I'm sorry to hear about your father's medical situation. This is definitely a complex scenario given the international aspect and his residency status. One important consideration that hasn't been fully addressed is whether your father would qualify as a "qualifying relative" for tax purposes. Since he was deported and hasn't been a US resident for about 20 years, this could impact both the medical expense deduction and the penalty exemption for the 401k withdrawal. For the qualifying relative test, the IRS requires that the person either be a US citizen, resident alien, or resident of Canada or Mexico. Since your father is in Mexico, he might still qualify under the Mexico provision, but you'd need to verify he meets all the other requirements (relationship test, gross income test, support test). Also, keep in mind that even if you qualify for the medical expense exception to avoid the 10% penalty, you'll still owe regular income tax on the entire withdrawal amount. And the medical expense deduction only helps if you itemize and your total medical expenses exceed 7.5% of your AGI. Given the complexity, I'd strongly recommend consulting with a tax professional who has experience with international medical expenses and retirement withdrawals. The potential tax savings from proper planning could easily offset the consultation cost. Document everything meticulously - hospital records, payment receipts, currency conversion rates, and any correspondence about your father's care. You'll want a clear paper trail if the IRS has questions later.

I'm so sorry you're going through this difficult situation with your father. Having dealt with something similar when my aunt was hospitalized in Canada, I understand how overwhelming the financial and tax implications can be on top of the medical stress. One thing that might help is understanding the timeline requirements for hardship withdrawals. The IRS typically requires that the withdrawal be made in the same year as the medical expenses, or within a reasonable time after they're incurred. Since your father is currently hospitalized, this timing should work in your favor. Also, make sure to check if your 401k plan even allows hardship withdrawals - not all plans do, and each plan has its own specific rules about what documentation they require. Some plans have stricter requirements than what the IRS mandates. A few practical tips from my experience: - Keep detailed records of all payments, including any money transfers to Mexico - Get itemized bills from the hospital showing specific services and dates - Document the relationship between you and your father (birth certificate, etc.) - Save records of any insurance claims that were denied or not covered The loan option mentioned by others is definitely worth exploring first, as it avoids the immediate tax consequences entirely. Even if you end up needing to do a withdrawal later, having that loan option gives you more flexibility. Hang in there - the tax stuff is complicated but manageable with proper documentation and possibly professional help.

Has anyone mentioned the "ownership test" exception? I think there's something where if one spouse meets requirements and the other doesn't, you might still qualify. I know OP isn't talking about spouses, but there might be a similar provision for family members? Not sure tho.

One thing that might help your situation is the "step-up in basis" rule if your mom passes away while you still own the property together. I know that's not something anyone wants to think about, but it's important to understand all your options given your difficult financial situation. Also, have you considered doing a 1031 exchange? If you're buying another property immediately, you might be able to defer the capital gains entirely. The new property would need to be of equal or greater value and you'd have strict timing requirements (45 days to identify replacement property, 180 days to close), but it could completely eliminate your current tax burden. Given that you mentioned you're planning to buy a smaller place outright, this might not work since you'd need to reinvest all the proceeds, but it's worth exploring with a tax professional. Sometimes restructuring the timing of purchases can save significant tax dollars. The unemployment and health issues you mentioned should definitely qualify for the unforeseen circumstances exception. Make sure you document everything - medical records, unemployment benefits, job loss documentation, etc. The IRS is generally sympathetic to these situations when properly documented.

So glad to hear your tax prep company is stepping up and taking responsibility! That's actually a huge relief - having them document the error officially with the IRS will definitely help speed up the process. Most people don't realize that many legitimate tax preparation companies do carry errors and omissions insurance specifically for situations like this. Since they're filing the paperwork on your behalf, make sure you get a copy of everything they submit to the IRS, along with any reference numbers. This will be super helpful if you need to follow up or check on the status later. The fact that they have insurance and are being proactive about fixing their mistake is a really good sign that you'll get this resolved much faster than the typical 6-8 week timeframe for misdirected refunds. Keep us updated on how it goes - your experience might help others who run into similar issues!

This is such a stressful situation, but you're definitely not alone in dealing with this! I went through something similar a few years ago when my tax preparer accidentally used outdated bank info from my previous return. One thing that really helped me was getting a copy of my tax transcript from the IRS website (irs.gov) - it shows exactly where your refund was sent and the status. You can access it immediately online with your SSN and some basic verification info. This gave me concrete details to reference when I called both the IRS and my tax prep company. Also, while you're waiting for everything to get sorted out, consider asking your tax preparer if they offer any kind of emergency assistance or advance on the refund amount since it was their error. Some of the larger chains have policies for situations like this, especially when it's clearly their mistake. At minimum, they should be covering any fees you incur because of their error. The good news is that your sister and cousin are right - the money will eventually come back to you, it's just a matter of time. Banks are required to reject deposits when the account name doesn't match, so it will bounce back to the IRS who will then issue a paper check. Hang in there!

Don't forget to get a good appraisal to support your purchase price allocation! I made the mistake of not documenting this well when buying into a partnership and got hammered during an audit because the IRS claimed my allocation was unreasonable.

This thread has been incredibly helpful! I'm dealing with a similar situation where I'm buying into an established LLC taxed as a partnership. One thing I want to add is that timing matters a lot for the Section 754 election - it has to be made by the due date (including extensions) of the partnership's return for the tax year when the transfer occurs. Also, don't overlook the impact on your depreciation deductions if the partnership owns depreciable assets. With a 754 election and proper basis step-up, you might get additional depreciation deductions on your share of partnership assets, which can provide significant tax benefits over time. For anyone considering this, I'd strongly recommend running the numbers both ways (with and without the election) to see the long-term impact. The election is generally irrevocable once made, so you want to be sure it makes sense for your specific situation.

Ruby, I went through this exact same decision process with our school's choir booster club last year. While 501(c)(7) might seem like the easier path, it's definitely not the right fit for what you're doing. The key issue is that 501(c)(7) organizations are supposed to benefit their members primarily through social activities. But your booster club exists to support the band program - that's an educational purpose that benefits the broader community, not just your member families. The IRS would likely question this classification during review. Also, keep in mind that 501(c)(7) organizations have income limitations - if more than 35% of your gross receipts come from non-member sources (like concession sales to the general public), you could lose your exemption. With your fundraising activities, you'd probably exceed this threshold. Go with the 501(c)(3) route using Form 1023-EZ. At $20K annual revenue, you're well under the $50K threshold. The application fee is only $275, and honestly, the peace of mind knowing you have the correct status is worth it. Plus, donors can deduct their contributions to a 501(c)(3), which might help with your fundraising efforts. The process really isn't as scary as it seems - just make sure your bylaws clearly state your educational support purpose rather than social club language.

I've been following this conversation with great interest as our tennis booster club is facing the exact same dilemma. Ruby, I want to echo what others have said about avoiding the 501(c)(7) route - we almost made that mistake ourselves until our accountant warned us about the potential issues. One thing I haven't seen mentioned yet is the importance of having proper corporate structure in place BEFORE applying for tax exemption. Make sure you're incorporated as a nonprofit corporation in your state first, then apply for federal tax exemption. Many booster clubs operate as unincorporated associations, but the IRS generally prefers to see formal corporate structure for 501(c)(3) applications. Also, regarding the social events concern - don't worry about organizing family events! The IRS understands that educational support organizations often have social components. The key is that your PRIMARY purpose needs to be supporting the band's educational mission. Social activities can be secondary as long as they're not your main focus. I'd strongly recommend getting your documentation reviewed before submitting. After seeing all the positive feedback about taxr.ai in this thread, I'm definitely planning to use that service for our application. Better to catch any issues upfront than deal with rejection letters and delays later. Good luck with your application process! The fact that you're asking these questions now shows you're on the right track.