That's really helpful advice about just doing a temporary adjustment for the rest of the year. Do you think I should do that additional withholding for both our W-4s or just mine? And do I need to change anything else on the form besides putting the extra amount on line 4c?

You could do it all on just one W-4 or split it between both - the IRS doesn't care as long as the total withholding is correct. If you're paid at similar frequencies, I'd just divide it evenly for simplicity. The easiest approach is to keep everything else the same on your current W-4s and just add the additional amount on line 4c. No need to change your filing status or check any additional boxes if the only issue is making up that $1k difference. Then in January, submit new W-4s removing that extra withholding amount.

I second the TurboTax W-4 calculator recommendation. The IRS calculator is too basic for complex situations. The TurboTax one asks more detailed questions and gives more precise recommendations.

That's excellent advice I hadn't considered. Our attorneys are still drafting the initial separation agreement, so I'll make sure to include specific language about the inherited IRA tax liability. Would it be helpful to also include language about any potential future audits related to that money?

Absolutely include language about potential future audits! You want the agreement to cover not just the current known tax liability, but any future claims, audits, penalties, or interest that might arise related to that inherited IRA distribution. It's also worth specifying that your ex must provide proof of payment of these taxes as part of the divorce settlement. That way you have documentation that the tax obligation was satisfied, which can protect you if questions come up years later. Many people don't realize the IRS can look back several years, so protecting yourself long-term is important when untangling finances in a divorce.

Great point! Your tax filing status is determined by your marital status on December 31st of the tax year. If the divorce isn't finalized by then, they'll still be considered married for tax purposes and can choose either MFJ or MFS. If it is finalized by then, they'd file as single or possibly head of household.

Thanks for confirming that. I should have mentioned I went through this last year - our divorce wasn't finalized until February this year, so we had to make the MFJ vs MFS decision for last year's taxes. We ended up filing separately despite some lost deductions because my ex had some serious tax issues I wanted to avoid. Definitely worth the peace of mind even though it cost me about $800 more in taxes.

Any recommendations on where to get historical documents appraised without risking damage? I have some old property tax records from 1880s Manhattan that I've been keeping in a box.

For historical document appraisals, I'd recommend contacting a reputable auction house like Christie's or Sotheby's for high-value items, or a local auction house that specializes in historical documents if you want something less intimidating. They typically have experts who know how to handle fragile items. Another great option is to reach out to university libraries with special collections departments, particularly ones with focuses on economic or New York history. Places like NYU or Columbia have experts who can give you information about the historical significance while properly handling the documents. They often offer free consultations even if you're not planning to donate, and they use archival-quality gloves and proper lighting to prevent damage.

That's fascinating! Did traveling salesmen get any special tax treatment back then? Like deductions for being on the road?

Would this apply in my situation? I've always filed on time before - this is literally the first year I've ever missed. Are there special forms I need to fill out to request the abatement?

Yes, this would absolutely apply to your situation! The First Time Penalty Abatement is specifically designed for people who have been compliant in the past but had a one-time issue. You don't need special forms - you can request it by phone when you call the IRS, or include a penalty abatement request letter with your late return explaining your situation. You can also request it after receiving a penalty notice. Just be sure to mention "First Time Penalty Abatement" specifically when you make the request.

Make sure you're still withholding enough from your paychecks. I had the same issue because I had accidentally claimed too many allowances on my W-4, so not enough tax was being taken out during the year. Fixed that and now I'm good.

Can you explain more about how opportunity zone investments affected your passive activity calculations? I'm considering an opportunity zone property but mostly looking at the capital gains benefits, hadn't considered passive loss implications.