This! I had Robinhood show completely wrong basis amounts for some options I exercised last year. How do you correct this on your tax forms if the 1099 is wrong?

You need to file Form 8949 and check box C for short-term transactions with incorrect basis. Then you'll list the transaction as reported on your 1099-B, but you'll make an adjustment in column g to correct the basis amount. In the code column, you'll enter "B" which means that the basis was reported incorrectly by the broker. Keep detailed records of your actual trade confirmations showing the correct basis in case you're ever audited. It's definitely more work, but it ensures you're not overpaying taxes because of broker reporting errors. Most tax software has a way to enter these adjustments, though it's not always obvious where to find that section.

Robinhood's tax docs are still a mess. I switched to TDA and it's night and day difference. Their reporting actually makes sense and properly tracks wash sales.

Thank you for this clear explanation! That makes sense about separating the academic period from when I actually paid. I guess I'll have to wait until next year to claim that big payment. Do you know if there's any limit to how much tuition I can claim next year? Since I'll have both semesters' worth of payments potentially in the same tax year?

You're welcome! For education credits, there are annual limits regardless of how many semesters you're paying for. The American Opportunity Credit has a maximum of $2,500 per eligible student per year, based on the first $4,000 of qualified expenses. The Lifetime Learning Credit maxes out at $2,000, based on 20% of up to $10,000 in qualified expenses. So even with multiple semesters' payments falling in the same tax year, you'll still be subject to these annual limits. What's important is maximizing your eligible expenses up to these limits each tax year. If you have flexibility in when you make payments around December/January, you can sometimes time them to optimize your credits.

This is such an important point! My parents and I double-claimed education expenses one year and it was a huge headache to fix. You also need to make sure you're not claiming the expenses if someone else paid them.

Thank you for that tip about separate envelopes! I definitely would have put them all in one package thinking I was being efficient. Did you receive any kind of confirmation when they received/processed the returns? I'm worried about them getting lost in the mail.

You should definitely send them certified mail with return receipt requested through USPS. That way you'll get confirmation they were delivered. As for processing, it took about 4-5 months before we saw any activity - they're very slow with paper returns. Eventually, we received notices for each return - either bills for what was owed (with penalties) or notices about refunds. If you're really concerned, you can check your husband's IRS transcript online about 6-8 weeks after sending them to see if they show as processed.

Yep, this is correct. I worked for a tax firm and we had clients who lost out on thousands in refunds because they waited too long. The 3-year rule for refunds is strict, but the IRS can come after you for taxes owed for much longer!

Wait, this sounds serious. I don't have signature authority on any accounts in Ecuador, but since I'm sending money and receiving profits, could that count as having a "financial interest"? How would I know if I need to file this FBAR thing?

The definition of "financial interest" can be broad. If you have an arrangement where you're entitled to profits from the business, the IRS might consider you to have a financial interest in the accounts, even without signature authority. The safest approach would be to consult with a tax professional who specializes in international reporting. But generally, if you're investing in a business and receiving returns based on performance, you likely have a financial interest. If the total of all foreign accounts you have an interest in exceeds $10,000 at any point in the year, you'd need to file the FBAR. You might also need to look into Form 8938 (Statement of Specified Foreign Financial Assets) depending on the amounts involved. These are separate from your tax return and have different filing requirements and deadlines.

That approach could create more problems than it solves. The IRS looks at the substance of transactions, not just what you call them. If there's a pattern of you investing money and then receiving returns that correlate with business performance, relabeling them as "gifts" could be seen as tax evasion. While non-US persons can give gifts to US citizens without triggering gift tax for the recipient, unusual patterns of large gifts might trigger extra scrutiny. If audited, you'd need to prove these were genuine gifts with no expectation of return, which contradicts the investment arrangement described.

What about for a single-member LLC? Are the rules any different since it's a disregarded entity for tax purposes? Could I take loans from my business more easily?

For a single-member LLC that's a disregarded entity, the situation is actually quite different. Since a disregarded entity is treated as the same taxpayer as you for federal tax purposes, technically you can't loan money to yourself - it would be like taking money from one pocket and putting it in another. The business funds are already considered your funds from a tax perspective, so there's no tax advantage to structuring withdrawals as loans. You're already being taxed on the business profits regardless of whether you withdraw the money or not (via Schedule C on your personal return). That said, for proper bookkeeping and to maintain the liability protection of your LLC, you should still document any personal withdrawals properly. If you're mixing business and personal funds without documentation, you risk piercing the corporate veil in legal situations.

Completely different. The billionaire strategy works because they're borrowing from a third party (bank or broker) using assets as collateral. They're not taking money directly from their companies without taxation. When Musk or Bezos get liquidity, they either: 1) Take loans from banks using their stock as collateral (legitimate third-party loans), 2) Sell shares and pay capital gains tax, or 3) Receive salaries/compensation that are taxed as income. The "loan" from your own business isn't actually a loan in the IRS's eyes unless it meets very specific criteria that most small business owners don't satisfy. Otherwise it's just income/distribution with extra steps.