I've seen this happen with TurboTax plenty of times. The software is just following the tax code, which says you need to pay throughout the year. What most people dont know is that your inheritance itself isnt taxable income! But if you sold investments or property that you inherited, the gains are taxable. And there's something called "step-up in basis" where inherited assets get valued at the date of death, not the original purchase price. So only gains after that point are taxable. Check if maybe you sold some stocks or something after inheriting them? That would explain the capital gains tax. But either way, the penalty is about WHEN you paid, not IF you paid enough total.

Great thread everyone! I'm dealing with a similar situation and this has been super helpful. One thing I want to add is that you can also use Form 2210 to request a waiver of the underpayment penalty if you had reasonable cause - like a sudden change in income, casualty loss, or other circumstances beyond your control. Also, for anyone making estimated payments, remember that the IRS allows you to pay online through EFTPS (Electronic Federal Tax Payment System) or IRS Direct Pay. Just make sure to keep records of when you made each payment since the timing is so important for avoiding penalties. The safe harbor rules mentioned earlier are really key - if your AGI last year was under $150k, you just need to pay 100% of last year's tax liability through withholding and estimated payments to avoid any penalty, regardless of how much you actually owe this year.

Anyone else notice the IRS has been taking longer to process CAA-submitted W7 applications lately? Last year I was telling clients 4-6 weeks, but now I'm seeing 8-10 weeks minimum.

Thanks for bringing up this processing time issue - I've definitely noticed the same trend. I'm also a newer CAA (about 8 months now) and I've been tracking my application timelines. My first few submissions in September/October were processed in about 5-6 weeks, but everything I've submitted since January has been taking 9-12 weeks. I think part of the issue is that the IRS is still catching up from the pandemic backlog, plus they've had budget constraints affecting staffing levels. What I've started doing is being very upfront with clients about current processing times and explaining that while CAA applications don't get lost in the mail like regular submissions can, the review process itself is just taking longer right now. I also make sure to emphasize the other benefits - like not having to mail original documents and generally having fewer rejections due to documentation issues since we verify everything upfront. It's not ideal, but at least clients appreciate the transparency about realistic timelines.

Don't forget to consider state tax implications too! My cousin's beach house in Florida was destroyed in a hurricane, and while he handled the federal taxes correctly, he completely missed some state-specific requirements for reporting the insurance proceeds. Some states follow federal rules for casualty losses and involuntary conversions, but others have their own forms and schedules. Might be worth checking with a local tax professional who knows your state's requirements.

Just wanted to add one more thing that might help - make sure you keep detailed records of ALL expenses related to the fire and cleanup, even if they seem minor. I had a similar situation with a rental property fire and my tax preparer was able to deduct things like boarding up costs, debris removal, and even some of the storage fees for salvaged items. Also, if you had any personal property in the rental (appliances, furniture you provided to tenants), those might qualify for separate casualty loss treatment on Schedule A if they weren't fully reimbursed by insurance. It's easy to overlook these smaller items when you're focused on the big picture of the building and land. The timing issue you're dealing with is actually pretty common with insurance claims - they love to drag things out across tax years. Just make sure you're consistent in how you report the basis calculations between your 2024 and 2025 returns so you don't accidentally double-count anything.

Anyone else think its crazy we cant update banking info in 2025? Like hello IRS get with the times 🙄

Pro tip: call the IRS at 1-800-829-1040 and ask them to put a "trace" on your refund if it's been more than 21 days since you filed. They can sometimes expedite the paper check process or give you a better timeline. Also, definitely check that your address is correct in your IRS online account - I've seen people wait months for checks that went to old addresses!

I went through this exact same situation last year with about $25 in stock profits. After reading through all the comments here, I decided to call the IRS directly (yes, it took forever to get through). The agent told me something that might help clarify things for everyone: The key isn't the profit amount - it's whether your broker reported the cost basis to the IRS on your 1099-B. Look at your 1099-B form and check if there's basis information included. If it shows "basis reported to IRS" or has the cost basis filled in, then the IRS already has all the information they need and you likely don't need Form 8453. However, if your 1099-B shows the sale proceeds but NOT the cost basis (common with older accounts or certain types of trades), then yes, you need to send Form 8453 with documentation regardless of the tiny profit amount. For my $25 situation, it turned out my broker HAD reported the basis, so I didn't need to send anything extra. Check your 1099-B first before assuming you need to mail anything!

This is really helpful information from everyone! I'm dealing with a similar situation but with crypto trades instead of stocks. Made about $45 in profits from some Bitcoin trades last year and my tax software is also telling me I need Form 8453. From what I'm reading here, it sounds like the key is whether the exchanges reported my cost basis to the IRS. Most crypto exchanges don't provide 1099-B forms like stock brokers do - they usually just give you a 1099-K or their own transaction summary. Does anyone know if the same "basis reported to IRS" rule applies to cryptocurrency transactions, or do crypto trades automatically require the Form 8453 documentation regardless of the amount? I'm trying to figure out if I can avoid mailing in 20+ pages of crypto transaction records for such a small gain.