Can we talk about how ridiculously complicated this whole process is? I mean, why on earth do they use cryptic codes like BP and 8B instead of just clearly stating what each distribution is? And why doesn't tax software correctly handle these common situations? I had a similar issue last year with an excess contribution to my Roth IRA (different from your 401k situation but similar principle) and ended up paying hundreds to a CPA just to fix what should be straightforward. The tax code is deliberately made confusing so that average people mess up and either overpay or have to hire expensive help.

I just went through this exact situation with my Roth 401k excess contributions! The confusion is totally understandable - these distribution codes are incredibly confusing even for tax professionals. Here's what I learned after dealing with this mess: You're absolutely right that you don't need to amend your 2020 return. The BP-coded distribution represents the return of your already-taxed Roth contributions, so it shouldn't be taxable in 2021 either. The 8B-coded distribution is the earnings on those excess contributions, which IS taxable in 2021. The tricky part is getting TurboTax to handle this correctly. What worked for me was: 1. Enter both 1099-Rs as normal 2. For the BP form, look for an "override" or "adjust" option when TurboTax tries to add it to taxable income 3. Force the taxable amount to remain $0 for the BP distribution 4. Let TurboTax handle the 8B form normally since it's correctly treating that as taxable One thing that helped me understand this better was realizing that when your plan fails ADP testing (which sounds like what happened to you), they have to return contributions even from non-highly compensated employees to bring the plan back into compliance. It's not your fault - it's a plan-wide issue. Don't skip reporting the BP form entirely - you need to report it but ensure it's not taxed twice. The IRS expects to see both 1099-Rs on your return even if one isn't taxable.

Don't forget to check your state tax rules too! Some states have more generous casualty loss provisions than federal, especially for declared disasters. In my state, we were able to deduct 100% of our hurricane losses on our state return even though we couldn't on the federal return because of the AGI limitation. Saved us about $300 on state taxes.

I went through this exact same situation with my fence after Hurricane Ian a couple years ago. One thing that really helped me was documenting the original installation cost and age of the fence - the IRS agent I spoke with said this was crucial for calculating the basis. Since you paid $3,900 for replacement and didn't file insurance, make sure you keep those contractor receipts. Also, if you can find any records of what you originally paid for the fence installation, that will help with the fair market value calculations Sofia mentioned. The federally declared disaster area status is definitely beneficial - it gives you that option to amend last year's return if it results in a bigger refund. I ended up doing that and got money back within about 8 weeks, which was much faster than waiting for this year's filing season. Just make sure to write "Hurricane Milton" on your return so the IRS knows it's disaster-related.

Has anyone considered the potential red flags of someone wanting to pay such a large amount upfront? In some cases it could be completely innocent, but I've heard of people using rent payments to launder money. Might be worth asking why they want to pay it all upfront.

I'd also suggest getting references and doing a thorough background check if you haven't already, especially with such a large upfront payment. Legitimate tenants who want to pay in advance usually have good reasons - like they're relocating for work, received a windfall, or just prefer the convenience of not dealing with monthly payments. One practical tip: consider asking for the payment via bank transfer or certified check rather than cash, and make sure you provide a detailed receipt that breaks down exactly what months the payment covers. This creates a clear paper trail for both tax purposes and your own protection. Also, don't forget that you'll still need to provide the tenant with proper documentation at year-end (like a 1099 if applicable) showing the total rent they paid, even though you'll be reporting the income across multiple tax periods as others have mentioned.

25 One thing nobody's mentioned yet: you might need to pay STATE taxes too, not just federal! For me in California, I set aside an extra 8% just for state taxes on top of the 25% for federal. Check your state tax rates and factor that in!

Great point about state taxes! Since you're in Ohio, you'll need to factor in Ohio state income tax too. Ohio has a progressive income tax rate that ranges from 0% to 3.99%. For your income level (around $24k annually), you're probably looking at around 1-2% for state taxes. So I'd recommend setting aside about 27-30% total: roughly 25% for federal (income + self-employment tax) and 2-3% for Ohio state taxes. Ohio also requires quarterly estimated payments just like federal, so you can usually pay both at the same time. Don't forget Ohio also has local income taxes in many cities - check if your city has additional income tax requirements. Some cities in Ohio charge an additional 1-3% on top of state taxes. You can check the Ohio Department of Taxation website to see what applies to your specific location.

Quick question - if I'm using TurboTax, where exactly do I find the Form 8995? I think I qualify too but can't seem to locate it in the software.

This is really helpful! I'm in a similar boat with my new freelance writing business that I started in September. Made about $2,800 in profit and was wondering if I qualified for the QBI deduction. Based on what everyone's saying here, it sounds like I should qualify under that same income threshold exception since writing is also typically considered an SSTB. My husband and I file jointly and our total income is around $195,000, so we're well under that $375,800 threshold. One thing I'm curious about - do we need to have any specific business structure (LLC, etc.) or does it work for sole proprietorships too? I'm just operating as a sole proprietor right now and reporting everything on Schedule C.