6 months, but they're also overwhelmed with cases.

Oh wow, I had no idea about the hobby loss rule. So even if I am legitimately reinvesting in my business, I need to show some profit occasionally? Does the amount of profit matter or just the fact that there is some?

The amount of profit doesn't have a specific threshold - it just needs to be genuine profit. The key is demonstrating that you have a profit motive, not just a tax reduction motive. Small profits are fine as long as they're real. What helps is having a business plan that shows your reinvestment strategy is part of a long-term growth plan that will eventually result in greater profits. Documentation is your friend here - keep records showing how your business decisions are commercially reasonable and aimed at eventual profitability.

What kind of business do you have? I'm wondering because different industries probably have different standards for what counts as a necessary expense.