Is that always true though? I thought there were exceptions based on how many days you rent it and personal use days? The whole 14-day rule and all that?

That approach could potentially create even bigger problems. The IRS looks at the substance of transactions, not just the form. If they determine the arrangement is actually a disguised below-market rental, they could disallow your rental expense deductions AND potentially treat the "gifts" as taxable rental income that you failed to report. Additionally, regular monthly gifts that coincide exactly with rent payments would look suspiciously like a tax avoidance scheme. It would be hard to argue these are genuine gifts rather than just a way to circumvent the Fair Market Rent rules. I'd strongly advise against this approach.

Ah, I see. I didn't realize the IRS would look at the whole picture like that. Makes sense though - it would be pretty obvious what was happening if the gifts lined up exactly with rent payments. Thanks for explaining!

That's a really good point I hadn't considered. I probably spent 15 hours last year just on my taxes, and that was before all these complications. Do you know if tax preparation fees are tax deductible?

Unfortunately, tax preparation fees aren't deductible for individuals anymore since the 2017 tax law changes. However, if you have a business (which you do with your craft sales), you can deduct the portion of tax prep fees related to your business on Schedule C. So if your tax preparer charges $400 and roughly 30% of your return complexity is from your business, you could deduct about $120 as a business expense. Make sure they break down their fee so you can document this properly!

This is terrible advice. I thought the same thing until I got audited last year. Turns out I'd been incorrectly handling my home office deduction for my side business for 3 years. Ended up owing $3,200 in back taxes plus penalties. A $400 tax pro would have saved me thousands.

I registered it as what they call an "individual enterprise" in Turkey, which is basically their version of a sole proprietorship. There's no separate legal entity - the business and I are the same for liability purposes. Does that change anything about how I should approach the US tax side?

That's good news! If it's truly equivalent to a US sole proprietorship with no separate legal entity status, then you're on the right track with Schedule C reporting. Just make sure you keep documentation showing the legal status in Turkey in case of any IRS questions. Just be aware that as your business grows, you might want to consider the implications of potential liability exposure since you're personally liable for the business. Many people with foreign operations eventually set up an LLC in the US that owns the foreign business operations to create some liability protection while still maintaining pass-through tax treatment.

I used TurboTax Self-Employed last year for my Canada-based consulting business and it handled the Schedule C foreign expenses fine. You just enter everything in USD after converting the amounts yourself. The software doesn't help with the currency conversion or FBAR filing though - you have to handle that separately.

Thanks for the tip about checking for quarterly payments! I actually did make two estimated payments last year that I almost forgot about. I'll definitely compare the forms side by side. Do you know where specifically I should look to see how each program is handling my self-employment income?

You'll want to look carefully at Schedule C (Profit or Loss From Business) on both returns. That's where your self-employment income and expenses are reported. Pay special attention to Part II where expenses are listed - sometimes one software will find more deductible expenses than another. For self-employment tax specifically, check Schedule SE (Self-Employment Tax). This is where you'll see if the program is calculating SE tax on the correct amount of income. The SE tax should only apply to your net profit from self-employment, not your W-2 wages.

I've also seen cases where one software detects certain tax credits automatically while others make you manually enter the information. Especially education credits, child tax credits, and earned income credit. Worth checking those too!

Absolutely correct! The free versions especially can miss credits if you don't know to look for them. The Earned Income Tax Credit is particularly valuable if you qualify, but the software might not automatically check eligibility unless you answer certain questions correctly. Also, different software might handle state taxes differently, which can affect your overall tax picture. Some states have specific deductions or credits that certain free software versions might miss completely.

I appreciate the suggestion! In this case, I actually paid the hospital directly rather than gifting money to my dad, but that's good to know for future reference. Would it have made any difference tax-wise if I had sent him the money first and then he paid the hospital? Or is the end result the same either way?

The end result would be exactly the same tax-wise. Whether you pay the hospital directly or give your father the money to pay, the IRS views it the same way - as a gift to your father. Neither approach would give you a tax deduction. The only practical difference is that paying directly ensures the money is used for its intended purpose, and sometimes hospitals offer cash discounts or payment plans when working directly with them. But from a tax perspective, there's no advantage to either approach.

This sounds like tax fraud. You can't just claim personal expenses as business expenses by making up fake work. The IRS specifically looks for this kind of thing in audits.