Thanks for this! How exactly would I be able to prove she was insolvent from 12 years ago? Would we need bank statements from that time? I'm not sure we'd even have access to those anymore.

You'd need to make your best good-faith effort to document her financial situation at that time. Old bank statements, credit reports, loan documents, property records, etc. would be helpful. If you don't have everything, create a reasonable estimate based on what you do know, and document your methodology. The IRS understands that records from many years ago may not be complete. Just be prepared to explain and defend your calculations if questioned. The key is showing that her debts exceeded her assets at the time the debt was cancelled.

This happened to me too. No notice whatsoever until the 1099-C showed up. Apparently they're only required to send the 1099-C, not a separate cancellation notice. Super annoying.

Thanks for bringing this up! I double-checked everything and my overall tax situation is pretty much identical to last year. Same filing status (single), same standard deduction, no dependents, no additional income sources, and my 401k contribution percentage is the same. The only significant change was switching employers, which is why the withholding issue makes the most sense. After reading everyone's comments, I'm going to submit a new W-4 with additional withholding in line 4c. Hopefully that'll fix things for next year's return!

Good thinking to check all those factors! Since everything else remained consistent, it definitely sounds like the withholding change from your new employer is the culprit. Using line 4c for additional withholding is exactly the right approach. Just be careful not to overwithhold too much - remember that a smaller refund means you had more money in your paychecks throughout the year. Some financial advisors actually recommend aiming for a small refund since it means you're not giving the government an interest-free loan. But I understand many people prefer the forced savings of a larger refund!

If both you and your spouse work, the Step 2 checkbox is actually designed specifically for your situation. It adjusts your withholding to account for the higher tax bracket you might be in when combining both incomes. The downside is that it might overwithhold a bit. If you want more precise control, you could use the IRS withholding calculator online to get an exact dollar amount for Step 4c instead. That's what I did, and it worked out perfectly - we got a small refund instead of owing like we did the previous year.

Thanks for mentioning this. How did you determine what portion was earnings versus contributions? Did the financial institution provide that breakdown or did you have to calculate it somehow?

The financial institution should provide statements showing the breakdown between contributions and earnings. Ask specifically for a "basis and earnings statement" as of the date of death. Most major brokerages and banks can generate this report. If they can't provide it for some reason, you'll need to track down old contribution records. The original Roth contributions are your basis, and everything above that amount is considered earnings. The 1099-R you receive when the distribution happens should also code whether it's a qualified or non-qualified distribution, which helps determine taxability.

I tried the "Roth IRA rescue" approach last year and it worked! Had to file some additional paperwork with the financial institution showing I was the sole heir, but saved about $8,200 in taxes that would have been paid by the estate if it had gone through probate normally.

I didn't even think about using the app! Is it available for both iPhone and Android? And do I need to create an account first or can I just download it and pay?

Yes, it's available for both iPhone and Android. You download it from your app store for free. You don't need to create an account beforehand. You just download the app, go to the "Payments" section, and it will give you options to pay. You'll need basic info like your SSN/ITIN, date of birth, and filing status to verify your identity. For payment you can choose Direct Pay (bank account) or pay by card through a payment processor (which charges a fee).

Good advice! I also take screenshots of the payment confirmation page. Learned that lesson the hard way after a payment "disappeared" from their system a few years ago.

Screenshots are definitely smart too. I've started saving everything as PDFs now - confirmation pages, notices, everything. The IRS lost my payment and then tried to charge me interest and penalties before they fixed it. Never again!

Does the withholding rate change if your income is higher? I make about $180k and my company withholds 37% on RSUs which seems excessive, but maybe that's correct?

Yes, the withholding rate does change at higher income levels. For supplemental wages (including RSUs) over $1 million, the mandatory withholding rate is 37%. For supplemental wages under $1 million, the employer can choose either a flat 22% rate or aggregate the amount with your regular wages and withhold at your normal income tax rate. If your company is withholding at 37% for all RSU vesting regardless of amount, they're using a conservative approach that will likely result in overwithholding for most employees. This isn't incorrect, just cautious. Some companies do this to ensure employees don't end up with unexpected tax bills. You'll get any excess back when you file your return, or you could adjust your W-4 on your regular paychecks to compensate.

Wow, I didn't even think about the state tax aspect! That could definitely explain part of the difference I'm seeing. I'll have to go back and look more carefully at my vesting statements to see the breakdown of federal vs state withholding. Thanks for pointing this out!

Happy to help! Also check if your company does any FICA (Social Security/Medicare) withholding on the RSUs too. Some companies handle this by withholding extra shares, while others might reduce your next regular paycheck to cover these taxes. That's another reason your "received" amount might be less than what shows up as income on your W2.