Dont overthink this. Calculate taxable amount as: Box 1 minus (Box 9a divided by life expectancy from IRS tables) I been doing this for 8 years on my federal disability. Your tax guy is making it more complicated then it is. The UNKNOWN is just OPM being lazy and making us do the math ourselves.

I've been dealing with FERS disability taxes for several years now, and I wanted to add some clarity to the excellent advice already given here. The key thing to understand is that "UNKNOWN" in box 2a doesn't mean there's an error - it's actually standard practice for OPM-issued 1099-Rs. Here's what I've learned through experience and consultation with tax professionals: 1. You absolutely need to use the Simplified Method Worksheet from Publication 575 2. Since your husband has a survivor benefit, use Table 2 (Joint Life expectancy) 3. The calculation is: Gross Distribution (Box 1) minus your annual exclusion amount 4. Annual exclusion = (Total contributions in Box 9a) ÷ (expected payments from IRS table) One important point I haven't seen mentioned: make sure you're using your husband's age when the disability payments STARTED, not his current age. This affects which row you use in the life expectancy table. Also, keep detailed records of these calculations because you'll need to track how much of the total contributions you've already recovered tax-free in previous years. Once you've recovered the full $6,500, all future payments become fully taxable. The insurance premiums in box 5 are separate and may qualify for medical expense deductions if you itemize, but they don't affect the taxable amount calculation itself.

Great advice from everyone here! Just wanted to add one more thing that saved me a lot of headaches last year. If you're dealing with multiple online casinos and trying to track all your deposits and withdrawals, check if your bank offers year-end summaries or transaction categorization. I called my bank and they were able to provide me with a detailed report of all transactions to gambling sites throughout the year. This was super helpful because it showed not just my deposits but also my withdrawals, which helped me piece together my actual losses versus just money I moved around. Also, for future reference, many online casinos will let you set up automatic win/loss tracking in your account settings if you look around. I wish I had known this earlier! Now I have detailed records for this tax year that will make things much easier. @Jamal - definitely don't report just the net amount. Report the full $8,700 from your 1099-MISC and keep those bank statements and screenshots organized in case you need them later. Even if you can't deduct the losses this year, having good records protects you if there are ever questions about your return.

@Jamal - I went through almost the exact same situation last year! Had about $7,200 in winnings from an online poker site but around $4,800 in losses throughout the year. Here's what I learned: You absolutely must report the full $8,700 from your 1099-MISC - don't even think about reporting just the net. The IRS already has that 1099 on file and your return needs to match. For your documentation, those bank statements showing deposits are actually pretty good evidence, especially combined with your screenshots. I was worried my records weren't perfect either, but my tax preparer said the IRS understands that online gambling doesn't always provide the same level of documentation as brick-and-mortar casinos. One thing that really helped me was creating a simple spreadsheet with dates, deposit amounts, and any screenshots I had. It made everything look more organized and professional. Since you usually take the standard deduction, run the numbers both ways. In my case, even with $4,800 in losses, I was still better off with the standard deduction because I didn't have enough other itemizable expenses. But definitely keep all those loss records - you never know when you might need them! The IRS isn't out to get you as long as you're reporting honestly and have reasonable documentation for your positions. You've got this!

Great question! I went through this same confusion when I hit 73 last year. As others have confirmed, RMDs are definitely taxed as ordinary income - so you'd pay that 12% rate, not the 15% capital gains rate. One thing that really helped me was setting up automatic tax withholding on my RMDs. Since you mentioned you're budget planning, I'd suggest having your IRA custodian withhold taxes directly from the distribution - maybe start with 15% to be safe since your RMD will add to your other income and could potentially bump you up a bracket. You can always adjust the withholding percentage for future years once you see how it affects your overall tax situation. Also, don't forget to factor in state taxes if your state has income tax. The withholding approach saved me from having to make quarterly estimated payments and worrying about underpayment penalties.

One thing I'd add that might be helpful for your planning - since you mentioned you're 73 and this is your first RMD year, make sure you're aware of the timing rules. You actually have until April 1st of the year after you turn 73 to take your first RMD (so April 1, 2025 for you). However, if you wait until next year to take your first RMD, you'll also have to take your second RMD by December 31, 2025, which could push you into a higher tax bracket for that year since you'd be taking two distributions in one tax year. Most people find it better to take their first RMD before December 31st of their first RMD year to spread the tax impact over two years instead of bunching it all into one year. Given that you're in the 12% bracket now, this timing strategy could help you stay in that lower bracket for both years rather than potentially jumping up to 22% if you take both distributions in 2025.

Someone mentioned this above, but it's worth emphasizing: INTENT is absolutely critical in how these contributions are treated. If you're audited, the IRS will look at whether the transaction was intended as a loan from the beginning. If there's no documentation, no interest, no repayment schedule, and no actual repayments being made, they'll likely recharacterize it as a capital contribution regardless of how you reported it. One approach I've seen work well: Do a combo where part is clearly designated as a capital contribution (perhaps the proportional amounts based on ownership) and the excess is structured as a formal loan with proper documentation, reasonable interest, and an actual repayment schedule that you follow.

As someone who went through a similar situation with my S-Corp, I'd recommend being very careful about retroactively creating loan documentation without contemporaneous evidence of loan intent. The IRS looks for substance over form. In your case, since you have $30,700 from the 51% owner and $1,800 from the 49% owner, one clean approach might be to treat the first $16,575 from the majority owner as a capital contribution (proportional to their 51% ownership of the total $32,500), and document the remaining $14,125 as a shareholder loan with proper terms going forward. This way you have a reasonable business justification for the split - the proportional part as equity investment, and the excess as debt financing. Just make sure any loan documentation includes a realistic repayment schedule that you actually intend to follow, market-rate interest, and treat it like a real loan with regular payments when cash flow allows. The key is being able to demonstrate genuine loan characteristics from this point forward, not just having a piece of paper that says "loan" without the substance to back it up.

I'm surprised nobody's mentioned this yet - having a negative basis of -50k when your profit/loss/capital percentages are all 16.8% suggests the partnership as a whole might have done a significant refinancing or cash-out refi and distributed proceeds to partners. That's a common way basis goes negative while capital accounts stay positive. Do you remember receiving any large distributions in the past few years? Partnership refinances often create exactly this situation - your capital account stays intact for book purposes but your basis gets reduced by the distributions.

This is actually a really common situation that trips up a lot of partnership investors. The key thing to understand is that your capital account and your outside basis serve completely different purposes and are calculated using different rules. Your capital account (the 120k on your K-1) is like your "book value" share of the partnership - it's what you'd theoretically get if the partnership liquidated everything at book value today. Your outside basis (the -50k your CPA mentioned) is your tax basis in the partnership interest, which determines things like how much loss you can deduct and what happens when you sell or receive distributions. The reason your basis went negative while your capital account stayed positive is likely due to cash distributions you received over the years that exceeded your initial investment plus your share of partnership income. When you receive distributions, they reduce your basis dollar-for-dollar but don't necessarily reduce your capital account the same way. Given that you have 63k in partnership liabilities allocated to you (6k + 57k), your actual "at-risk" basis for loss limitation purposes would be your -50k basis plus the 63k in liabilities, which gives you 13k of basis to absorb losses. This is why tracking partnership basis gets so complex - there are multiple layers of limitations and calculations. I'd strongly recommend getting a detailed basis calculation from your partnership's tax preparer (not just your personal CPA) showing how you got to -50k. You have a right to that information as a partner.