1 Thanks for mentioning this! I just checked and her unemployment benefits were about $3100, so it looks like we'll need to use Form 8615 after all. When I use her total income ($2600 earned + $3100 unearned) to figure out her tax bracket, do I use that combined amount? Or does the kiddie tax calculation separate them?

7 The kiddie tax calculation does separate earned income from unearned income. Her $2600 from the mall job is taxed normally at her own tax rates. For the unemployment benefits of $3100, the first $1,150 is tax-free, the next $1,150 is taxed at her rate, and only the remaining $800 would be taxed at your parents' rate. Form 8615 walks you through this calculation step by step. You'll need your parents' tax info though, specifically their taxable income and tax amount from their return, to complete the form. This is why it gets complicated - you're essentially calculating part of her tax using their information.

8 The regular unemployment benefits count as unearned income and would be reported on Form 8615. However, the stimulus payments (economic impact payments) were technically advance tax credits and are NOT considered income at all - neither earned nor unearned. Those don't get reported as income on the tax return.

Does this Social Security benefit apply even if both spouses work their whole careers? I thought that only mattered if one spouse didn't work much or at all.

Yes, it can still matter even if both work their full careers. Each person gets their own benefit based on their earnings, but they're also entitled to 50% of their spouse's benefit if that amount is higher than their own. So if one person consistently earned more, the lower-earning spouse could potentially get a higher benefit through the spousal benefit. It also matters tremendously for survivor benefits. If one spouse passes away, the surviving spouse can switch to the deceased spouse's full benefit amount if it's higher than their own. Unmarried partners don't have access to this option regardless of how long they've been together.

This is really helpful. Question though: for education credits, do both parents' incomes count anyway if they both claim the child as a dependent in alternating years (even if unmarried)? Or does it only look at the income of whoever claims the child that year?

Thanks for this suggestion! Did you have to provide any special documentation when you submitted Form 911? And did you end up getting your refund in a reasonable timeframe after the advocates got involved?

You need to provide a copy of the 5071C letter and explain your unsuccessful attempts to resolve through normal channels (keep notes of dates/times you tried calling). I also included copies of my photo ID and Social Security card, which sped things up. I did eventually get my refund, but it wasn't quick - took about 10 weeks after the Taxpayer Advocate got involved. Still better than not getting it at all! They told me identity theft cases require extra processing time even after verification. The important thing is they stopped the fraudulent return and protected my tax account from further issues. They also added extra security to my account for future years.

I second this approach! I had a CP01A identity verification issue (similar to 5071C) and my Senator's office was incredibly helpful. They have dedicated staff who deal with IRS issues all the time. Just go to your representative's website and look for "constituent services" or "casework" - most have an online form specifically for federal agency issues.

I did charge a small interest rate (like 2%) but I never actually reported it on my taxes since he never made any payments. Should I go back and amend those previous returns to show the interest I SHOULD have received, even though I didn't get it? Would that help my case or just complicate things?

You don't need to amend previous returns to report interest you never received. In fact, doing so might raise red flags. What matters is that you had a legitimate expectation of being repaid with interest, which your loan agreement should show. The IRS follows the concept of "constructive receipt" - you only need to report income when you actually receive it or have unrestricted access to it. Since you never received any interest payments, there was nothing to report. Just focus on documenting that this was a genuine loan with the expectation of repayment, and that the debt has now become worthless.

Yes, that's right. Non-business bad debts are treated as short-term capital losses, which means they're subject to the capital loss limitation ($3,000 per year against ordinary income). However, if OP has any capital gains in the same year, the loss would first offset those gains. Any remaining loss can be carried forward indefinitely to future tax years. So if OP has no capital gains, it would take about 16 years to fully utilize the $47,000 loss. But if they have capital gains in future years, they could use more of the loss carryforward each year to offset those gains without the $3,000 limitation.

I completely forgot about those monthly payments from before! That makes so much sense now. Do you think I should adjust my withholding for this year to get more back next time?

If you want a larger refund next time, you can certainly adjust your withholding. Submit a new W-4 to your employer requesting additional withholding on line 4(c). Even an extra $50 per paycheck would give you about $1,200 more in your refund next year. Just remember that a refund is essentially an interest-free loan you're giving to the government throughout the year. Some financial advisors might suggest instead putting that extra withholding into a savings account yourself each month. But I completely understand the psychological benefit of getting a larger refund - many of my clients prefer it as a form of "forced savings.

She might not qualify for the full EIC with her income level. For 2024 filing season, EIC starts phasing out around $42,000 for a single parent with 2 kids. Her $42,800 main job plus $5,300 freelance puts her at $48,100 total income, which could reduce the EIC significantly.