This is such a well-rounded discussion! I'm dealing with a similar situation with an old universal life policy, and reading through everyone's experiences has been really eye-opening. The breakdown of only the gains being taxable (not the full payout) was something I definitely needed to understand better. One thing I'd add from my research is that it's worth asking your insurance company for a "policy illustration" or "surrender value statement" before you actually cash out. This document should show you the exact cash surrender value, any fees, and importantly, it often breaks down the cost basis (total premiums paid) versus the cash value. Having this in writing before you proceed can help you verify the tax calculations and avoid any surprises. Also, if you're working with a tax professional, they can often help you strategize the timing of the surrender if you have any flexibility. For example, if you expect to be in a lower tax bracket next year, it might be worth waiting. But given your house-buying timeline, that flexibility might not exist. The conservative investment approach everyone's recommending really is the smart play here. I learned the hard way during the 2008 financial crisis that "safe" money for major purchases should actually be safe, not just invested in what feels safe. Your 4.75% HYSA rate is genuinely competitive right now.

Just wanted to chime in as someone who works in insurance - the advice about getting a policy illustration before surrendering is spot on. I'd also recommend asking specifically for a "surrender calculation worksheet" if they have one. This will show you the exact breakdown of your cost basis, any remaining surrender charges, and the taxable portion. One thing I haven't seen mentioned is that some policies have loan features - if your grandparents ever took any loans against the policy that weren't repaid, that could affect your tax calculation. The outstanding loan amount gets subtracted from your payout but might still be treated as taxable income in some cases. Worth asking about when you call. For the withholding decision, given that you know you have about $1,200 in gains and you're in Texas (no state tax), having them withhold the 10% federal is definitely the safer route. You're looking at owing somewhere between $144-264 in federal taxes on that gain depending on your bracket, so the $120 they'd withhold gets you most of the way there. Your HYSA strategy is absolutely the right call for a 2027-2028 house purchase. I've seen too many people get burned trying to squeeze extra returns from money they need for a specific date. That 4.75% rate with guaranteed principal is actually pretty solid in today's environment.

I was in the exact same boat a few weeks ago! Here's what I learned: you can actually start some of the verification process without the letter by setting up ID.me through the IRS website. While you won't be able to complete the full refund verification without that specific code from the letter, you can at least get your account set up and verify your basic identity. Also, try checking your IRS online account - sometimes the verification letter appears there digitally before the physical one arrives in the mail. That's how I got my code early and was able to complete everything online. If you absolutely can't wait, the in-person route at a local IRS office is your best bet. You'll need to schedule an appointment (usually 1-2 weeks out) and bring multiple forms of ID, but they can verify you on the spot without needing the letter code. The whole process is frustrating but hang in there - once you get through verification, refunds usually process pretty quickly!

I just went through this nightmare myself! The good news is you have a few options even without the letter. I was able to verify my identity by scheduling an appointment at my local IRS Taxpayer Assistance Center - took about 2 weeks to get an appointment but they verified me immediately with just my driver's license, Social Security card, and last year's tax return. Before doing that though, definitely try logging into your IRS online account first. My verification letter actually showed up there about a week before it came in the mail, so you might be able to get that code sooner than expected. Also, if you're really desperate to talk to someone, calling right when they open at 7 AM seems to be the sweet spot for shorter hold times. I got through in about 30 minutes that way versus the 2+ hour waits later in the day. The whole identity verification thing is such a pain but once you get through it, your refund should process pretty quickly. Hang in there!

Whatever you do, don't ignore this filing requirement! I made that mistake with my S-corp that had literally no activity for 8 months and ended up with $2,450 in penalties before I realized what was happening. Even explaining to the IRS that the business never operated didn't get the penalties waived.

Yes, you absolutely need to file Form 1120-S for 2023, even with zero activity during your S-corp period. I learned this the hard way when I had a similar situation with my consulting LLC. The IRS filing requirement is triggered by the S-election itself, not by whether you had income or expenses. Since you were an S-corp from July through November 2023, you're required to file for that tax year. The good news is that filing a "zero return" is much simpler than a regular 1120-S. You'll basically be entering zeros in most fields, but you still need to complete all the required schedules (K, K-1, L, etc.). Don't forget to check the "Final Return" box since you revoked the election, and attach a brief statement explaining the S-corp termination date. My advice: don't procrastinate on this! The March 15th deadline comes fast, and those late filing penalties start at $210 per month per shareholder. Even if you file an extension, you need to get that done by the original due date. Better to spend a few hours on paperwork now than deal with penalty notices later.

Hey Emma! I totally get the confusion - withholding taxes were a mystery to me when I started working too. Everyone's given great explanations here, but I wanted to add one practical tip that really helped me. Since you're working 30 hours a week at $18.50/hour, your withholding is probably calculated as if you'll make about $28,860 for the full year. But if you're a student, seasonal worker, or this is your first job partway through the year, you might not actually earn that much annually. This could mean you're having way too much withheld! I'd recommend keeping track of your total earnings and withholding amounts for a few paychecks, then use that info with the IRS withholding calculator or one of those paystub tools others mentioned. You might find you can safely reduce your withholding and get more money in each paycheck instead of waiting for a big refund next year. Also, don't feel bad about not understanding this stuff - the tax system is complicated and they don't exactly teach "How to Read Your First Paystub 101" in school! You're asking the right questions.

@Emma Swift, I completely understand your confusion! When I got my first real paycheck, I had the same reaction - "Wait, where did all my money go?!" Here's the thing that helped me wrap my head around it: Think of withholding tax like a layaway plan, but in reverse. Instead of paying a little bit each time until you can take something home, the government is essentially saying "We know you're going to owe us money at the end of the year for income tax, so let's collect it bit by bit from each paycheck so you don't get hit with a massive bill in April." The $175 they're taking isn't disappearing - it's going toward your actual tax bill for 2025. When you file your tax return early next year (for 2025), you'll add up all the money they withheld from your paychecks throughout the year. If that total is more than what you actually owe in taxes, you get the difference back as a refund. If it's less, you pay the difference. At your income level and working part-time, there's a decent chance they're withholding more than you'll actually owe, which means you'd get money back. But like others have mentioned, you can adjust your W-4 to have less withheld now and get more in each paycheck instead of waiting for a refund later. The key is finding that sweet spot where you're not owing a bunch come tax time, but you're also not giving the government an interest-free loan all year!

Had the same problem. Found out TurboTax creates a different PIN each year that you set during the filing process. For me the problem was I had entered my AGI wrong - I was looking at line 7 instead of line 11 on my 1040. Double-check that.

Glad to hear your return finally got accepted! I went through something similar last year and it's such a relief when it finally goes through. For anyone else dealing with this, I learned that the IRS verification system can be pretty finicky. One thing that helped me was creating a checklist: 1) Make sure you're using the AGI from line 11 of your 2021 Form 1040 (not any other line), 2) If you can't find or remember your self-selected PIN, stick with the AGI option entirely, and 3) If you're a first-time e-filer or had any issues with your previous return, the "0" AGI method often works as a backup. The most important thing I learned is to be patient with the system - sometimes it takes a day or two for acceptance even when everything is correct. Thanks for sharing your update, it'll definitely help others who are going through the same stress!