I hadn't even considered the trust angle! Do you know what specific features of your Malaysian policies triggered the 3520 requirements? Were they whole life policies with investment components or something else? This adds a whole new layer of complexity I need to look into.

My policies were whole life with investment components, but what triggered the 3520 requirements was the specific contractual structure. The policies were technically held in a separate account managed by trustees, even though I was the beneficiary. Some Asian insurance companies use trust structures for tax efficiency in their local markets, not realizing it creates a nightmare for US taxpayers. Look for any mention of "trust," "trustee," or separate legal entities in your policy documents. If your partner directly owns the policies in their name, you might be safe from 3520 requirements, but if there's any intermediary entity, that's a red flag.

Unfortunately, your Hong Kong advisor is likely applying HK tax rules, not US ones. The US-HK tax agreements don't provide the protection they're suggesting. For US tax purposes, foreign life insurance policies rarely qualify for the same tax-deferred treatment as US policies. The annual growth (inside buildup) of cash value in foreign policies is generally taxable phantom income for US taxpayers unless the policy meets strict requirements under IRC 7702. Almost no foreign policies meet these requirements since they're designed for their local markets. Your accountant is probably right about reporting the growth.

Did you find any brokers that would accept the arrangement? I'm curious which ones actually allow this type of setup, even if they're not the best platforms.

I found a few smaller brokers in places like Belize and Vanuatu that would accept the setup, but their platforms were terrible compared to what I was used to. Delayed quotes, wide spreads, and sketchy withdrawal processes that sometimes took weeks. One broker I tried had such bad execution that I calculated I was losing about 3-4 pips on every trade just from slippage. When you're trading frequently, that adds up to more than what you'd save in taxes, even if the setup were legal (which it isn't).

That's really interesting! I hadn't considered futures. Does this apply to currency futures specifically? And would I need to make any special elections on my tax return to get this treatment?

Yes, currency futures specifically get the 1256 treatment. Regular spot forex doesn't qualify unless you make a specific election under Section 988 to treat it as capital assets, and even then it doesn't get the 60/40 split that futures get. You don't need to make any special elections for futures - they automatically qualify for the 60/40 treatment. Your broker will send you a 1099-B showing your futures trades, and you'll report them on Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles). The tax software handles the split automatically.

I've been using FreeTaxUSA for 3 years now. No complaints and saved a ton of money. Do they still let you import your previous TurboTax returns? That was the feature that convinced me to switch initially since I didn't have to re-enter everything.

Yes, they still allow you to import previous returns including ones from TurboTax. That's what made switching so easy. You just upload your PDF from last year and it pulls most of the information automatically. You still have to review everything of course, but it saves a ton of time compared to starting from scratch. The interface definitely isn't as polished as TurboTax but all the same features are there, just organized a bit differently. Took me maybe an extra 15 minutes to get used to it, but considering I saved about $50 compared to what TurboTax wanted to charge me, it was totally worth it.

$250 seems really reasonable for full service. Does your accountant e-file for both federal and state? And do they handle more complex situations like self-employment or investment income?

What are the actual rules for being claimed as a dependent? I moved out halfway through last year (July 2024) but my parents paid for my health insurance all year. Can they still claim me even though I'm financially independent now?

For your situation, it depends on several factors. The main tests for a qualifying child dependent are relationship, age, residency, support, and whether you file a joint return. For the age test, if you're under 19, or under 24 and a full-time student for at least 5 months of the year, you could qualify. The residency test requires living with your parents for more than half the year, but temporary absences for education count as time lived with them. The most important factor is usually the support test - if you provided more than half of your own support (rent, food, clothing, medical, etc.), then your parents cannot claim you, regardless of health insurance.

I've used both and prefer FreeTaxUSA. Credit Karma (now called Cash App Taxes) is completely free for federal AND state, while FreeTaxUSA charges for state filing. But I found FreeTaxUSA's interface more intuitive and their explanations clearer. Also had better luck with their customer service when I had a question. If you only have W-2 and student loan interest, either will work fine honestly. Just pick one and go with it!

Are there any downsides to paying taxes with a credit card? I've always been told to avoid it but never understood why.

The main downside is the processing fee - it's about 2% of your total payment. So on a $2700 tax bill, you'd pay around $54 extra just for using a card. The IRS doesn't charge this fee directly, but they use payment processors who do. The other potential issue is falling into credit card debt. If you put taxes on a card and can't pay it off fairly quickly, you could end up paying way more in credit card interest than you would with an IRS payment plan (which typically has a lower interest rate). However, if you have a card with a 0% intro period and you're confident you can pay it off during that time, it can be a reasonable strategy.

Yes! I did this last year and it worked great. Just attached Form 9465 to my return, proposed a monthly payment I could afford, and got approval in about 3 weeks. Much easier than dealing with their website or phone system.