1 How long do you actually need to keep settlement documents? Is 7 years standard or should I be keeping this stuff even longer?

11 You should keep settlement documents indefinitely, honestly. The standard recommendation for most tax documents is 7 years, but for something like a settlement that could be questioned many years later, I wouldn't risk discarding them. The IRS generally has 3 years to audit your return, but this extends to 6 years if they suspect you underreported income by more than 25%. And there's no statute of limitations at all if they suspect fraud. Since a settlement can be a large sum that might look like "missing income" during automated reviews, having your documentation ready even 10-15 years later could save you a massive headache.

19 This is super important! I work at an accounting firm and see this mistake constantly. Personal injury settlements are only tax-free for compensatory damages (medical bills, pain/suffering, etc). Punitive damages are 100% taxable, and sometimes they're not clearly separated in settlement paperwork.

That's really interesting and completely changes the equation! I hadn't heard about that change to the RMD rules for Roth 401(k)s. If they're removing RMDs, then it seems like the main advantage of the Roth IRA is gone. Are there any other differences I should consider now that RMDs won't be a factor for either account type?

Even with the RMD changes, there are still some differences to consider. Roth IRAs still offer more flexibility for early withdrawals of contributions without penalties, which can be valuable if you might need access to funds before retirement. Inheritance rules also differ slightly between the two account types. Non-spouse beneficiaries of Roth IRAs have more flexible distribution options in some cases compared to Roth 401(k) beneficiaries. Additionally, Roth IRAs typically offer more diverse investment options than 401(k) plans, though this depends entirely on the specific providers you're considering. If the investment options and fees are comparable between your choices, the withdrawal flexibility of the Roth IRA might still make it slightly more advantageous.

This is a good point. Which state are you in? I'm in California and heard the protections are different here too, but couldn't find clear info online.

Thank you for the advice! I've already started working on my 2022 return and will file it this week. Is there any way to reduce the penalties since this is my first time making this mistake?

You can request penalty abatement under the IRS First Time Penalty Abatement policy if you haven't had any significant penalties in the past 3 tax years and have filed (or filed extensions for) all required returns. Call the IRS after you file and pay or set up a payment plan. Tell them you want to request "first-time penalty abatement" for reasonable cause. Explain that you misunderstood the withholding requirements with multiple jobs and that you've taken steps to correct it for the future. Many people get approved, especially for first-time mistakes.

You might want to update your W4 instead of just asking for extra withholding. If you use the IRS Tax Withholding Estimator online it'll tell you exactly how to fill it out for multiple jobs.

Would they really go after someone for less than a pound in unpaid tax though? Seems like it would cost them more to send the letter than they'd get back.

It's not about the amount, it's about the principle. HMRC systems are increasingly automated and can pick up discrepancies between what platforms report and what you declare. My friend didn't get in serious trouble, but did have to file an amended return and pay a small penalty that was way more than the actual tax due. The real issue isn't the £2 over - it's that once you're over the allowance threshold, technically the full amount becomes declarable (though you still get to claim the £1000 allowance against it). HMRC might not chase 80p, but they might question why £1002 of income wasn't declared at all.

That's not correct. The £1000 trading allowance absolutely applies to self-employed work including Uber. Being self-employed doesn't change the allowance - that's precisely what the trading allowance is for: small amounts of self-employed/trading income.

But my Coinbase 1099 is missing a bunch of transactions from before 2023. Does that mean I'm screwed?

You're not screwed, but you do need to account for those missing transactions. Exchanges are only required to report transactions from certain years forward, but that doesn't exempt you from reporting everything. For transactions not on your 1099, you'll need to go back through your exchange history and download those transaction records. Some exchanges let you export your complete history as a CSV file, which can be really helpful. Then you'd need to calculate your gains/losses for those transactions or use one of the crypto tax services people have mentioned to help with that.

This matches what my CPA told me. He said the IRS doesn't expect Form 8949 to list thousands of trades, but rather to have reasonable summaries with backup documentation. He has clients who are day traders with stocks who do the same thing.