Just a warning - my parents set up an irrevocable trust in 2014 and we've had nothing but headaches. The tax filing requirements are a NIGHTMARE. We have to file a separate trust tax return (Form 1041) every year which costs about $900 with our accountant. Plus the trustee fees are eating into the assets. And now my mom needs some of the money for a special medical treatment but we can't access it because, surprise, it's irrevocable! Our attorney didn't emphasize enough how permanent this decision would be. Consider a revocable trust that converts to irrevocable upon death instead. Much more flexibility during lifetime.

This is such a timely question for me! I'm in a similar situation with my aging parents and have been wrestling with the same decisions. One thing I learned from my estate planning attorney is that the key advantage of an irrevocable trust isn't just the estate tax savings - it's also the "valuation discount" you can get. If your parents are transferring business interests or real estate (like that vacation property), they might be able to claim a discount on the value for gift tax purposes since the beneficiaries won't have immediate control. For your situation with $650K in total assets, you're definitely in the range where an irrevocable trust could make sense, especially with the vacation property appreciation potential. But I'd strongly recommend getting a second opinion from an estate planning attorney who specializes in irrevocable trusts before making the decision. The flexibility concern is real - once it's done, it's done. Some attorneys can build in limited flexibility through trust protectors or distribution standards, but you need to plan for worst-case scenarios upfront. Have you considered what happens if your parents need long-term care or have other major expenses?

Has anyone actually filled out Form 8606 for a situation like this? I did a backdoor Roth last year with a large traditional IRA balance and honestly had no idea what I was doing on that form. My tax software kept giving me weird warnings about basis calculations.

I'm dealing with a very similar situation and the confusion is real! After reading through all these responses, it seems like the consensus is clear - your financial advisor is correct about the pro-rata rule applying. What really helped me understand this better was realizing that the IRS doesn't care which specific shares or contributions you tell your brokerage to convert. They look at ALL your traditional IRA balances (across all accounts) as one big pool when calculating the taxable portion. The math in your case would be roughly: $7,000 conversion × ($1,300,000 pre-tax ÷ $1,307,000 total) = about $6,965 would be taxable. You'd only get about $35 tax-free from your after-tax contribution. Based on what others have shared here, your best bet might be to see if your current employer's 401k accepts IRA rollovers. If you can move that $1.3M into your 401k, then you could do clean backdoor Roth conversions going forward without any pro-rata complications. I'm definitely going to look into the 401k rollover option for my own situation. Thanks to everyone who shared their experiences - this thread has been incredibly helpful!

A little paranoid maybe, but worth checking - is someone filing fraudulent tax returns in your name? If someone did that and changed your address with the IRS, you might want to request an Identity Protection PIN from the IRS for future filings.

I went through this exact same situation a few months ago! The 570/971 codes with undeliverable mail notification are definitely connected. In my case, the IRS had tried to send me a CP05 notice requesting additional verification of my identity, but it bounced back because of a formatting issue with my apartment number. Here's what worked for me: 1. I updated my address through the IRS online account (make sure it matches USPS formatting exactly) 2. Called the IRS using the practitioner priority line early in the morning (around 7 AM) - had better luck getting through 3. The agent was able to tell me what the original notice was about and handled the verification over the phone My refund was released about 12 days after that call. The key is getting someone on the phone who can actually see what notice they tried to send you. Don't just update your address and wait - you need to proactively find out what they were trying to communicate. Also, keep checking your transcript daily for that 571 code that reverses the 570 hold. That's your signal that things are moving again. Good luck!

One more tip for Schedule 1 - make sure you're using the 2024 version of the form! I mistakenly used the 2023 version last year and it caused all kinds of confusion because they change the line numbers sometimes. Also double check that your Schedule C profits match exactly what you enter on Schedule SE for each person. Small discrepancies can trigger automatic notices from the IRS.

As someone who went through this exact same confusion last year with my spouse, I can confirm what others have said - you absolutely need separate Schedule SE forms for each of you since they're tied to individual SSNs and calculate self-employment tax separately. But here's something that helped me get organized: create a simple checklist. For each spouse: Complete your own Schedule C (already done ✓), then your own Schedule SE using the Long version (Section B) since you're both over $400 in earnings. Make sure the net profit from Schedule C matches exactly what you put on Schedule SE. Then for your joint return: Use ONE Schedule 1 where you'll combine both of your business income totals and both of your self-employment tax deduction amounts. The key is keeping the individual calculations separate but reporting the combined totals on your joint forms. Don't feel bad about being overwhelmed - the IRS forms really aren't user-friendly! But once you get the pattern down, it's much clearer than it initially appears.

Do you know if your tax preparer used a Refund Transfer product or similar service? That makes a big difference. If they did, your refund first went to a temporary bank account they set up, then they transferred your refund minus their fees to you. That temporary account is likely closed now, so any CTC payments sent there will definitely bounce back.

UPDATE: The IRS just announced yesterday that the Child Tax Credit Update Portal will be available starting June 21st, 2024, according to their latest press release. They're specifically urging people who had refunds processed through tax preparer bank accounts to update their information ASAP. The first monthly payments are scheduled for July 15th, and they recommend making any banking changes at least two weeks before that date to ensure proper processing. Here's the link to the official IRS page with instructions: https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments