I had almost this exact situation last year. Make sure you're also checking if your cousin had other Schedule A deductions that might impact the recovery calculation! In my case, I focused so much on the SALT cap that I forgot to consider how my charitable contributions and medical expenses affected the overall calculation on Worksheet 2. This actually made a portion of my state refund taxable even though I thought the SALT cap would protect me.

You're absolutely right to be careful with this calculation! I went through a similar situation last year when I switched from MFJ to Single after my divorce. The key insight you've identified is correct - if the nondeductible portion of your SALT (the amount over $10k) exceeds your state tax refund, then none of the refund is taxable. This is because you didn't receive a tax benefit for that portion of your state taxes in the prior year. However, I'd recommend double-checking a few things: 1. Make sure you're only considering your cousin's portion of the joint SALT deduction, not the full amount from the MFJ return 2. Verify that all other itemized deductions from the prior year are properly accounted for in the worksheet calculations 3. Consider whether any of the state taxes that generated the refund were actually deductible under the prior year's circumstances The Publication 525 worksheets are designed exactly for these filing status change situations. If Worksheet 2a is indicating that none of the refund is taxable, that's likely correct. But given the complexity and potential for errors, you might want to have a tax professional review the calculation before filing, especially since the stakes are relatively high with a $3,600 refund.

Don't forget to look into state taxes too! Federal is only part of it. Some states have inheritance taxes that are separate from federal estate taxes. For example, in PA where I live, there's an inheritance tax even if the estate is below the federal threshold.

This is a complex situation that really highlights why estate planning and proper documentation are so important. Based on what you've described, it sounds like the estate should be filing Form 1041 since the mobile home was still owned by the estate at the time of sale. The arrangement where your in-laws put the property in someone else's name for the sale creates some potential complications. That person might technically be considered the seller for tax purposes, even if they're just acting as an agent. The signed contract you mentioned should specify whether they're acting on behalf of the estate or the beneficiaries. Given the $33,000 gain and the unusual sale arrangement, I'd strongly recommend consulting with a tax professional or estate attorney who can review the specific contract language and advise on the proper reporting. The IRS can be very particular about how these transactions are structured and reported, especially when there are agency relationships involved. Also, make sure the executor is aware of their filing obligations - they may need to file Form 1041 even if the estate doesn't owe any tax, depending on the gross income of the estate.

You know what's funny (but not really)? I've been checking my transcript so often that I think the IRS website recognizes me now. 😅 "Oh look, it's THAT person again..." But seriously, I noticed last year that sometimes the transcript status can jump from N/A straight to fully processed without any in-between status. It's like watching water boil - nothing happens for ages and then suddenly everything happens at once. As long as your return was accepted and you have that confirmation, you're probably fine. The system is just... how do I put this nicely... not the most efficient technology in the world.

I'm going through the exact same thing right now! Filed about 10 days ago and my transcript is still showing N/A while WMR just says "processing." Reading everyone's responses here is really reassuring - it sounds like this is totally normal timing. I've been obsessively checking both systems daily (I know, I know, probably not helping my anxiety). What's interesting is that I filed a simple return with no credits or complications, so I was expecting it to move faster, but apparently even straightforward returns can take the full 21 days during busy season. Thanks for posting this question because I was starting to wonder if something went wrong with my filing!

Heads up! If your LLC elected S-Corporation status at any point, you need to file Form 1120-S instead of 1065. Made this mistake my first year and got a nasty letter from the IRS. Double check your entity classification before filing.

Just to clarify something that might be confusing from the thread - while there's no IRS filing fee for Form 1065, don't forget about your state requirements! Even with zero activity, many states still require annual filings and fees. For example, if you're in California, you'll owe the $800 minimum franchise tax even with no income. Texas has a "no tax due" report that still needs to be filed. Each state is different, so check your state's Secretary of State website or Department of Revenue. Also, since you mentioned this LLC has been inactive, you might want to consider formally dissolving it if you don't plan to use it. This could save you from ongoing state fees and annual filing requirements. You'd need to file a final Form 1065 (checking the "final return" box) and handle the state dissolution process, but it might be worth it long-term.

Has anyone used Free File Fillable Forms to handle this? I'm trying to do my own taxes with backdoor Roth for the first time and I'm completely lost on how to properly report everything.

I went through this exact same situation last year and want to share what I learned! You're absolutely right to be concerned - taking the deduction when doing a Backdoor Roth creates a tax mess. Here's what happened in your case: You deducted the Traditional IRA contribution (getting a tax benefit now), but then converted that pre-tax money to a Roth IRA. The IRS sees this conversion as taxable income since you're moving pre-tax dollars into an after-tax account. If you didn't report the conversion as income on your return, you definitely need to amend. You have two paths forward: 1. Keep the deduction and add the conversion as taxable income on an amended return 2. Remove the deduction, file Form 8606 for a non-deductible contribution, and the conversion won't be taxable For future reference, the classic Backdoor Roth strategy uses option 2 - make non-deductible contributions specifically so the conversion isn't a taxable event. Since you were eligible for the deduction (no employer plan), you had to actively choose NOT to take it. I'd recommend consulting with a tax professional before amending, as they can run the numbers to see which option saves you more in taxes. The timing matters too since amended returns take months to process.