As someone who's dealt with both unfiled returns and PTO payouts, I'd strongly recommend getting those back tax filings sorted out ASAP before making any decisions about the PTO timing. The IRS has different rules and potential penalties for late filing that could affect your overall tax strategy. For the PTO itself, one thing to consider is your state's tax situation too - some states have different withholding rules for lump sum payments that could impact your decision. Also, if you're planning to use any of that $10k for major purchases or debt payoff, the timing of when you actually receive the cash (after withholding) vs. when you get it back as a refund could matter for your financial planning. Given the complexity with the health insurance subsidies, unfiled returns, and potential salary increase, this might be worth a consultation with a tax professional who can run the numbers for your specific situation rather than trying to figure it all out on your own.

I've been through something very similar with a large PTO payout and unfiled returns. Here's what I learned that might help: First, regarding the withholding vs actual tax liability - you're absolutely right that it evens out when you file. However, there's a cash flow consideration many people miss. If you take the lump sum now, you'll likely have 22% federal plus state withholding taken out immediately, but you won't see that money back until you file your return (which could be months away if you're still catching up on prior years). For the health insurance subsidies, this is actually the biggest factor in your decision. The ACA subsidy cliffs are steep - you could lose thousands in premium tax credits by going just a few hundred dollars over the income threshold. Since you mentioned expecting a salary increase next year, splitting the PTO between December and January might be worth it just to manage your annual income in each tax year. One thing I don't see mentioned yet - since you haven't filed for 3 years, you should know that the IRS stops processing refunds after 3 years. So if you had refunds coming for 2021 or earlier years, you may have lost them permanently. This makes it even more important to get caught up on those filings before worrying about optimizing this PTO payout. My suggestion: handle the unfiled returns first, then use those actual income figures to model out how the PTO timing affects your taxes and subsidies for both this year and next year.

I'm experiencing the exact same issue! My DDD was 2/23 and I'm using Netspend through Pathward as well - still no sign of my refund. I've been checking my account multiple times a day hoping it would magically appear. Called Netspend customer service yesterday and they gave me the same response about no pending deposits showing up. It's really stressful when you're depending on that money for bills and expenses coming due. After reading through everyone's experiences here though, I'm feeling a lot more reassured that this is just typical Pathward timing - seems like they consistently take the full 4-5 business days they're allowed to hold our funds. It's frustrating that they can earn interest on our money during that time while we're left wondering if something went wrong. Thanks for starting this thread - it's comforting to know so many of us are going through the same delay right now with Pathward. Definitely considering switching to a regular bank account next year to avoid this stress!

I'm dealing with the exact same frustrating situation! My DDD was 2/24 and I'm still waiting on my Netspend card through Pathward. It's so stressful when you need that money for bills and expenses. I've called Netspend twice and they keep saying no pending deposits, which just makes me more anxious. But reading through all these comments has been incredibly helpful - I had no idea Pathward was notorious for taking the full 4-5 business days they're legally allowed to hold our funds. It's really annoying that they can earn interest on OUR money while we're left wondering if something went wrong. I've been obsessively checking my account every few hours hoping it'll magically appear! From everyone's experiences here, it sounds like this is just typical Pathward behavior and we need to wait out that full 5 business day window. Definitely switching to a real bank or credit union next year to avoid this stress. Thanks for posting this - it's reassuring to know we're all going through the same Pathward delays right now!

I appreciate everyone sharing their experiences and expertise here! As someone new to this community, I've learned a lot just from reading through this thread. The consensus seems clear that claiming exempt when you know you'll owe taxes isn't worth the legal risk, even if some people have gotten away with it in the past. What really stood out to me was @StarSeeker's audit story - knowing that the IRS has automated systems specifically flagging exempt claims that don't match up with tax liability is pretty sobering. And @Sasha Ivanov's point about the 90%/100% rule for withholding requirements helps explain why the penalties exist in the first place. For anyone else considering the exempt route, it sounds like the smarter play is using the IRS withholding calculator and Form W-4's Step 4(c) to legally reduce withholding while staying compliant. Combined with maximizing 401k contributions and maybe setting up an automatic transfer to a separate tax savings account, you can achieve most of the same cash flow benefits without the audit risk. Thanks to everyone who took the time to explain the real consequences and better alternatives!

I'm glad I found this discussion! I was honestly tempted to claim exempt on my W4 at my new job because withholding always feels like giving the government an interest-free loan, but reading everyone's experiences here has completely changed my mind. The point about it being a legal certification rather than just a tax strategy really hit home. I don't want to risk an audit or penalties just to get a bit more cash flow each month. @StarSeeker's story about getting flagged by automated systems is exactly the kind of real-world consequence that makes you realize it's not worth the gamble. I think I'll follow the advice to use the IRS withholding calculator and adjust my W4 properly using Step 4(c). That way I can still optimize my take-home pay without breaking any rules. Plus the idea of maxing out 401k contributions to reduce taxable income is something I should be doing anyway for retirement planning. Thanks to everyone who shared their knowledge and experiences - this community is incredibly helpful for navigating these tax questions!

To add something different to the QuickBooks discussion - I'm a bookkeeper who works with several self-employed clients. Here's how I recommend handling quarterly estimated taxes: 1) Set up a specific equity account called "Owner's Draw - Tax Payments" 2) When you need to pay taxes, transfer money from business to personal as an owner's draw 3) Pay the taxes from your personal account 4) Track the amounts in a separate spreadsheet so you know how much you've paid toward taxes each year This keeps your business books clean and accurate while still giving you the records you need for tax time. Remember that these payments are NOT business expenses - they're distributions of profit.

I'm looking at my QuickBooks right now and don't have an Owner's Draw account. I only see a bunch of expense categories. How do I add that as an account type? And would this be considered an equity account or something else? Thanks for being patient with my beginner questions!!

As someone who recently went through this exact process, I can't stress enough how important it is to start gathering your preliminary financial statements early. I made the mistake of waiting until the last minute and discovered that one of our brokerage firms needed 10 business days to generate the year-to-date report. Here's what I wish I had known earlier: create a comprehensive asset inventory first, then systematically contact each institution about 6-8 weeks before your planned termination date. For investment accounts, ask specifically for "income and realized gains/losses through [termination date]" rather than just a general statement - this ensures you get the tax-relevant information. Also, don't forget about any automatic reinvestment plans (DRIPs) that might generate small amounts of additional income right up until termination. These often get overlooked but can affect your final tax calculations. One last tip - if your trust has any money market accounts or CDs that will mature after your planned termination date, factor in that accrued interest when calculating your reserves. The preliminary statements often don't capture interest that's earned but not yet paid, which can create surprises later.

I'm in a very similar boat as the original poster - dealing with trust termination pressure from beneficiaries while trying to handle the tax complexities properly. Reading through all these responses has been incredibly helpful, especially the practical tips about contacting brokerage firms directly for preliminary statements. One additional consideration I haven't seen mentioned yet: if your trust has any foreign investments or accounts, the reporting requirements can get significantly more complex with a short-year return. I discovered our trust had a small position in a foreign mutual fund that required additional forms (8621 for PFICs) that I wasn't prepared for. The fund company couldn't provide the detailed income breakdown I needed for the short-year period, which ultimately delayed our termination by several months. Also want to echo the advice about strategic timing. We initially planned to terminate in early November but shifted to late December after realizing we'd miss out on some year-end capital loss harvesting opportunities that significantly reduced our overall tax liability. Sometimes waiting those extra few weeks can save thousands in taxes, which more than justifies the additional administrative burden. For anyone considering this route, I'd strongly recommend creating a detailed timeline working backwards from your target termination date. Include time for: gathering all statements (8-10 weeks), CPA review and planning (4-6 weeks), beneficiary notices if required by your trust document (varies), and a buffer for unexpected complications (2-4 weeks). Better to plan conservatively and finish early than rush the process and make costly mistakes.