Don't forget when you file your taxes with a missing or reconstructed cost basis, you need to check the appropriate box on Form 8949. There's literally a checkbox for "Adjustment code B" which is for when the cost basis wasn't reported to the IRS. Then attach your basis calculation to your return. Without proper documentation, the IRS might assume your basis is $0 and tax you on the entire proceeds!

I've been through this exact scenario with inherited stock from the 1980s. Here's what worked for me after getting completely overwhelmed by all the corporate actions: First, don't panic about getting it "perfect" - the IRS understands that reconstructing basis from decades ago is challenging. The key is making a reasonable, documented effort. Start with your $1,100 original investment and work chronologically through each corporate action. For each stock split, divide your per-share basis accordingly. For the acquisitions, you'll need to find the exchange ratios (usually available in SEC filings or company investor relations). The spinoff is trickiest - you'll need the basis allocation percentage between the parent and spun-off company. Pro tip: Call the current company's shareholder services department. They often have detailed historical information specifically for tax basis calculations, including basis allocation percentages for spinoffs. I was surprised how helpful they were. Document everything you find and your calculation method. Attach this to your return along with Form 8949 using the appropriate adjustment code. Even if your numbers aren't perfect, showing good faith effort with documentation will protect you if the IRS has questions. The worst thing you can do is just guess randomly or report zero basis - that guarantees problems later!

Random question but related - I'm actually doing the opposite (Traditional to Roth recharacterization). Anyone know if the same rules apply in reverse? My earnings in the Traditional were like $12.

Just wanted to confirm what others have said - you're absolutely right to be confused because recharacterization rules are pretty complex! But the good news is that those $8 in earnings won't create any current-year tax issues for you. When you recharacterize from Roth to Traditional, the IRS treats it as if you made the Traditional IRA contribution originally. Both your $2500 contribution and the $8 in earnings will simply become part of your Traditional IRA balance. No current-year income to report, no distribution treatment, and no automatic need for Form 8606. The only thing you'll need to figure out is whether your Traditional IRA contribution will be deductible based on your income and the fact that you mentioned having a 401k at work. If it's fully deductible, you just take the deduction on your tax return. If it's non-deductible (because you're over the income limits), then you'd file Form 8606 to track your basis - but that's about the contribution itself, not those earnings. Fidelity should handle all the paperwork correctly and send you the proper forms showing the recharacterization. The earnings piece really is the easy part of this whole process!

I'm confused about the child tax credit situation with Form 8332. If I let my ex claim our kids using this form, does that mean they get ALL the tax benefits? Or do I still get some of them?

Just want to add one more tip that saved me a lot of trouble - make sure you keep detailed records of when you give the completed Form 8332 to your ex. I take a photo of the signed form and send it via email so there's a timestamp, then also give them the original. Last year my ex lost the form right before filing and we had to scramble to get another one signed. Having that digital backup with the date stamp helped prove I had provided it on time. Also helped when the IRS had questions later - I could show exactly when the form was completed and delivered. The whole process is stressful enough without having to worry about lost paperwork!

4 Has anyone dealt with the failure-to-file penalty for Form 1065 specifically? I'm in a similar situation but with a multi-member LLC, and we're getting hit with $2,100 per partner per month for late filing! It's absolutely crushing us.

I've been through this exact nightmare with my LLC! Here's what I learned that might help: First, don't panic - you have options. The IRS penalty system is harsh but there are legitimate ways to get relief. Since you're a single-member LLC filing Schedule C, you're likely dealing with failure-to-file and failure-to-pay penalties on your personal return. Your current accountant sounds unreliable if they've consistently filed late despite claiming to file extensions. Extensions only give you time to file, not to pay - so if you owed taxes, you'd still get hit with penalties even with valid extensions. Here's my action plan that worked: 1) Get your IRS transcripts immediately to see what was actually filed and when 2) Fire your current accountant - they're clearly not handling your situation properly 3) Look into First Time Penalty Abatement for at least one tax year 4) Document everything about your previous accountant retiring and the chaos that caused 5) Consider "reasonable cause" arguments for the other years The key is being proactive. I waited too long hoping my accountant would fix things, and it just got worse. You might be surprised how much penalty relief is available if you approach it systematically. Don't let the intimidating notices paralyze you - there's definitely a path forward here.

Something nobody's mentioned yet - if your husband's getting this stipend without any tax docs, his employer might be misclassifying this payment to avoid payroll taxes. That could cause bigger problems down the road. If he's truly an employee (W-2), ALL compensation should be reported on his W-2, including stipends. The only exception would be properly documented reimbursements under an accountable plan.

I handle payroll for a small company and we've had this exact issue. If the stipend is a true reimbursement under an accountable plan it should NOT be on his W-2. But there are strict rules - he must submit expense reports/mileage logs to his employer, have a business purpose for each expense, and return any excess money not used for business expenses. If those requirements aren't met, it's just taxable income that should be included on his W-2.