Has anyone considered the downside of the NUA strategy? Your mom would be keeping a HUGE concentration in a single stock (BOA) which carries significant risk. If BOA stock tanks after she takes the distribution but before she sells, she could lose a lot of money. The tax savings from NUA treatment has to be weighed against the risk of being so heavily invested in one company. My father-in-law did the NUA strategy with his GE stock in 2016, thinking the tax savings was worth it. The stock then crashed, and he lost way more than the tax savings would have been. Maybe consider doing NUA for just a portion of the BOA shares to reduce concentration risk?

One critical detail that hasn't been fully addressed - your mom needs to be very careful about the timing of when she actually retires and takes the distribution. The NUA strategy requires that the entire 401(k) balance be distributed within the same tax year as a "triggering event" like separation from service. If she's planning to retire mid-year, she might want to consider whether it makes sense to retire at the beginning of the year to have more time to execute the strategy, or wait until January of the following year. This timing can significantly impact her tax situation, especially if she has other income in the retirement year. Also, make sure she understands that once she takes the BOA shares into a taxable account, she'll need to track the cost basis very carefully for when she eventually sells. The IRS will want clear documentation showing the original purchase prices versus the fair market value at distribution. Her 401(k) administrator should provide a detailed breakdown, but it's crucial to keep those records safe. Has her advisor calculated exactly what her tax liability would be on the cost basis portion? That immediate tax bill could be substantial and needs to be planned for.

Quick tip for everyone - SAVE YOUR RECEIPTS! I learned this the hard way when I got audited two years ago over my scholarship tax treatment. Make sure you keep: - All scholarship/grant award letters showing amounts and conditions - Course syllabi that list required materials - Receipts for everything you're counting as a qualified expense - Any communication from your school about required equipment The IRS specifically questioned my computer purchase until I showed them the department requirement letter stating all students needed a laptop with certain specifications. Without that documentation I would've been hit with additional taxes plus penalties.

Great discussion everyone! Just want to add one more thing that might help @Giovanni Ricci and others - the IRS has a specific worksheet in Publication 970 (Tax Benefits for Education) that walks you through exactly how to calculate the taxable vs. non-taxable portions of your scholarship. The key distinction is that scholarship money used for "qualified education expenses" (tuition, fees, required books, supplies, and equipment) is tax-free, while money used for anything else (room, board, travel, research, personal expenses) is taxable income. For your specific situation Giovanni - if your program explicitly requires the laptop and software, keep documentation showing that requirement. The $650 in textbooks should definitely qualify if they were required for your courses. The housing stipend portion you mentioned is indeed taxable as you suspected. One tip that saved me headaches: create a simple spreadsheet showing your total scholarship amount, then subtract out each qualified expense with supporting documentation. Whatever's left over is your taxable scholarship income that you'll need to report as "other income" on your tax return.

I just wanted to add my perspective as someone who went through this exact situation about 6 months ago. The Code 420 dependent verification really threw me off initially because nobody explains that "examination" and "audit" have different technical meanings in IRS-speak. What really helped me was creating a simple spreadsheet tracking all my dependent-related expenses for the year - things like medical copays, school fees, clothing purchases, etc. I didn't need to provide every single receipt, but having that organized overview made it much easier to demonstrate that I was providing more than 50% support. One tip I haven't seen mentioned yet: if you have any joint custody situations or complex family arrangements, include a brief written explanation along with your documents. The IRS reviewers appreciate context, especially when living situations aren't straightforward. My timeline was almost exactly 9 weeks from mailing to resolution, and my full refund was released once they completed the verification. The waiting is definitely the hardest part, but it sounds like you have all the right documentation ready to go. Just remember - they're not trying to deny legitimate claims, they're just verifying eligibility due to increased scrutiny on tax credits. You've got this!

I went through this exact same Code 420 verification process about 4 months ago and can definitely relate to the confusion about terminology! The IRS rep was absolutely right - it's technically an "examination" but it's really just dependent verification, not a full audit of your entire return. Here's what worked for me: I created a simple checklist based on the letter they sent and gathered documents for each requirement. For relationship proof, I used birth certificates. For residency proof, I included school enrollment records and medical records that showed my address. For support proof, I gathered receipts for major expenses like daycare, medical copays, school supplies, and even some grocery receipts to show I was covering daily needs. The process took exactly 7 weeks from when I mailed everything back (certified mail with return receipt) to when my refund was released. One thing that really helped was including a brief cover letter that said something like "Enclosed please find the requested documentation for my Code 420 dependent verification" and then listed each document and which child it pertained to. Don't stress too much about having perfect documentation for every single expense - they understand that families don't keep receipts for everything. Focus on showing clear proof of relationship, that the kids live with you, and that you're providing their primary financial support. You already have the key documents gathered, so you're well-prepared! The waiting is definitely the hardest part, but these verifications are routine and straightforward when you respond promptly with organized documentation.

I think this is actually a glitch in their system. The exact same thing happened to me a few months ago. The verification link disappeared from my account but I still needed to verify. I ended up having to call and wait on hold for ages, but the agent told me it's a known issue with their system - sometimes the verification link vanishes even though verification is still required. Total incompetence on their part.

I had this exact same issue last year! The verification link disappeared from my account even though I still needed to verify. Here's what worked for me: 1. Try the direct ID.me link at idverify.irs.gov - sometimes it works even when the link in your account is gone 2. Call the verification line (800-830-5084) at exactly 7am Eastern when they open - I got through in about 15 minutes that way 3. If calling doesn't work, schedule an in-person appointment at your local IRS office through their website The phone verification was actually pretty straightforward once I got through. They asked me questions about my previous tax returns and verified me right over the phone. My refund was processed within 10 days after that. Don't panic about the 30-day deadline - as long as you're actively trying to verify, they usually work with you. The system is just incredibly broken and glitchy. Keep trying different methods until something works!

For what it's worth, I think your accountant dropped the ball here. If he knew he needed your authorization to file an extension, he should have proactively reached out for it rather than just letting the deadline pass. Every accountant I've worked with automatically files extensions if they think there's any chance of missing a deadline. I'd seriously consider finding a new accountant who specializes in small business/partnership returns. A good accountant should have warned you about the March 15 deadline for partnerships (it's different than individual returns) and should be helping you with the penalty abatement rather than just shrugging it off.

I went through this exact situation with my LLC last year and successfully got the penalty waived. Here's what worked for me: I called the IRS using the number on the penalty notice (not the general 1-800 number). Yes, I was on hold for about 90 minutes, but it was worth it for the immediate resolution. When I got through, I was polite but direct: "I'm calling to request First-Time Penalty Abatement for notice [penalty notice number]. This was my first partnership return, I have a clean filing history, and I was unaware of the March 15th deadline." The representative pulled up my account, confirmed I had no prior penalties, and removed the entire $820 penalty on the spot. No paperwork, no waiting weeks for a response. The key is being specific about "First-Time Penalty Abatement" - don't just ask them to "waive the penalty." One tip: call early in the morning (8 AM EST) when they open. Hold times are typically shorter then. And definitely consider switching accountants - yours should have filed an automatic extension or at minimum warned you about partnership filing deadlines being different from individual returns. Good luck! This is very fixable.