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Something else to consider for child performer income - check if your state has what's called a "Coogan Law." In California, New York, Louisiana, and some other states, a percentage of a child performer's earnings must be set aside in a blocked trust account until they reach adulthood. This wouldn't show up on tax forms, but is a legal requirement in those states.
We're in Illinois. Do you know if there are any special requirements here? The commercial was for a regional grocery chain, and I don't think they mentioned anything about special accounts when we signed the contracts.
Illinois doesn't have a specific Coogan Law like California or New York, so you don't have the same legal requirement to set up a blocked trust account. However, it's still a good practice to save some of your children's earnings for their future. Since the commercial was for a regional grocery chain and the earnings were relatively modest ($1,200 each), you're mainly just dealing with the standard tax considerations that have been discussed in other comments. Just make sure to check those W-2s to see if any taxes were withheld, as that would be a good reason to file returns for them to get those withholdings back.
Another thing to consider - once your kids get a taste of that sweet commercial money, they might want to do more! My daughter started with one commercial at age .4 and now at 10 she's done dozens. Get yourself a good system for tracking their income and expenses each year. Also worth noting that if they start making "substantial" income (over $2,500 annually), you might run into the "kiddie tax" for unearned income. This doesn't apply to W-2 wages from performing, but if you invest their earnings and generate interest/dividends, that can trigger different tax rules.
Don't forget to report this to adult protective services in your area too, not just the police. Financial exploitation of seniors is something they take seriously and they might have additional resources to help. Also report to the FBI's Internet Crime Complaint Center at IC3.gov.
Definitely this! Also reach out to the SEC and FINRA if this "advisor" claimed any professional credentials. Even if they were overseas, these agencies track these scams and sometimes can help with recovery.
Thanks for this advice. We did file a police report but I didn't know about adult protective services or the IC3. I'll definitely look into those resources today. Mom is so embarrassed about all this that she's been reluctant to tell anyone, but I'm trying to get her all the help possible.
Has anyone considered the wash sale rule implications here? If her mom buys similar stocks within 30 days before or after this loss, it could impact the deductibility.
Good point about wash sales, but it likely doesn't apply here since this wasn't a normal market transaction where she sold at a loss. This was essentially theft through transfer. But you're right that she should avoid buying substantially identical securities within 30 days if she wants to ensure the loss deduction isn't deferred.
Don't forget about the "like-kind exchange" rules too - those might apply here if you're doing this as an investment property rather than primary residence! Worth looking into especially if you haven't lived in your current house long enough to qualify for the exclusion.
Thanks for bringing this up, but these are both primary residences. We've lived in our current home for 6 years, and the childhood home will become our new primary residence once we complete the purchase. So I think we should qualify for the capital gains exclusion rather than needing the like-kind exchange rules.
You're absolutely right that the primary residence exclusion is your best option here. Since you've lived in your current home for 6 years, you easily meet the 2-out-of-5 years requirement. I mentioned like-kind exchanges just as an alternative for readers in different situations, but your plan to use the Section 121 exclusion for primary residences is perfect for your situation. Just make sure to keep good records of both transactions for your tax files.
Has anyone used TurboTax to handle a situation like this? I'm dealing with something similar and wondering if I need to pay for a professional or if tax software can handle it properly.
I used TurboTax last year for my home sale. It asks all the right questions about how long you lived there and the purchase/sale prices. Just make sure you have all your closing documents handy. The land contract part might be trickier though.
One thing nobody mentioned yet - you should also be getting interest on your refund since it's from 2019! The IRS has to pay you interest for any refund delayed beyond 45 days after the filing deadline (which would obviously apply in your case). It won't be a fortune, but hey it's something! Just make sure all your math is correct before sending it in because errors will definitely delay processing.
Seriously? I had no idea they'd pay interest on delayed refunds! Do they automatically calculate that or do I need to request it somehow? And will that interest be taxable for 2025?
Yes, they calculate and add the interest automatically, you don't need to request it! The IRS adds it to any refund that's issued beyond the 45-day processing window. The interest is considered taxable income, so you'll need to report it on your 2025 tax return (the year you receive it). The IRS will send you a Form 1099-INT if the interest is $10 or more, but you have to report it regardless of the amount or whether you receive the form.
Make sure to keep copies of EVERYTHING! I mailed in a late 2017 return last year and it somehow got "lost" after delivery. Thank god I had sent it certified mail so I could prove they received it. Had to send the whole thing again with a copy of the certified mail receipt. Such a headache! If I could go back in time, I'd make copies of the entire return + all supporting documents + my certified mail receipt and put it all in a folder I wouldn't lose.
Sean Flanagan
Just wanted to add something that might be helpful - if you're using commercial tax software, check if there's a software update available. Last year I had a similar issue with not seeing the correct tax year for an extension, and it turned out my software needed an update to show the current filing options. After updating, all the correct years appeared in the dropdown. Some companies push these updates automatically, but others require you to manually check and install them.
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Isabella Oliveira
ā¢Thanks for this suggestion! Which tax software were you using? I'm on TaxAct for Business, and I'm wondering if that might be the issue.
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Sean Flanagan
ā¢I was using ProSeries when I had that issue. With TaxAct, you should be able to check for updates by going to the Help menu and looking for "Check for Updates" or something similar. If you're using their online version rather than desktop software, try clearing your browser cache or using a different browser entirely. Sometimes these issues can also be related to the subscription level you have - some tax years might not be available if your subscription doesn't cover that period. Might be worth checking with TaxAct support directly if the update doesn't resolve it.
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Zara Mirza
Has anyone successfully filed a 1065 extension online this year? I'm struggling with the same issue as OP but with different software (Drake). Thinking this might be a broader problem with the IRS systems perhaps?
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NebulaNinja
ā¢I filed our partnership extension last week using UltraTax and had no issues selecting the 2023 tax year (for filing in 2024). Everything processed normally. So I don't think it's an IRS-wide system issue.
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