5 Has anyone addressed whether this could be an intentional income-shifting strategy by the mom? I've seen small business owners do this to reduce their own tax liability by "paying" family members. The IRS is aware of this practice and does scrutinize family business arrangements. If the child isn't actually performing meaningful work worth $6,300, or if they're not being paid market rates for the work, this could be problematic in an audit.

You're absolutely right to be concerned about this situation. As several others have mentioned, the $400 threshold for self-employment income is key here - your daughter definitely needs to file. However, I'd strongly recommend getting professional help before proceeding. The classification of a 12-year-old as an independent contractor is highly questionable and could trigger an audit. The IRS looks closely at family business arrangements, especially when children are involved. A few red flags I see: 1) A 12-year-old typically can't meet the "independence" test for contractor status, 2) The amount seems high for basic filing/sorting work by a child, and 3) This could be viewed as income shifting to avoid taxes. I'd suggest consulting with a tax professional who can review whether this should have been handled differently (like employee wages with FICA exemptions for children in family businesses) and help you navigate the filing requirements properly. The goal should be compliance, not just getting through this year's filing.

Has anyone had experience with changing the account owner on a 529 plan? I'm thinking about making my son the owner of his 529 to simplify this whole process for future years.

Just went through this exact situation last year with my daughter! The key thing to remember is that even though you own the 529 account and receive the 1099-Q, your son can absolutely claim the education credits on his own return as long as he's not your dependent. Here's what we learned: The 1099-Q itself doesn't need to be "reported" as income if all the distributions went toward qualified education expenses. Your son would claim the American Opportunity Tax Credit or Lifetime Learning Credit based on the actual tuition and fees paid, regardless of the funding source. One important note - make sure to run the numbers both ways before deciding. Sometimes parents in higher income brackets actually benefit more from claiming the dependent exemption than the student gains from the education credits, especially if the student has little other income. But if you're phased out of the education credits due to income limits, then having your son claim himself usually makes more sense. Also keep good records showing the 529 distributions matched up with qualified expenses, just in case the IRS has questions later. The account ownership doesn't matter for tax purposes - what matters is who the beneficiary is and whose education expenses were paid.

Has anyone used TurboTax for this situation? I'm wondering if it correctly handles Roth IRA withdrawals for education expenses or if I need to manually override something.

One thing to be extra careful about - make sure you understand the timing rules for "qualified higher education expenses." The IRS requires that the expenses be paid in the same tax year as your withdrawal, and they must be for you, your spouse, your children, or your grandchildren who are enrolled at least half-time in an eligible institution. Also, you need to reduce your qualified education expenses by any tax-free assistance you receive - like scholarships, grants, employer tuition assistance, or even American Opportunity Tax Credit amounts. So if your tuition is $10,000 but you get a $3,000 scholarship, you can only count $7,000 as qualified expenses for the penalty exception. I learned this the hard way when I forgot to subtract my Pell Grant amount and had to amend my return. The IRS caught it during processing and sent me a notice asking for clarification. Fortunately I had kept all my documentation, but it delayed my refund by several months.

I feel your pain on this one! I went through the exact same confusion last year with FreeTaxUSA and the EIC thresholds. It's really misleading how they present the information - you see that $59,899 figure and think you're golden, but that's only if you have multiple qualifying children. As a single person with no kids, your actual EIC threshold is around $17,640 for 2024 taxes, so at $43,750 you're unfortunately well above the limit. I know it's disappointing, especially with those medical expenses you mentioned. One thing that really helped me was double-checking that I hadn't missed any other credits or deductions. Since you mentioned medical expenses wiping out your savings, definitely look into whether you can itemize and deduct medical expenses that exceeded 7.5% of your AGI. Also, if you contributed to a 401k or IRA this year, make sure you're getting credit for the Retirement Savings Contributions Credit if you qualify. FreeTaxUSA should have prompted you about these, but sometimes the software doesn't make it obvious. It's worth going back through those sections to make sure you're not leaving money on the table elsewhere!

I completely understand your frustration with the EIC threshold confusion! This is actually one of the most common misunderstandings during tax season. The $59,899 figure you're seeing is indeed for taxpayers with three or more qualifying children, but as a single filer with no kids, your EIC income limit for 2024 taxes is only around $17,640. At $43,750 in income, you're unfortunately above that threshold, which is why FreeTaxUSA is correctly telling you that you don't qualify. I know it's disappointing, especially with those unexpected medical expenses you mentioned. However, don't give up hope! Since you had significant medical expenses that wiped out your savings, you should definitely check if you can itemize deductions. If your medical expenses exceeded 7.5% of your adjusted gross income (which would be about $3,281 in your case), you might be better off itemizing rather than taking the standard deduction. Also, make sure you're not missing other credits you might qualify for - like the Retirement Savings Contributions Credit if you contributed to a 401k or IRA, or any education-related credits if applicable. Sometimes these lesser-known credits can provide meaningful tax relief even when you don't qualify for the EIC.

Yara, I completely feel for you going through your first tax season post-divorce - that's a lot to handle on your own! The great news is that everyone here is spot-on about code 826 being positive. I wanted to add something that might help with your peace of mind: you can actually call the IRS automated refund hotline at 1-800-829-1954 and use your SSN and refund amount to get a quick status update without waiting on hold for an agent. Also, since you mentioned trying to figure out all the codes and notices solo, the IRS has a really helpful transcript code lookup tool on their website under "Understanding Your Tax Account Transcript" that breaks down what each code means. It's been a lifesaver for me when I see new codes pop up. One thing I learned the hard way - once you see 826, try not to obsess over checking your transcript daily (easier said than done, I know!). The system usually updates once a week, typically overnight on Friday into Saturday. Checking more often than that just adds stress without giving you new info. You're doing great navigating all this complexity! That 826 code really is a good sign that things are moving in the right direction. 🌟

Hey Yara! I just wanted to jump in with a quick reassurance - I had the exact same code 826 situation about 6 weeks ago and was similarly stressed about what it meant (also dealing with some major life changes that made tax season extra complicated). Like everyone else has mentioned, it really is good news! One thing that helped me manage the anxiety was creating a simple tracking sheet with the dates each code appeared on my transcript. It helped me see the pattern and timeline more clearly rather than just refreshing randomly and hoping for changes. I ended up receiving my refund 11 days after the 826 code showed up, plus about $73 in interest which was honestly a pleasant surprise. The hardest part really is just the waiting, but you're clearly being proactive and asking the right questions. The fact that you're seeing 826 means you're definitely in the final stages. Try to be patient with yourself during this process - handling taxes solo for the first time after a divorce is genuinely challenging, and you're doing better than you probably realize! Hoping you see that 846 code pop up very soon! 🤞