$172 is definitely above the threshold you need to report. I work at a bank (not tax advice) and we send 1099-INTs to both customers AND the IRS for anything over $10. The IRS computer systems automatically match these documents against tax returns, so they'll know this income wasn't reported. Here's what typically happens: The IRS will eventually (6-9 months later) send you a CP2000 notice saying they found unreported income. They'll calculate the additional tax, add interest from the original due date, and possibly a small penalty. Then you'll have to respond and pay the amount. It's much simpler to just amend now before that happens. Plus it looks better if you correct the mistake voluntarily rather than waiting for them to find it.

You absolutely should amend your return for the $172 interest income. I went through something similar last year and learned the hard way that the IRS automated matching system is very thorough. Here's the reality: Your bank already sent a 1099-INT to the IRS showing that $172 in interest income. When the IRS runs their matching program (usually 6-12 months after filing season), they'll compare what you reported against all the 1099s they received. The discrepancy will trigger an automated notice. At your income level ($76k), you're probably in the 22% federal bracket, so we're talking about maybe $38 in additional federal tax, plus California state tax (probably around 6-8% depending on your exact bracket). So total additional tax would likely be under $60. The key benefit of amending voluntarily is that you avoid the failure-to-report penalty and minimize interest charges. If you wait for the IRS to find it, you'll pay interest calculated from the original due date plus potential penalties. Form 1040-X isn't too complicated for a straightforward addition like this. Just report the additional interest income and pay the difference. Much better to handle it proactively than deal with IRS notices later.

I'm dealing with a very similar situation right now! Inherited my grandmother's IRA in 2021 and just discovered I've been missing RMDs. Reading through everyone's experiences here has been incredibly helpful. One thing I wanted to add - when I called my IRA custodian (Fidelity), they were actually pretty helpful in calculating what my missed RMDs should have been for each year. They have worksheets and can walk you through the calculations based on your account balance and the IRS life expectancy tables. Also, something to keep in mind - if you're taking multiple years of RMDs all at once in 2024, you might want to consider spreading the withdrawals across a few months rather than taking it all in one lump sum. It won't change the tax implications, but it might help with managing the cash flow and any potential investment timing issues. The penalty waiver route seems to be working for people, especially given all the confusion around the SECURE Act changes. I'm planning to file Form 5329 for each missed year once I take my distributions.

One thing I'd add to all the great advice here is to be careful about the timing of when you take these missed distributions. Since you're taking multiple years' worth of RMDs all at once in 2024, this could potentially push you into a higher tax bracket for the year. You might want to consider doing some basic tax planning first - maybe run the numbers to see if it makes sense to take some distributions in December 2024 and the rest in January 2025 to spread the tax impact across two years. Obviously you want to get compliant as soon as possible, but a few weeks of timing difference could potentially save you significant money if it keeps you out of a higher bracket. Also, don't forget that you can have taxes withheld directly from the IRA distributions to help cover the tax bill. Most custodians can set this up easily when you request the withdrawals. Given that you'll likely owe more taxes than usual this year, having some withheld upfront can help avoid an underpayment penalty. The penalty waiver approach definitely seems to be the way to go based on what others have shared. The IRS has been pretty reasonable about these inherited IRA situations given all the rule changes.

Don't forget to look at your state taxes too. Some states are more generous with deductions for educators and self-employed individuals than the federal government. For example, my state allows additional deductions for educational professionals beyond what federal allows. Also, if you're self-employed even part-time, don't forget you can deduct health insurance premiums as well! I always missed that one until my accountant pointed it out.

Based on your situation, here are the key points for your tax filing: **For your private tutoring income ($560):** - Report this on Schedule C as self-employment income - You can deduct business expenses, but only the portion used for business **Equipment allocation is crucial:** Since you use the same equipment for both your W-2 job (learning center) and private tutoring, you need to split the costs. If you estimate 40% private tutoring use, you can deduct 40% of the $1,140 ($456) on Schedule C. **You have two depreciation options:** 1. Regular depreciation over 5-7 years 2. Section 179 election to deduct the full business portion immediately (since your amount is small, this might be simpler) **Important considerations:** - Keep detailed records of your usage percentage calculation - The educator expense deduction doesn't apply to private tutoring - Make sure your Schedule C deductions don't exceed your self-employment income - Consider quarterly estimated payments if you continue tutoring regularly **Documentation tip:** Create a simple log showing hours worked for each type of tutoring to support your allocation percentage. This will be valuable if the IRS ever questions your deduction. The equipment purchases right when you started private tutoring actually supports your business use claim, so keep those receipts and purchase dates well documented!

This thread has been incredibly helpful! I'm in a similar situation and was getting overwhelmed by conflicting information online. One thing I want to add based on my research: make sure you understand the state-level implications too, not just federal. Some states don't recognize the S corp election for state tax purposes, which means you might be taxed as an LLC at the state level and an S corp at the federal level. This creates additional complexity for tax filings and record-keeping that most online guides don't mention. I found this out when I called my state's department of revenue, and it completely changed my timeline. In my state (California), LLCs pay an annual franchise tax regardless of the S corp election, plus they have different filing requirements. So while the federal side might be "easy," the state side added unexpected costs and compliance requirements. Before finalizing your operating agreement modifications, I'd recommend checking with your state tax authority to understand how they treat LLC-to-S corp elections. It might influence some of the provisions you include in your agreement, especially around distributions and member responsibilities. Has anyone else run into state-specific complications with their LLC S corp elections?

This is such a comprehensive discussion! As someone who recently went through this exact process, I want to emphasize how important it is to get the operating agreement modifications right from the start. One thing I learned the hard way: even though you're still legally an LLC, the IRS can revoke your S corp election if your operating agreement contains provisions that violate S corp requirements. I initially used a standard LLC template and almost lost my election status because it included language allowing different classes of membership interests. The key modifications I had to make were: 1) Removing any language about special allocations or disproportionate distributions, 2) Adding provisions requiring reasonable salary before distributions, 3) Including language about maintaining single-class-of-stock equivalent structure, and 4) Adding annual compliance review requirements. What saved me was working with an attorney who specialized in S corp elections for LLCs. Yes, it cost more upfront than using a template, but considering that losing S corp status could cost thousands in additional taxes, it was worth the investment. The attorney also helped me understand ongoing compliance requirements that most online guides don't cover. For anyone considering this route: the federal election might be "easy to file," but maintaining S corp status requires ongoing attention to both your operating agreement provisions and your actual business practices. Don't just file the election and forget about it!

Quick heads up - if your trust distribution was large (over $15,000 in 2022/2023), make sure the trustee isn't confusing the 65-day rule with gift tax reporting. I've seen this happen where trustees think the beneficiary needs to report large distributions as gifts, but trust distributions aren't considered gifts for tax purposes (the original transfer to the trust may have been). Trust distributions are generally reported as income by the beneficiary (unless they're distributions of principal, which usually aren't taxable). The gift tax annual exclusion amount ($17,000 for 2023) isn't relevant to trust distributions.

I'm dealing with a similar situation and wanted to share what I learned from my CPA. One thing that hasn't been mentioned here is the importance of checking whether your trust made a "distributable net income" (DNI) election. This can affect how much of your distribution is actually taxable income versus a return of principal. In my case, the trust distributed $35,000 to me in February 2023 under the 65-day rule, but only about $22,000 of it was actually taxable income - the rest was a distribution of trust principal (which isn't taxable to me). This shows up clearly on the K-1, but I almost missed it and was preparing to pay taxes on the full amount. The timing rule everyone discussed is absolutely correct - you report in the year you receive the money regardless of the trust's election. But don't forget to look at the character and taxability of the distribution itself. Sometimes trustees don't explain this distinction clearly.