Good to hear your income is well within the Roth limits! Based on everything discussed in this thread, it sounds like you have a clear path forward: 1) Report the full $14,300 taxable amount from your 1099-R as ordinary income 2) No early withdrawal penalty due to the 1D distribution code 3) Your Roth contributions are separate transactions and should be reported normally One small administrative note - when you're entering this in TurboTax, make sure you answer "No" to any question about whether this was rolled over to another retirement account. The software sometimes tries to be helpful but can create confusion with these inheritance situations. Also, keep good records showing the inheritance and the 1099-R in case you ever need to explain the source of funds to the IRS. Inheritance distributions can sometimes trigger additional scrutiny, especially when there are subsequent retirement contributions, but having the proper documentation makes everything straightforward. Sounds like you handled everything correctly from a planning perspective - just a matter of getting the tax reporting right now!

Just wanted to add one more consideration that might be helpful - since you mentioned using some of the inheritance for bathroom renovations, make sure you're keeping detailed records of how you allocated those funds. While it doesn't change the tax treatment of the 1099-R distribution, having clear documentation of what portion went to Roth contributions versus home improvements can be useful for your own records. Also, for future reference, if you ever inherit retirement accounts again, you might want to consult with a tax professional before making the distribution decision. Sometimes there are strategies like setting up an inherited IRA that can provide more flexibility in timing distributions to manage tax brackets over multiple years. In your case, taking the lump sum made sense given your plans, but it's worth knowing all the options. The main takeaway from this thread seems clear though - you'll report the $14,300 as ordinary income, no penalties due to the 1D code, and your Roth contributions are completely separate transactions. Sounds like you're on the right track!

Quick warning from someone who's been audited over this exact issue - if your equipment rental income is substantial compared to your service income, the IRS might challenge whether it's genuinely "rental" or just part of your service business. For example, if you charge $500 for your services and $2000 for equipment on the same job, that might raise flags. If you're regularly in the business of renting equipment (even to people who don't hire your services), that strengthens your position. Make sure you have documentation showing fair market value for your equipment rentals. Having rate sheets showing standard pricing helps. Also document maintenance costs, depreciation, and other expenses associated with the equipment ownership separately from your service business expenses.

This is such a common issue in our industry! I'm a lighting technician who also rents out my LED panels and control boards. I've been dealing with the same frustrating situation where some companies just don't want to be bothered with issuing separate forms. One thing that's helped me is creating a simple template email I send to accounting departments right after completing a job. I include the invoice breakdown and explicitly request they issue separate forms - one 1099-NEC for my technical services and one 1099-MISC for equipment rental. I send this within a week of the job while it's still fresh in their system. I also started requiring a deposit specifically for equipment rental at booking, which creates a clearer paper trail showing the rental component is separate from services. This has made it much easier when I need to demonstrate to the IRS that these are truly distinct income streams. The tax savings really do add up - last year I saved about $2,800 in self-employment taxes by properly categorizing my rental income. It's definitely worth the extra effort to get this right!

Friendly reminder to also check your state tax requirements! Not all states tax capital gains the same way as the federal government. Some states fully tax capital gains as ordinary income, some have their own capital gains rates, and a few don't tax capital gains at all.

Great question about the Washington capital gains tax! You're correct that Washington's new 7% capital gains tax (RCW 82.87) only applies to certain types of capital assets, and personal vehicles are specifically excluded. The tax applies to gains from stocks, bonds, business interests, and similar financial assets, but not to personal property like cars, boats, or household items. So for your car sale situation, you'd only need to worry about federal capital gains tax, not the Washington state tax. This is actually one of the few advantages of Washington not having a general state income tax - most capital gains on personal property aren't subject to additional state taxes here. Just make sure you keep good records showing it was a personal vehicle and not held for business purposes, since that distinction could matter for other tax implications.

Great question! You're absolutely correct to use the 2016 tax assessment percentages. The IRS guidance is clear that the allocation should be based on values "at the time you buy it," not when you convert to rental use. I went through this exact same process last year with a property I bought in 2018 and converted to rental in 2023. Even though the county's land/building percentages had shifted significantly over those years, my CPA confirmed that using the 2018 assessment percentages was the proper approach. One tip: when you're preparing your depreciation schedule, make sure to clearly document your calculation method and reference Publication 527. I created a simple spreadsheet showing: - Original purchase price: $X - 2016 county assessment land percentage: Y% - Land value (non-depreciable): $X × Y% - Building value (depreciable): $X × (100% - Y%) This documentation has been helpful for my records and gives me confidence that I followed IRS guidelines correctly. The fact that you're thinking through this carefully upfront will save you headaches later!

This is such a timely question! I just went through this exact scenario with a duplex I bought in 2019 and converted to rental property last year. Like you, I noticed the county assessments fluctuated quite a bit - from 18%/82% in 2019 to 23%/77% in 2024. After consulting with my tax advisor, we definitively used the 2019 assessment percentages. The key phrase in Publication 527 that sealed it for me was "at the time you buy it" - this clearly establishes that your cost basis allocation should reflect the property's composition when you acquired it, not when you put it into service as a rental. Here's what I did for documentation: 1. Downloaded and saved the 2019 county assessment showing the land/building breakdown 2. Created a calculation worksheet showing: Purchase price × 2019 land percentage = non-depreciable land value 3. Kept a copy of the relevant section from Publication 527 with my tax records One thing to watch out for - make sure you're looking at the assessment that was in effect for your 2016 tax year, not necessarily the assessment date closest to your purchase date. Sometimes counties do mid-year reassessments that might not reflect the values at your time of purchase. You're definitely on the right track using the 2016 percentages!

Miranda, I'm so glad you caught this in time! I went through almost the exact same situation with my father-in-law two years ago. He had signed with a company called "Tax Resolution Pro" and they were about to withdraw $9,800 from his account. Here's what we did that worked: We called them immediately and said "We are exercising our right to cancel under the 3-day rescission period as outlined in section [X] of the contract dated [date]." Be very specific about referencing the contract language. We also contacted his bank simultaneously to put a stop payment on any pending ACH transactions from that company. The key thing is to be persistent but polite. These companies will often try to talk you out of canceling by saying things like "you'll lose this special rate" or "your case will be harder to resolve later." Don't fall for it. The IRS programs aren't going anywhere, and you don't need to pay thousands to access them. After we canceled, we helped him set up a payment plan directly with the IRS online. It took about 20 minutes and cost $31 instead of nearly $10,000. He's been making his monthly payments for two years now with no issues. Document everything you do today - take screenshots of emails, save voicemails, keep records of who you spoke with and when. This paper trail will protect you if they try to claim the cancellation wasn't properly submitted. You're being a great advocate for your mom. Don't let them make you feel bad about canceling - you're absolutely doing the right thing.

Miranda, I'm so sorry your family is dealing with this stress! As someone who works in elder financial protection, I see these predatory tax resolution companies targeting vulnerable seniors all the time. The good news is you still have options even on the third day. Here's exactly what to do RIGHT NOW: 1) Call American Tax Services immediately - don't wait another hour. Say: "I am exercising my right to cancel this contract under the 3-day rescission period per the contract dated [insert date]. This cancellation is effective immediately." 2) While on that call, send an email to them with the same cancellation language. Get a read receipt if possible. 3) Contact your mom's bank ASAP to stop any pending ACH/electronic payments from American Tax Services. Most banks can place a stop payment immediately over the phone. 4) Send a certified letter today with the same cancellation notice - go to the post office before they close. Don't let them guilt trip you or use scare tactics about "losing your chance" or "making things harder with the IRS." These are manipulation tactics. The IRS has consistent programs available year-round, and working directly with them is always better than paying these inflated fees. Once you've canceled, the IRS Fresh Start program has several options for your mom including payment plans, hardship deferrals, and potentially reducing the total amount owed if she qualifies. You've got this - stay strong and don't let them intimidate you!