I'm confused about the child tax credit situation with Form 8332. If I let my ex claim our kids using this form, does that mean they get ALL the tax benefits? Or do I still get some of them?

Just want to add one more tip that saved me a lot of trouble - make sure you keep detailed records of when you give the completed Form 8332 to your ex. I take a photo of the signed form and send it via email so there's a timestamp, then also give them the original. Last year my ex lost the form right before filing and we had to scramble to get another one signed. Having that digital backup with the date stamp helped prove I had provided it on time. Also helped when the IRS had questions later - I could show exactly when the form was completed and delivered. The whole process is stressful enough without having to worry about lost paperwork!

Random question but related - I'm actually doing the opposite (Traditional to Roth recharacterization). Anyone know if the same rules apply in reverse? My earnings in the Traditional were like $12.

Just wanted to confirm what others have said - you're absolutely right to be confused because recharacterization rules are pretty complex! But the good news is that those $8 in earnings won't create any current-year tax issues for you. When you recharacterize from Roth to Traditional, the IRS treats it as if you made the Traditional IRA contribution originally. Both your $2500 contribution and the $8 in earnings will simply become part of your Traditional IRA balance. No current-year income to report, no distribution treatment, and no automatic need for Form 8606. The only thing you'll need to figure out is whether your Traditional IRA contribution will be deductible based on your income and the fact that you mentioned having a 401k at work. If it's fully deductible, you just take the deduction on your tax return. If it's non-deductible (because you're over the income limits), then you'd file Form 8606 to track your basis - but that's about the contribution itself, not those earnings. Fidelity should handle all the paperwork correctly and send you the proper forms showing the recharacterization. The earnings piece really is the easy part of this whole process!

Based on my experience as a fee basis official for a federal agency, I want to emphasize the importance of getting your classification sorted out ASAP. The distinction between employee and independent contractor has huge implications beyond just withholding. If you're truly a fee basis official who's an employee, you should have access to workers' compensation, unemployment benefits, and potentially other employment protections. Independent contractors don't get these benefits. One thing that helped me was looking at the actual IRS factors for worker classification: Do they control HOW you do your work or just WHAT work you do? Do you use their equipment/office space? Are you integrated into their regular operations? These factors matter more than just the payment structure. Also, don't forget about potential deductions if you are classified as an independent contractor - home office, professional development, equipment, etc. Keep detailed records of all work-related expenses from day one, regardless of your classification, because you might need them later. The quarterly estimated tax payments are crucial if you're 1099 - missing them can result in penalties even if you pay everything at year-end. Set aside money immediately from each payment you receive.

As someone who recently went through a similar classification challenge with my municipal position, I'd strongly recommend getting everything in writing from your HR department about your status. Don't just accept verbal explanations - ask for documentation that clearly states whether you're classified as an employee or independent contractor. One thing that really helped me was requesting to see the actual job description and any internal memos about how positions like yours are supposed to be handled. Sometimes there's a disconnect between what HR tells you verbally and what their official policies actually say. Also, keep detailed records of everything - your work schedule, supervision level, equipment provided, training requirements, etc. This documentation could be crucial if you ever need to challenge your classification with the IRS or Department of Labor. From a practical standpoint, if you're not having taxes withheld, I'd recommend opening a separate savings account immediately and transferring 25-30% of each payment into it for taxes. Even if you later find out you're misclassified as a contractor, you'll have the money set aside and won't be scrambling at tax time. The uncertainty is stressful, but getting proper documentation and keeping good records will protect you either way the classification goes.

4 Has anyone dealt with the failure-to-file penalty for Form 1065 specifically? I'm in a similar situation but with a multi-member LLC, and we're getting hit with $2,100 per partner per month for late filing! It's absolutely crushing us.

I've been through this exact nightmare with my LLC! Here's what I learned that might help: First, don't panic - you have options. The IRS penalty system is harsh but there are legitimate ways to get relief. Since you're a single-member LLC filing Schedule C, you're likely dealing with failure-to-file and failure-to-pay penalties on your personal return. Your current accountant sounds unreliable if they've consistently filed late despite claiming to file extensions. Extensions only give you time to file, not to pay - so if you owed taxes, you'd still get hit with penalties even with valid extensions. Here's my action plan that worked: 1) Get your IRS transcripts immediately to see what was actually filed and when 2) Fire your current accountant - they're clearly not handling your situation properly 3) Look into First Time Penalty Abatement for at least one tax year 4) Document everything about your previous accountant retiring and the chaos that caused 5) Consider "reasonable cause" arguments for the other years The key is being proactive. I waited too long hoping my accountant would fix things, and it just got worse. You might be surprised how much penalty relief is available if you approach it systematically. Don't let the intimidating notices paralyze you - there's definitely a path forward here.

Something nobody's mentioned yet - if your husband's getting this stipend without any tax docs, his employer might be misclassifying this payment to avoid payroll taxes. That could cause bigger problems down the road. If he's truly an employee (W-2), ALL compensation should be reported on his W-2, including stipends. The only exception would be properly documented reimbursements under an accountable plan.

I handle payroll for a small company and we've had this exact issue. If the stipend is a true reimbursement under an accountable plan it should NOT be on his W-2. But there are strict rules - he must submit expense reports/mileage logs to his employer, have a business purpose for each expense, and return any excess money not used for business expenses. If those requirements aren't met, it's just taxable income that should be included on his W-2.