Anyone using TurboTax for calculating their adoption tax credit? I'm finding it really confusing to enter all the different expenses, and it's not clear how to handle expenses that got partially reimbursed through our employer's adoption assistance.

As someone who just finalized an adoption last month, I wanted to share a few things that caught me off guard with the adoption tax credit. First, keep EVERY receipt - even seemingly small ones like notary fees and certified mail costs add up. Second, if you're doing a domestic adoption and it falls through, you can still claim expenses for that failed adoption attempt on your taxes, which I had no idea about until my tax preparer told me. One thing I wish I'd known earlier - photograph or scan all your receipts immediately because some of ours from the adoption agency faded over the 18-month process. Also, if you're traveling for court dates or to meet the child, keep detailed records of mileage, hotels, and meals. We were able to claim almost $1,800 in travel expenses we initially thought might not qualify. The income phase-out limits are pretty high ($263,410-$303,410 for 2024), so most families don't need to worry about that, but it's worth checking. Good luck with your adoption journey - it's so worth it in the end!

Don't forget about state taxes too! Depending on your state, you might owe additional money there. Some states are pretty tax-friendly for self-employed people but others will take another good chunk.

Welcome to the self-employment tax shock club! I'm a freelance graphic designer and went through the exact same thing my first year. That $6,700 on $37k taxable income is actually pretty typical - you're looking at about 18% effective rate which includes both income tax and self-employment tax. The self-employment tax is the killer - that extra 15.3% for Social Security and Medicare that your employer used to pay half of. When I finally understood that breakdown, it all made sense why the bill was so high. For next year, definitely start making quarterly payments. I use the IRS's safe harbor rule - pay 100% of what I owed the previous year divided by 4. That way even if I have a good year and owe more, I won't get hit with penalties. Also consider opening a separate tax savings account and automatically transfer 25-30% of every payment you receive. Treat it like money that's already gone. It's painful at first but beats the April panic! Hang in there - it gets easier once you adjust your mindset and systems!

Has anyone mentioned the option of maxing out your 401k contribution from this bonus to defer some of the taxes? If you haven't already hit your annual contribution limit, you might be able to direct a portion of this bonus (up to the annual max) into your 401k, which would reduce the immediate tax hit.

Another consideration for a bonus this large - you might want to think about charitable giving strategies if that's something you're interested in. With a $1.3M bonus pushing you into the highest tax brackets, charitable deductions become extremely valuable. You could potentially set up a donor-advised fund or make direct charitable contributions before year-end to offset some of the tax burden. Even if your employer withholds at the mandatory rates, strategic charitable giving could help reduce your overall tax liability when you file. Just make sure to keep detailed records and consider bunching multiple years of charitable giving into this high-income year to maximize the benefit. A tax professional who specializes in high-income situations would be invaluable for planning something like this.

I'm confused by some advice here. My accountant told me ANY 1099-NEC income HAS to be reported on Schedule C as business income, no exceptions. He said the IRS automatically matches 1099-NECs with Schedule C filings and you'll get flagged if you put it on Schedule 1 instead. Am I missing something?

As someone who's dealt with similar confusion, I'd recommend being really careful about whose advice you take here. I see people recommending various tools and services, but honestly, the IRS publication 535 (Business Expenses) has a clear section on hobby vs. business that's free and official. The key question is: are you engaged in this activity with the genuine intent to make a profit? Based on your description - playing once a month for enjoyment, not actively seeking more gigs, not depending on the income - this really does sound like hobby income to me. If you classify it as hobby income on Schedule 1, you'll avoid self-employment tax but you also can't deduct any related expenses. Given that you're not trying to deduct expenses anyway, this seems like the most straightforward approach for your situation. Just make sure whatever you decide, you're consistent. If you call it a hobby this year, don't suddenly switch to business next year unless your behavior actually changes (like if you start actively marketing your services or depending on the income).

I just went through this last year. The most important thing is timing - if the annuity company already cut the check to the estate with 20% withholding, unfortunately you've likely lost the ability to do any kind of inherited IRA rollover. The distribution to the estate is considered the taxable event. Remember that on the 1041, you'll report the FULL amount of the annuity as income (including the 20% withheld), and then show the withholding as a credit. When the estate distributes the money to you, you'll receive a K-1 showing your share of the estate's income, deductions, etc. One potential silver lining - check if the deceased had any unrecovered investment in the annuity contract. If they made after-tax contributions to the annuity, a portion of the distribution might be non-taxable return of basis.

I'm dealing with a very similar situation right now with my aunt's estate. One thing that might be worth exploring - and I'm not sure if this applies to your specific case - is whether the annuity company properly followed the required distribution procedures when there's no named beneficiary. In some cases, if the annuity company didn't give proper notice to potential beneficiaries or follow state law requirements for estate distributions, there might be grounds to challenge the distribution method. I've heard of situations where this led to the ability to "undo" the estate distribution and have it paid directly to the heir instead. You might want to review the annuity contract terms and your state's laws about how these distributions should be handled. If there were procedural errors, it could potentially open up options that wouldn't normally be available once the money hits the estate. Also, make sure you're not missing any deadlines for estate tax elections or other time-sensitive decisions. Some states have different rules about inherited annuities that could affect your tax situation.