One thing to consider if you give your nephew money directly or to his 529 plan - it could potentially impact his financial aid package if he's receiving any need-based aid. Money in a student's name is assessed at a higher rate (20%) than parent assets (around 5.6%) when calculating the Expected Family Contribution. Might want to coordinate with his parents about this.

Great advice from everyone here! Just to add another perspective - since you're in California and your nephew will be in Pennsylvania, make sure you understand which state's 529 plan might work best. While California doesn't offer state tax deductions for 529 contributions, some other states allow non-residents to get deductions if they contribute to that state's plan. Pennsylvania actually does offer a state tax deduction for PA 529 contributions, but only for Pennsylvania residents. However, if your nephew's parents are PA residents, they could potentially benefit from any contributions they make. One strategy might be to give the money to your nephew's parents, who could then contribute to the PA 529 plan and potentially get the state tax benefit themselves. This would require coordination with them and might complicate the gift tax situation slightly, but could maximize the overall tax efficiency for the family. Also echoing the financial aid concern mentioned earlier - definitely coordinate with his parents about timing and structure to minimize any negative impact on his aid package!

ugh I feel you on this confusion! I was in the exact same boat a few weeks ago staring at my transcript like it was written in alien language 👽 cycle 05 basically means you're on the weekly Thursday update schedule instead of daily. so save yourself the headache of checking every day - just check Thursday mornings and you'll see any changes then. honestly after reading all these comments I'm definitely gonna try that taxr.ai thing everyone's raving about. seems like it would've saved me hours of googling "what does code xyz mean" lol. hang in there, the waiting game is brutal but at least now you know when to actually look for updates!

okay this is making so much more sense now! I was literally driving myself crazy checking my transcript every single day wondering why nothing was changing 🤦‍♀️ so cycle 05 = Thursday updates only, got it. definitely gonna stop torturing myself with daily checks lol. and wow everyone seems to love this taxr.ai thing - might have to bite the bullet and try it since I'm clearly terrible at decoding all these numbers myself. thanks for breaking it down in actual human language instead of IRS speak!

Something else to consider - make sure your brokerage is properly coding the account transfer. My custodial account was incorrectly processed as a regular transfer instead of an UTMA conversion when I turned 21, and it caused a bunch of reporting issues. The brokerage sent me a 1099 that made it look like I'd sold everything and rebought it, which would have created a huge tax bill. Had to get it fixed before filing my taxes that year. Double check all the paperwork when the transfer happens!

Has anyone dealt with partial transfers? My custodial account has some stocks that aren't doing great right now, and my dad suggested keeping those in the custodial account until they recover before transferring everything. Is that even allowed?

This is definitely frustrating but totally fixable! I've seen this happen to so many people starting their first jobs. A few things to check immediately: 1. Look at your paystub line by line - break down exactly what's being withheld (federal income tax, state tax, Social Security, Medicare, plus any voluntary deductions) 2. The biggest issue is probably your W-4. When you filled it out, if you left it mostly blank or didn't claim any allowances/adjustments, the system defaults to withholding as if you're single with no dependents making that pay rate all year long. For a part-time worker, this creates massive over-withholding. 3. Go to HR/your manager ASAP with your paystub and ask to fill out a new W-4. Since you're part-time and this is likely your only job, you can probably claim more allowances or use the newer W-4 format to reduce withholding significantly. The good news is any over-withholding will come back to you as a refund when you file taxes next year. But definitely fix this now so your future paychecks aren't eaten up unnecessarily. Most employers are understanding about this - it's a super common new employee issue.

This is such a frustrating situation but you're definitely not alone! I went through something very similar at my first retail job. The combination of improper W-4 setup plus those sneaky uniform and meal plan deductions can really shock you on that first paycheck. Since you've already identified the extra deductions, definitely push back on those - especially the uniform charge. In many states, employers can't legally charge you for required work uniforms. The meal plan should definitely be optional if you didn't explicitly agree to it. For the tax withholding part, the key is getting that W-4 corrected ASAP. When you talk to your manager tomorrow, ask specifically which version of the W-4 form they use. If it's the newer 2020+ version, the IRS Tax Withholding Estimator will be your best friend for figuring out exactly what to put in each section. One thing that might help ease your stress - if you're working part-time and making under about $12,000-$13,000 for the year, you likely won't owe any federal income tax at all. That means everything being withheld for federal taxes will come back to you as a refund. Still worth fixing now though so you can actually use that money for textbooks instead of waiting until next spring! Keep us updated on how the conversation with your manager goes. Most employers are pretty understanding about fixing these new employee W-4 issues once you bring it to their attention.

Quick clarification about special allocations in partnerships since there seems to be confusion. While partnerships CAN allocate income differently than ownership percentages, these special allocations must have "substantial economic effect" to be recognized by the IRS. This isn't just a formality - it requires careful drafting in your partnership agreement and proper maintenance of capital accounts. You need to ensure: 1. Capital accounts are maintained properly 2. Liquidating distributions are made according to capital accounts 3. Partners are obligated to restore deficit capital accounts If your special allocations don't meet these requirements, the IRS can reallocate income based on "partners' interests in the partnership," which is basically their default allocation method.

Great thread! As someone who went through this decision recently, I want to emphasize something that might get overlooked in all the technical details: the administrative burden difference. S Corps require payroll processing (even if it's just for the owner-employees), quarterly payroll tax filings, and annual W-2s. This adds ongoing compliance costs that partnerships don't have. When you factor in payroll service fees or accountant time, it can easily add $2,000-4,000 annually in additional costs. For our small consulting firm, this tipped the scales toward LLC taxed as partnership despite the self-employment tax on all income. The flexibility in allocations and distributions was just a bonus - the simplified administration was the real win. Also worth noting: if you're in a state with high franchise taxes for corporations (like California's $800 minimum), that's another factor favoring partnerships. Make sure you're looking at the total picture, not just federal tax implications.