One thing that hasn't been mentioned yet - your mom should check if the 401k plan is governed by ERISA (most employer plans are). If so, there are specific notice requirements under ERISA Section 104(b)(4) that the plan administrator must follow before making distributions. Request a copy of the Summary Plan Description (SPD) and plan document from Merrill Lynch or her former employer. These documents will outline the exact procedures that should have been followed for address verification and involuntary distributions.

This is exactly the kind of situation where you need to be extremely persistent and methodical. I went through something similar with my father's 403b account that was liquidated by Vanguard without proper notice. Here's what I'd recommend doing immediately: 1. Send a certified letter to Merrill Lynch demanding ALL records related to the account closure - including internal notes, address verification attempts, dates of all communications, and proof of delivery for any mail they claim to have sent. 2. File complaints with multiple agencies simultaneously: FINRA, CFPB, your state's Attorney General consumer protection division, and the Department of Labor (since this appears to be an ERISA plan). 3. Contact your mom's former employer's HR department - they may have records of the proper procedures that should have been followed and can put pressure on Merrill Lynch as the plan sponsor. 4. Document the financial impact: calculate not just the taxes and penalties, but also the lost retirement savings and any other costs (accounting fees, time off work, etc.). The key is creating a paper trail that shows Merrill Lynch failed to follow proper procedures. In my dad's case, we discovered they had only attempted to contact him through regular mail to an old address, despite having his updated contact information on file. Once we proved this pattern of negligence, they reversed the entire distribution. Don't let them brush this off - retirement accounts have special protections precisely because of situations like this.

22 Has anyone actually calculated the dollar value of those benefits? I mean, 1 week vacation + 6 sick days + holidays is probably around 15-16 paid days off? At $26/hr that's like $3,300 in benefits (assuming 8hr days). Plus you're paying extra 7.65% in SE tax as 1099, which on $54k annual is about $4,100. So you're down like $800 before any deductions. You'd need enough legitimate business expenses to make up for that difference.

One thing that might tip the scales in favor of 1099 is the control and flexibility it gives you. As a contractor, you typically have more leverage to negotiate rates in the future, set your own schedule, and potentially take on additional clients to increase income. The entrepreneurial experience alone can be valuable for your career development. However, don't underestimate the administrative burden. You'll need to track all expenses meticulously, handle your own bookkeeping, and manage quarterly tax payments. Consider whether you're prepared for that extra work or if you'd need to hire help (which cuts into your savings). Also worth noting - make sure this arrangement truly qualifies as 1099 work under IRS guidelines. If you're doing the same job with the same level of control from your employer, they might be misclassifying you to avoid paying their portion of payroll taxes and benefits. The IRS takes worker misclassification seriously.

As a fellow small business owner, I completely understand the temptation to chase those higher personal CD rates - I've been in the exact same situation! But after reading through all these responses, I think everyone's absolutely right about keeping things separate. I actually just went through this decision process last month with about $75k in business cash. Initially I was looking at personal CDs offering 4.3% vs business CDs at 3.6%. That 0.7% difference seemed significant until I really thought through the complications: 1. The tax reporting nightmare - having to explain to my accountant why business money is generating personal 1099-INTs 2. Potential piercing of corporate veil issues if the IRS questions fund commingling 3. The bookkeeping headache of tracking business money in personal accounts I ended up going with a business money market account at Ally that's currently paying 3.8% with no minimum balance. Not quite as high as those personal rates, but the peace of mind is worth it. The Treasury bill suggestion from Chloe is brilliant too - I hadn't considered that option. You can buy them directly through TreasuryDirect.gov for business accounts, and they're paying around 4.5-4.8% right now for 3-12 month terms. Trust me, the extra paperwork and potential compliance issues aren't worth the few hundred dollars you might save annually on interest rates.

I really appreciate everyone's detailed responses here - this has been incredibly helpful in thinking through the implications I hadn't fully considered. The consensus is pretty clear that mixing business and personal funds, even with good intentions, creates way more problems than it's worth. After reading through all the advice, I think I'm going to explore a few options: 1. The Treasury bills suggestion sounds really promising at 4.5-4.8% - that's actually better than the personal CDs I was eyeing, and it keeps everything properly in the business realm. 2. I'll also look into some of the credit unions mentioned for business money market accounts. The flexibility of not being locked into a CD term might actually be better for our situation anyway, especially if we need the funds sooner than expected for that office expansion. 3. I'll definitely avoid the temptation to chase those personal CD rates. The potential audit flags, accounting complications, and corporate veil issues just aren't worth the marginal rate difference. Thanks for saving me from what could have been a costly mistake! Sometimes the "clever" solution isn't actually the smart solution. Better to keep things clean and compliant from the start.

This is such a helpful thread! I'm dealing with a similar situation where my client filed Form 966 but now wants to continue operations. One thing I wanted to add from my experience - make sure to document the timing of when the abandonment decision was made versus when any liquidating distributions might have already occurred. If partial distributions were made after the Form 966 filing but before the abandonment, those might need special treatment. The IRS could view those as liquidating distributions even if the overall plan is later abandoned. I learned this the hard way when a client had already distributed some assets to shareholders before changing their mind. Also, keep detailed records of the corporate decision-making process. The IRS may want to see evidence that the abandonment was a legitimate business decision and not just tax avoidance. Board minutes, shareholder resolutions, and documentation of the changed business circumstances can all be important if you're ever questioned about the abandonment. The guidance about sending a statement to the IRS service center is spot on - just make sure it's comprehensive and references all the relevant dates and corporate actions.

Great thread everyone! I'm a tax advisor who's handled several Form 966 reversals, and I wanted to add a few practical points that might help others in similar situations. First, timing is crucial when documenting the abandonment. The IRS generally wants to see that the decision to abandon was made for legitimate business reasons, not just to avoid tax consequences. Make sure your corporate minutes clearly state the business justification for continuing operations. Second, if you're in a state that requires annual franchise tax filings, check whether your Form 966 filing affected your state tax status. Some states automatically change your filing requirements once they're notified of dissolution plans, so you may need to update your state tax registration as well. Finally, consider the impact on any tax elections that might have been made in conjunction with the liquidation plan. For example, if you made a Section 338 election or any other special elections related to the liquidation, you'll need to evaluate whether those need to be addressed separately. The advice about sending a signed statement to the IRS service center is absolutely correct - just make sure it includes the EIN, original Form 966 filing date, and a clear statement that the plan has been formally abandoned by appropriate corporate action with the date of that action.

One thing to watch out for - make sure you're filling out Form 8332 correctly if you're the noncustodial parent claiming the child! A friend of mine got audited because they missed this step. With 50/50 custody you technically both qualify as custodial parents, but for tax purposes, whoever has the child for the most nights during the year is considered the custodial parent. If it's exactly equal, then the parent with the higher AGI is considered the custodial parent by IRS tiebreaker rules.

Just wanted to add another perspective as someone who's been through this exact situation. My ex and I started with the alternating years approach, but switched to each claiming one child consistently after the first year. Here's why: alternating years means one of you gets a much smaller refund (or even owes money) every other year, which can mess with your budgeting. When you each claim one child every year, your tax situation stays more predictable. Also, don't forget about things like FSA contributions for medical expenses or dependent care. If you're both contributing to FSAs for the kids, you'll want to coordinate that with whoever's claiming which child. One more tip - start tracking which nights each child stays with each parent NOW, even if you think it's exactly 50/50. Life happens, kids get sick and stay extra nights with one parent, school schedules change, etc. Having actual records will save you headaches if the IRS ever questions your filing.