Wow, I had no idea about this special needs qualification! Our child doesn't have special needs, but that's really good info for others. How does the state determination process work? Is that something the adoption agency would have told us about?

The state determination is made through your state's child welfare agency, not necessarily through your adoption agency. Special needs in this context isn't just medical - it can include factors like age, membership in a sibling group, ethnicity, or medical conditions that make a child harder to place. For my brother, their adoption was through the foster care system, and the state provided a letter confirming the child's special needs status for tax purposes. If you adopted privately or internationally, different rules apply. But definitely something worth looking into for anyone adopting through foster care especially!

I used H&R Block's online software and it handled the adoption credit really well. Had a specific section for Form 8839 and walked through all the qualified expenses. Much better than my experience with TurboTax the year before.

Thanks for suggesting this! I hadn't even thought about tax credits. Unfortunately, I don't think I can claim him as a dependent since he made about $55,000 before starting school this year. But I'll definitely look into all the education-related tax benefits once we're married next year. It sounds like from everyone's advice, the best approach is to pay the school directly for the remaining payments. For the money I've already given him directly, I'll just need to file the gift tax form but won't actually owe any taxes.

PA here - PSLF is definitely worth looking into, but keep in mind it requires 10 years of payments while working at qualifying employers. The employer has to be a government org or certain non-profits. Also, with the high salaries many PAs command (even at non-profits), sometimes it's financially better to just pay off the loans aggressively.

Whoa really? I had no idea there were tax credits available! Is that something I claim on my business tax return? And do you know roughly how much the credit might be? We definitely have under 50 employees (just 3 actually).

Yes, you claim it on your business tax return using Form 8881 (Credit for Small Employer Pension Plan Startup Costs). The credit was expanded to cover 100% of qualified startup costs up to $5,000 for the first three years of the plan. Even better, there's a new additional credit specifically for employer contributions for your employees. It can be up to $1,000 per employee depending on how much you contribute to their accounts. This phases down over 5 years. Since you mention having 3 employees, this could be quite valuable for your business if you're making employer contributions to their 401k accounts.

This is solid advice. I'd add that you should also keep copies of all the notices and disclosures you provide to employees, with dates of when they were distributed. The DOL can audit for compliance with those requirements separately from the IRS tax compliance stuff.

Thanks for this list! The notice I got actually has a few of these red flags. It does have a regular payment link but also mentions I can "expedite processing" by paying via gift card "to avoid processing delays" which seemed weird. And now that I look closer there are some grammar issues. I think I'm going to report this to the authorities.

You're making the right call by reporting it. The "expedite processing" via gift card is a MASSIVE red flag - the IRS would never accept gift cards as payment under any circumstances. This is definitely a scam targeting contractors and self-employed individuals. When you report it, try to include the original notice (or copies) if possible, as this helps authorities track down the source. The Treasury Inspector General for Tax Administration (TIGTA) has an online form specifically for reporting IRS impersonation scams at www.tigta.gov, or you can call them at 800-366-4484.

How did you figure out it was fake? Did you call the IRS or was there something obvious that gave it away?

Thanks for this idea. We've already filed an extension for other reasons, but I never thought about asking the brokerage to issue the 1099-R early. I'll definitely call them tomorrow to see if that's possible. Would save us a lot of hassle if they can do that before October.

Extensions are great for situations like this. Just remember that while the extension gives you more time to file, it doesn't give you more time to pay the tax you owe. You should estimate the tax on the earnings portion and pay it with your extension request (Form 4868) to minimize interest. From my experience, about half the brokerages are willing to issue these 1099-Rs early when asked specifically. Be sure to speak with someone in their tax department rather than just a general customer service rep, as they're more likely to understand what you need and why.

I used TurboTax last year for this exact scenario. In the Income section, there's an "Other Income" category where you can enter the earnings amount. I labeled it as "Earnings from excess Roth IRA contribution withdrawal" and entered the estimated amount. Then I attached a statement explaining the situation to my e-filed return. Worked fine, no issues from the IRS.