Thank you for this really practical perspective on the estate administration side! The idea of treating the payments as "advance distributions" and documenting them properly in the final estate accounting sounds like a much more manageable approach than trying to claw everything back into estate accounts. Your point about potentially avoiding Form 1041 altogether is especially helpful. Since there really is no other estate income and we're essentially just passing through what should have been direct inheritance anyway, it makes sense that proper documentation might be more important than formal estate tax filings. I'm definitely leaning toward getting professional help at this point. Between the interstate tax issues, the estate administration complexities, and the installment sale technical requirements, there are just too many ways to make costly mistakes. The investment in a specialist seems worth it to avoid potential penalties or audit issues down the road. Do you happen to remember roughly what you paid for professional help with your similar situation? I'm trying to budget for this and want to make sure I'm setting realistic expectations for the cost of getting everything handled properly.

For professional help with my inherited installment note situation, I ended up paying around $2,800 total - $1,200 for the initial estate consultation and tax planning, then another $1,600 for preparing all the necessary returns (estate final return, personal returns for three beneficiaries, and non-resident state returns). It felt expensive upfront, but it was absolutely worth it. The specialist caught several issues I would have missed, including a depreciation recapture component that applied to part of the original business sale that would have been costly to get wrong. They also helped structure the final estate distributions in a way that minimized ongoing compliance requirements. One money-saving tip - if you do go the professional route, try to find someone who can handle both the estate administration aspects AND the ongoing tax implications in one engagement. I initially tried to split this between my regular CPA and an estate attorney, but having someone who understood both sides saved time and reduced the overall cost. Also, many estate tax specialists will give you a flat fee quote upfront if you can provide them with all the relevant documents (original sale agreement, recent tax returns, estate inventory, etc.). This helps avoid surprise bills and lets you budget properly.

Great question about the multiple beneficiaries and Form 6252! Each beneficiary typically needs to file their own Form 6252 showing their proportional share of the installment payments. So you'd file one showing your 40% share, your sister would file one for her 35%, and your brother for his 25%. The total across all three forms should equal 100% of the payments received. However, you'll all be using the same basic information from the original sale (gross profit percentage, contract price, etc.) - just applying it to your respective shares. Make sure you coordinate with your siblings so everyone is using consistent numbers from the original 2020 sale agreement. Regarding the potentially improper Form 6252 filing in 2020, this is definitely something to address with a professional. If the installment election wasn't made properly, there might be ways to make a late election or amend the original return, but the rules are very specific and missing deadlines could be costly. You're absolutely right about professional help being almost mandatory for these situations. Between the multi-state issues, potential problems with the original filing, and coordination needed among multiple beneficiaries, the complexity really does justify the cost. Plus, if one person makes a mistake, it could potentially affect all the beneficiaries' tax situations.

The tuition and fees deduction was eliminated after 2020. It's no longer available for tax years 2021 and beyond. Credits are now the only education tax benefit for most students.

This is incredibly helpful, thank you! I hadn't thought about having my parents call the IRS directly to ask about credits claimed for my SSN - that's a great workaround if I can't get access to their old returns. Your point about timing is spot on too. I'm planning to take a full course load in 2024 and 2025, so I'll definitely have enough qualified expenses to max out the credit if I have any AOTC years remaining. One quick follow-up question - when you mention "required course materials," does that include things like a graphing calculator or laptop that's required for a specific program, or is it more limited to textbooks and basic supplies?

can u explain more about this bunching strategy? not sure i understand how that would help with claiming gambling losses. does this actually work with the irs?

The bunching strategy works because it helps you cross the threshold where itemizing becomes more beneficial than taking the standard deduction. Let's say your standard deduction is $13,850 but your itemized deductions including gambling losses only total $11,000. In this case, taking the standard deduction is better, but you lose the benefit of the gambling loss deduction. However, if you normally donate $3,000 to charity each year, instead you could donate $6,000 this year and $0 next year. Now your itemized deductions are $14,000 ($11,000 + extra $3,000), which exceeds the standard deduction. This allows you to benefit from deducting your gambling losses. The next year, you'd take the standard deduction since you wouldn't have charitable contributions to itemize. The IRS allows this strategy completely - there's nothing questionable about timing your legitimate charitable contributions to maximize tax benefits.

Thanks for the exact location! I've been searching for ages. What confuses me is I've entered my W-2G forms but the winnings amount shown in FreeTaxUSA doesn't match my actual winnings. Do you know why that might be?

@Arjun Patel The discrepancy between your W-2G forms and what FreeTaxUSA is showing could be due to a few reasons. First, make sure you ve'entered all your W-2G forms - sometimes people get multiple forms from different casinos or gaming sessions. Second, check that you ve'entered the amounts correctly from Box 1 winnings (on) each W-2G. Another possibility is that you might have other gambling winnings that weren t'reported on W-2G forms. Casinos are only required to issue W-2Gs for certain types of winnings above specific thresholds like ($1,200+ from slot machines or $5,000+ from poker tournaments .)You re'still required to report ALL gambling winnings even if you didn t'receive a form for them. Double-check your entries and make sure you haven t'missed any forms or accidentally duplicated any entries.

Do you have a template of this spreadsheet you could share? I'm terrible at creating these things from scratch but realize I should be tracking this better.

You're absolutely right about potentially overpaying! I made the same mistake my first year and ended up paying taxes on income I never actually received. When I went back and corrected it, I was able to claim a decent refund on my amended return. The IRS Form 1040X is what you'll need if you want to amend previous years - just make sure you have all your refund documentation ready. It's definitely worth doing if the amounts are significant enough to make a difference in your tax liability.

Omg thank you for this reminder! I use both PayPal and Square for client payments, and definitely would have forgotten to update them. Do you know if there's a specific time I should make these updates? Like should I wait until the start of a new tax year or do it immediately after getting the new EIN?

I'd recommend updating them as soon as your LLC is fully operational and you're ready to switch your business activity over to the new entity. The cleanest approach is to make a clear cutoff - for example, as of July 1, all new business runs through the LLC with its new EIN. If possible, doing this transition at the beginning of a calendar quarter makes your accounting cleaner. But the most important thing is to communicate clearly with your payment processors about the change and keep meticulous records of when the switch happened, so you can properly allocate income between your sole prop and LLC for tax purposes.

This is really reassuring to hear from someone who just went through it! I was worried about the timing aspect - like what happens if there's a gap between when I stop using my sole prop EIN and when I get the new LLC one. Good to know I can keep operating during that transition period. Quick question - when you say "make the switch before filing your next tax return," do you mean I need to have everything switched over by December 31st for this tax year? Or can I make the change partway through the year and just split the income appropriately on my returns?