Omg I didn't even think about that possibility! How would we know if that's what happened? And what did you have to do to fix it?

You can usually tell if there's potential identity theft if the notice mentions income sources your son didn't actually have. For example, if the notice shows income from employers he never worked for or investment income from accounts he doesn't own. In our case, we had to file Form 14039 (Identity Theft Affidavit) with the IRS and provide documentation proving my daughter's legitimate income. We also placed a fraud alert on her credit reports and froze her credit as a precaution. The IRS has a special department for tax-related identity theft cases, and they eventually cleared everything up - though it did take about 4 months to fully resolve.

I work in tax prep and we're definitely seeing an uptick. The IRS got a funding boost to go after unpaid taxes, but their systems are still outdated. They're basically casting a wider net with automated notices hoping to catch actual issues, but it means way more false positives.

I didn't even think about state taxes! I was in Illinois for college. Do you know if they're more aggressive than the IRS about pursuing old unfiled returns?

Illinois actually follows the federal statutes of limitations pretty closely for most tax matters, generally 3 years from filing or due date (whichever is later). However, like the IRS, they technically have no time limit for unfiled returns. That said, Illinois typically receives information from the IRS and educational institutions, so if the IRS hasn't flagged your account, Illinois likely hasn't either. State tax authorities usually have even fewer resources than the IRS for pursuing older, smaller cases. If you haven't received notices from Illinois by now, it's even less likely they'll pursue this than the federal government would.

Yes, he should check the box indicating that someone can claim him as a dependent when filing his own return. This is important because it affects his standard deduction amount and eligibility for certain credits. Being claimed as a dependent doesn't eliminate his obligation to file his own return if he meets the filing requirements (which for 2024, for dependents with only earned income, would be income exceeding $14,600). He'll need to report his taxable scholarship income (the portion exceeding qualified education expenses) as income on his return.

Do you know if property management time counts toward the 750 hours? I spend about 10 hours a week managing our rentals, but I'm not sure if that's enough to qualify.

Yes, property management time absolutely counts toward the 750 hours requirement, so your 10 hours weekly would give you about 520 hours annually. However, that alone wouldn't reach the 750-hour threshold. The bigger issue is that you also need to spend more than half your total working time on real estate activities to qualify as a real estate professional. So if you have a full-time job outside of real estate (say 2,000 hours/year), your 520 hours of property management wouldn't meet the "more than half" test. This is why it's often easier for one spouse to qualify if they're primarily focused on real estate activities.

How do you determine the split between land and building value for depreciation purposes? My county tax assessment breaks it down, but I've heard that's not always the best method.

Thanks for the insider perspective! So would you recommend I just go with my simplified approach for this year since I'm claiming less of a loss than I'm entitled to? Or should I spend the extra money to have everything properly documented transaction by transaction?

If you're claiming less of a loss than you're entitled to, from a practical risk perspective, you're unlikely to face issues. However, from a compliance standpoint, you should report transactions accurately. My recommendation would be to consider using specialized crypto tax software that can handle the volume of transactions correctly rather than manually simplifying. It would give you proper documentation if questions ever arise, and you'd get your full allowable loss. The peace of mind is often worth the investment, especially if you continue crypto trading in future years.

This! It's like getting pulled over by a cop even when you're not speeding. Your heart still races because you start second-guessing everything. "Did I signal that lane change? Is my registration current? Is there a taillight out I don't know about?

This is a good point I hadn't considered! My last US address was in Florida before moving to Germany. I still have my Florida driver's license though it's expired now. Would I still need to worry about state tax issues even though Florida doesn't have state income tax?

You're in a good position having your last residence in Florida since they don't have state income tax. States without income tax (like Florida, Texas, Nevada, etc.) don't generally pursue former residents for tax purposes. The bigger concern is for people from high-tax states like California or New York, where state tax authorities sometimes argue that you never truly "left" if you maintain certain connections. In your case with Florida, as long as you're filing your federal returns properly, you shouldn't have to worry about state tax complications.

This is so true! I got absolutely destroyed on taxes because I had UK investment funds that were classified as PFICs. The forms are ridiculously complicated (Form 8621) and the taxation is punitive compared to US-based investments. I ended up selling all my foreign funds and only investing through US brokerages now.