Wait, there's ANOTHER form beyond FBAR and 8938?? How many of these things do we need to file for foreign money? And does the $100,000 threshold apply to inheritances too or just gifts?

Yes, Form 3520 is specifically for reporting large foreign gifts and inheritances exceeding $100,000 from a nonresident alien (like your foreign father). It's separate from the FBAR and Form 8938, which are specifically for reporting the foreign accounts themselves. The $100,000 threshold absolutely applies to inheritances as well as gifts. Many people miss this form because they focus on the FBAR requirements but don't realize gift/inheritance reporting is separate. The penalty for not filing can be 5% of the gift amount per month up to a maximum of 25%, which on your inheritance could be substantial.

I used H&R Block's expat services for an inheritance from Ireland, and it was decent but expensive (around $800). They were familiar with FBAR and Form 8938 but honestly didn't seem super knowledgeable about the specifics of Irish inheritance rules.

Is there any resource that lists which states have these additional local requirements? I'm trying to be proactive but there's so much conflicting info out there.

There's no perfect single resource that I've found, but the Sales Tax Institute has a good overview of "home rule" states where local jurisdictions can administer their own sales taxes. Colorado, Alabama, Louisiana, and Alaska are the major ones to watch for. Arizona and Idaho also have some local peculiarities. The worst offender is definitely Louisiana with over 60 different local tax authorities. When you register with the state, they'll usually provide information about local requirements, but it's easy to miss if you're not paying attention to all the documentation they send.

I've used both. Avalara is more comprehensive but also more expensive and complicated to set up. TaxJar is more user-friendly for smaller businesses but might not have some of the advanced features. For just tracking economic nexus thresholds, both do a decent job, but I found TaxJar's alerts about approaching thresholds to be more helpful.

Thanks for the insight! I think TaxJar might be better for me then since I'm not that big yet. Did you find it integrated well with your existing systems? I'm using Shopify and QuickBooks.

Do you know if VITA volunteers are actually good at finding deductions? I'm always worried free services might miss something that would save me money.

VITA volunteers are actually really well-trained - they're certified by the IRS and many are accounting students or retired tax professionals who volunteer their time. In my experience, they're very thorough about finding deductions and credits. The main limitation with VITA is they can't handle super complicated tax situations like multiple rental properties or complex business returns. For a typical W-2 worker with some basic deductions and credits, they're excellent and often catch things people miss when filing themselves.

Do they have a good review process at the end? TurboTax has that "accuracy guarantee" thing that always made me feel safer using them, even though it's expensive.

Thanks for bringing this up! I am actually above the income limit for deductible contributions, so I'll definitely need to file Form 8606. Do I still report the recharacterized amount ($5,300) on that form, or do I need to use the original $6,000?

You would report the recharacterized amount ($5,300) on Form 8606 since that's what actually went into your Traditional IRA. This becomes your basis in the Traditional IRA for future distributions or conversions. Form 8606 is really important in your situation because it establishes that you've already paid tax on this money. Without it, you could end up being taxed twice on the same funds when you eventually withdraw them.

I agree. The fact that the 5498 only shows the recharacterized amount ($5,300) is exactly right. The IRS treats this as if you had contributed $5,300 to the Traditional IRA from the beginning. The $700 loss is just part of the investment experience, not an excess contribution that needs to be withdrawn.

Thank you so much for this - especially the naming convention! That's exactly what we've been confused about. The custodian kept talking about "reregistering" the account and we weren't sure if that was the right thing. Is there a specific form we should ask for to make this transfer happen correctly?

You'll want to ask the custodian for their "Inherited IRA Successor Beneficiary" form or sometimes it's called a "Death of Beneficiary" form. Each institution has slightly different paperwork, but those terms should help them find the right forms. Your mother-in-law will need to provide a copy of your father-in-law's death certificate and possibly his original inherited IRA paperwork. Be very specific that this is a successor beneficiary situation for an already-inherited IRA, not a new inheritance. If the person you're speaking with seems confused, ask to talk with their inherited IRA specialist - most larger institutions have people who specifically handle these more complex scenarios.

This is such an important point. My family got caught in this exact situation - my uncle passed in 2018 (pre-SECURE Act), then his beneficiary (my cousin) passed in 2022. The financial institution tried to apply the post-SECURE Act 10-year rule to the successor beneficiary, which was incorrect. The original inheritance date is what matters.