I actually did exactly this last year - cashed out at about a 20% loss to pay down debt. The mental relief of getting rid of the credit card debt was honestly worth way more than waiting for my investments to maybe recover someday. Plus the guaranteed "return" of not paying 22% credit card interest beats whatever I might have made in the market. Just my two cents!

Just wanted to add that you should also consider the timing of when you sell within the tax year. Since you're already at a loss, selling before December 31st means you can claim that loss deduction on this year's tax return, which could help offset any other income and potentially get you a bigger refund or lower tax bill. Also, once you pay off that credit card debt, try to resist the urge to rack it up again! The guaranteed savings from eliminating 20%+ interest rates is way better than any potential market gains. You're making a smart financial decision here - sometimes cutting losses and focusing on guaranteed debt reduction is the right move.

Has anyone dealt with a settlement that spanned multiple tax years? I received part of my settlement last year and will get the rest this year, but all the attorney fees came out of last year's payment. Trying to figure out if I can deduct all fees last year or need to split them somehow.

I went through something very similar last year and wanted to share what I learned. The key thing that helped me was getting organized with all the paperwork first. Make sure you have your settlement agreement that breaks down exactly what each portion of the $78,000 was for - physical injuries vs. lost wages. One thing to watch out for is that some settlement agreements aren't super clear about the breakdown, so you might need to contact your attorney to get a clearer allocation letter. This becomes really important because the IRS could ask for documentation later. Also, since you're using TurboTax, look for the section on "Other Income" and then "Legal Settlements." It should walk you through the process of reporting only the taxable portion. The software has gotten better at handling these situations in recent years. The math everyone described above is correct - allocate the attorney fees proportionally based on what percentage of your settlement was taxable income. Just make sure to keep copies of everything because settlement tax issues sometimes get flagged for review.

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.

Check if the 1099-MISC has her correct taxpayer ID/SSN at least! I once received a 1099 with the wrong SSN and it created a HUGE mess when I filed. The IRS computer systems kept flagging a "mismatch" and I got a scary letter about unreported income. Took months to straighten out.

This is definitely confusing, but you're right to want to get it sorted out! Before calling the employer, take a close look at which specific box has the amount - that'll help you ask the right questions. Also double-check that all the identifying information is correct (your wife's name, SSN, the employer's info). Sometimes these forms get generated with errors that can cause bigger headaches down the road. When you do contact them, ask specifically what type of payment this represents - was it a final paycheck adjustment, unused vacation payout, expense reimbursement, or something else? The nature of the payment determines how you'll need to report it on your tax return. Most employers' HR or payroll departments should be able to explain this pretty quickly once you have them on the phone. If you can't reach anyone at the old employer or they can't provide a clear answer, you might need to call the IRS for guidance on how to handle reporting this income properly.

Document EVERYTHING. Every call, every letter, every case number. You'll need it all later trust me

This exact thing happened to me last year! The key is getting your IP PIN from the IRS - call the Identity Protection PIN line at 800-908-4490. Once you have that, you can file your return even while the fraud investigation is ongoing. Also make sure to file a police report - some states require it for identity theft cases and it strengthens your documentation trail.