DON'T do this unless you're an actual tax professional with a CAF number. They will ask for your credentials and if you can't provide them, they'll just transfer you back to the regular line and you've wasted your time. They've gotten stricter about this in the last year.

Thanks for the heads up! I didn't realize they were checking credentials now. Guess I'll stick with the regular line and just use the tips from this thread. Definitely don't want to make things worse by trying to game the system.

Thanks for the validation. I've already started asking around for recommendations for next year. Did you find any specific questions that helped you separate the knowledgeable CPAs from those just claiming to understand crypto?

I ask them to explain how they handle specific crypto situations that I know are tricky - like liquidity pool rewards, token airdrops, or NFT transactions. The ones who give vague answers or just say "we can handle any crypto situation" without details are the ones to avoid. The good ones will be honest about what they know and don't know. My current CPA straight up told me he specialized in DeFi and mining operations but wasn't as familiar with NFTs. That honesty was refreshing, and he ended up partnering with an NFT tax specialist for that portion of my return. Transparency about their limitations is a huge green flag.

Eh, I disagree. The CPA did complete part of the work, so paying nothing would be unfair. The $250 partial payment makes sense. And honestly, most CPAs are overwhelmed during tax season - it sounds more like miscommunication than intentional deception.

This is why I just do my own taxes now. I spent $600 on a CPA two years ago only to find a mistake that could have cost me $1200. H&R Block software is like $70 and has handled everything I've thrown at it including rental property and some basic stock trades.

That's interesting! So are you saying some providers might actually allow employee contributions after December 31st, or is it more about how they classify the contributions internally? Has this approach ever caused issues with the IRS for you?

It's more about how they classify contributions internally. The IRS rules are still the same (employee contributions by Dec 31, employer by tax filing deadline), but some providers don't track the distinction in their system - they just report the total contribution amount. This approach hasn't caused me problems, but it requires careful record-keeping on your end. You need to document what portion was intended as employee vs employer when you file your taxes. The risk is if you exceed your allowed contribution limits for either category. I always consult with my tax professional to ensure my allocations are correct before finalizing my tax return.

Thanks for clarifying this! A lot of people confuse the deadline for establishing the plan with the deadline for contributions. I learned this the hard way last year when I set up my Solo 401(k) in February for the previous tax year, thinking I could still make employee contributions. Expensive lesson!

How much of a tax deduction did you actually get from doing this? And what percentage of the settlement amount do you receive as income each year? I'm trying to figure out if this makes financial sense.

My tax deduction was about 25% of the amount I put into the trust, so roughly $105,000, which I was able to use that year and carry forward some to future years since it exceeded my deduction limits. I receive about 5% of the trust value each year as income, which is around $21,000 annually. You can set different percentages based on your needs - anywhere from 5% to 50% technically, though most are in the 5-8% range. The payments can be fixed or variable depending on how you structure it. The key benefit was avoiding a massive tax hit in a single year while still having access to income from the full amount.

Unfortunately, Section 1031 exchanges only apply to business or investment real estate, not to settlements. Your brother-in-law is probably confusing it with other tax deferral strategies. For your settlement, you're better off looking at the options mentioned above like non-qualified assignments or potentially a charitable trust if that aligns with your goals. Section 1031 wouldn't be applicable to settlement funds.

Thanks for clearing that up. I had a feeling he might have been mixing things up. Appreciate the quick correction - saved me from going down a useless research rabbit hole!

I tried this route and it was a nightmare. The software technically "allows" you to adjust basis, but doesn't help you calculate what the correct basis should be. I ended up paying a CPA $350 to fix my return after I'd already spent hours trying to figure it out myself.