Quick tip that helped me - if you can pay even part of what you owe immediately, do it! Even paying $500-1000 of your balance shows good faith and might make them more willing to work with you on the rest. I was able to get on an installment plan for the remaining balance and they held off on filing the lien.

Don't let this overwhelm you - a Notice of Federal Tax Lien sounds scarier than it actually is in practice! I went through something very similar about 18 months ago when I owed around $4,200 to the IRS after some freelance work complications. The key thing to remember is that the IRS actually WANTS to work with you - they'd rather get their money through a payment plan than go through the hassle of seizing assets. When I called them (after many attempts to get through), the agent was surprisingly understanding and helped me set up a $130/month payment plan. Here's what I wish I'd known earlier: once you're on an approved installment agreement, they typically won't file the lien as long as you keep making your payments on time. Even if they do file it, you can request a lien withdrawal after making just 3 consecutive payments under your agreement. My biggest mistake was waiting so long to contact them. The penalties and interest kept piling up while I was avoiding the situation. Act now - call them first thing Monday morning, explain your job loss situation, and they'll likely be very willing to work with you on affordable monthly payments. You've got this!

I went through a very similar situation about three years ago with my grandmother's trust, and I completely understand the panic you're feeling right now. The trustee liquidated everything without any advance notice, and I was convinced I was going to owe more in taxes than I could possibly pay. Here's what ended up happening that might give you some relief: The actual taxable gains were only about 35% of the total trust value. A significant portion was return of principal (money that had already been taxed when it went into the trust), and some investments had actually declined in value since purchase. A few practical steps that helped me: 1. I demanded what's called a "final distribution statement" that showed the cost basis, purchase dates, and sale proceeds for every single investment. The trustee tried to give me a summary at first, but I insisted on the detailed breakdown. 2. I found out that the trust had been paying taxes on realized gains over the years when the trustee rebalanced the portfolio, so not all the appreciation was being taxed for the first time. 3. My tax professional was able to identify several deductions related to trust administration fees that I could claim, which helped offset some of the gains. The key is getting all the documentation and working with someone who really understands trust taxation. Don't let the trustee brush you off with vague explanations - you're entitled to complete records of everything they did with your money. It's still going to be a significant tax bill, but probably not the financial catastrophe you're imagining right now.

I've been following this thread closely since I went through a trust termination last year, and I wanted to add a few points that might help based on my experience. First, regarding the trustee liquidating without notice - this actually happened to me too, and I discovered that many trust documents have provisions allowing trustees to liquidate for "administrative convenience" during termination. However, they're still required to provide detailed accounting within a reasonable timeframe after the fact. One thing I haven't seen mentioned here is the potential for "throwback tax" if this was a complex trust that accumulated income over the years. If the trust retained earnings in some years and is now distributing them, there could be additional tax calculations involved. This is something a trust tax specialist would need to evaluate. Also, don't overlook the possibility of charitable deductions if the trust made any charitable contributions over the years, or estate tax deductions if there were administrative expenses. These can sometimes offset gains in ways you wouldn't expect. My biggest piece of advice: Keep detailed records of EVERYTHING. I created a spreadsheet tracking every document, every phone call, and every piece of correspondence with the trustee. This became invaluable when my tax professional was preparing the returns and when I needed to verify information later. The tax hit was significant for me (about $180k on a $850k trust), but with proper planning and the right professional help, it was manageable. You're not as helpless in this situation as it might feel right now.

Don't forget to check if you had any after-tax contributions to your original 401k! If you did, part of your distribution might be non-taxable even without considering the rollover status. This will be shown in Box 5 of your 1099-R as the "Employee contributions/Designated Roth contributions or insurance premiums.

Great question! Yes, you'll definitely receive a 1099-R form, and it will come from your old 401k plan administrator (not Fidelity). Since you did a direct trustee-to-trustee transfer, this should be a non-taxable event, but you still need to report it on your tax return. The key thing to look for when you receive the 1099-R is Box 7 - the distribution code. For a direct rollover like yours, it should show code "G". If it shows anything else (like "1" or "7"), you'll want to contact your old plan administrator to get it corrected, as those codes could trigger unnecessary taxes. You should receive the 1099-R by January 31st, so definitely wait for it before filing your taxes. Even though the rollover isn't taxable, the IRS needs to see that you properly reported the distribution and rollover on your return. Most tax software will walk you through this process once you have the form in hand. Congratulations on making a smart move with the direct transfer - that's the cleanest way to avoid any potential issues with the 60-day rollover rule!

Great question! I actually went through a similar situation when my spouse worked for a county in Connecticut while we lived in New Hampshire. The good news is that your strategy should generally work, but there are a few things to keep in mind. Once you roll the 457 into an IRA, it typically becomes subject to the tax laws of your state of residence when you take distributions, not where it was originally earned. The rollover essentially "cleanses" the connection to the original state and employer. However, I'd recommend a few precautionary steps: 1. **Document everything**: Keep records of the rollover process and make sure all your residency documentation is rock solid (driver's license, voter registration, etc.) in your no-income-tax state. 2. **Check for specific state provisions**: Some states have tried to claim tax on government employee retirement benefits even after rollover. Since you mentioned High Tax State is aggressive, it might be worth having a tax professional review their specific statutes. 3. **Consider timing**: You might want to wait until after your wife stops working in High Tax State before doing the rollover, just to avoid any potential complications during the transition. The IRS treats rolled-over 457 funds as regular IRA money, and most states follow this treatment. But given that this involves a government 457 plan and an aggressive tax state, a consultation with a tax pro familiar with that specific state's rules would give you peace of mind. Better to spend a few hundred on advice now than deal with an audit later!

This is a great question that many government employees face! The general principle is that retirement distributions are taxed by your state of residence at the time of withdrawal, not where the money was originally earned. Once you roll the 457 into an IRA, it should be treated like any other IRA for tax purposes. However, since you mentioned High Tax State is aggressive with taxes, I'd recommend being extra careful about establishing and maintaining clear residency in your no-income-tax state. Some states have specific provisions for government retirement benefits, and you don't want to give them any reason to claim you as a resident. A few key steps: make sure all your official documents (driver's license, voter registration, bank accounts) are in your no-income-tax state, spend the majority of your time there, and keep good records. The rollover should effectively sever the connection to the original state, but documentation is your friend if questions ever arise. Given the complexity and the fact that this involves a government 457 plan from an aggressive tax state, it might be worth consulting with a tax professional who's familiar with multi-state retirement planning. A few hundred dollars in professional advice now could save you thousands in potential issues down the road.

Does anyone know if FreeTaxUSA handles backdoor Roth conversions better than TurboTax? I'm about to do my first conversion and trying to decide which software to use.

Just wanted to add my experience for anyone else dealing with this confusion. I did my first backdoor Roth conversion last year and had the exact same panic when I saw the blank line 8 on Form 8606! What helped me understand it was realizing that the IRS views this as a "nondeductible contribution followed by a distribution" rather than a direct "conversion." So the form is structured to track your basis (the after-tax money you put in) and separate it from any earnings. In your case, you contributed $17,300 of after-tax money, it earned $7.25, and then you distributed $17,300 of it to convert to Roth. The $7.25 that's still sitting in your traditional IRA will be fully taxable if/when you convert it later since it's all earnings. One thing to keep in mind for future years - if you plan to do backdoor Roth conversions regularly, try to convert quickly after making the contribution to minimize any earnings that build up. Makes the tax reporting much cleaner!