I went through this exact situation when my mom's trust became irrevocable. The key thing to understand is that the trust's tax obligation exists regardless of whether you actually distribute the money or reinvest it. What helped me was getting a clear picture of the trust's "accounting income" versus "taxable income" - they're not always the same thing. The IRS looks at what the trust earned, not what you did with those earnings afterward. One strategy that worked for my situation was making small distributions to the beneficiaries (my siblings' kids) and having those funds go directly into 529 education savings accounts in their names. This way the income got taxed at their lower rates instead of the trust's compressed brackets, but the money was still being saved for their future benefit. You'd need to check if your trust document allows this kind of arrangement and whether it makes sense for your family's situation. Also, don't forget that the trust can deduct certain administrative expenses like trustee fees, accounting costs, and investment management fees. These deductions can help offset some of the tax burden.

This is a common confusion that many new trustees face! The key insight here is that irrevocable trusts are separate tax entities, so they owe taxes on income they retain regardless of whether that income is reinvested or sits in cash. The $2600 "distributed" amount you're seeing in TaxAct might be a software quirk or it could be related to how the program is calculating potential distributions under the trust's terms. I'd double-check your entries to make sure you haven't accidentally indicated any actual distributions. A few practical suggestions: 1. Consider consulting with a tax professional who specializes in trusts - the compressed tax brackets make this worth the investment 2. Review your trust document carefully to see if you have authority to make distributions now, as this could shift tax burden to your children at lower rates 3. Keep detailed records of all trust income and expenses, as the trust can deduct legitimate administrative costs Remember, as trustee you're responsible for ensuring the trust pays its taxes, but those taxes come from trust assets, not your personal funds. The trust should have its own bank account and tax ID number for this purpose.

I completed my ID.me verification about 10 days ago and I'm still waiting for any updates. Reading through everyone's experiences here is really helpful - it sounds like I'm still within the normal timeframe. I'm going to check my transcript like several people suggested since the WMR tool hasn't been very informative. It's reassuring to hear that most people are getting their refunds within 3-4 weeks now compared to the horror stories from previous years. Thanks for sharing your timelines, it really helps with the anxiety of not knowing what's happening!

I'm currently in week 2 of waiting after completing my ID.me verification on February 20th. Reading everyone's experiences here gives me hope that I should see my refund soon! I've been checking my transcript daily like many of you suggested, and I can see the TC 971 code with Action Code 111, so I know the verification went through successfully. The hardest part is just the uncertainty - my return was pretty straightforward with no credits or complications, so I'm hoping that helps speed things along. Has anyone noticed if simple returns tend to process faster after verification compared to more complex ones? Thanks for all the helpful insights in this thread!

11 Has anyone used TurboTax to report scholarship income? Do they have a specific section for this or is it just entered as "other income"? I'm trying to fix my return before I get one of these letters.

This is such a frustrating situation, but you're definitely not alone! I went through something similar a couple years ago and learned the hard way about scholarship taxation rules. One thing that might help is to gather all your documentation (1098-T, financial aid award letters, receipts for books/supplies) and create a detailed breakdown showing exactly what your qualified vs non-qualified expenses were. Sometimes the IRS makes errors in their calculations too - they might be treating ALL your scholarship money as taxable when only a portion actually is. Also, don't panic about the $8,200 bill. Even if you do owe some amount, the IRS offers payment plans and you might qualify for penalty relief if this is your first offense. Call them (or use one of those callback services others mentioned) to discuss your options. Many students genuinely don't know about these rules, so they're usually willing to work with you on payment arrangements. The key is responding to their letter within the timeframe they give you - don't ignore it hoping it goes away!

Just a heads up that you should check your state tax requirements specifically. In many states, the SMLLC may still need to file its own annual report or pay its own franchise/entity tax even though it's disregarded for federal purposes. I learned this the hard way when my SMLLC (owned by my partnership) got hit with penalties in California because I thought "disregarded" meant disregarded for all tax purposes. Turns out California still required a separate LLC fee!

This is exactly the kind of confusion that trips up so many business owners! You're absolutely right that the SMLLC should be treated as a disregarded entity when owned 100% by your multi-member LLC. One thing I'd add to the excellent advice already given: make sure you're consistently applying this treatment across all your tax forms. If your multi-member LLC has other tax obligations (like employment taxes, excise taxes, etc.), the SMLLC's activities should be reported under the parent LLC's EIN for those purposes too. Also, even though you don't report the SMLLC on Schedule B Question 3B, you might want to attach a brief statement to your 1065 explaining that you have a wholly-owned SMLLC that's being treated as a disregarded entity. This isn't required, but it can help avoid any confusion if the IRS sees the SMLLC's EIN referenced elsewhere (like on bank statements or contracts) during an audit. The key is consistency - treat it as part of your multi-member LLC for ALL federal tax purposes, not just income tax reporting.

Check if you claimed EIC or child tax credit. Those usually trigger 507 codes for verification. Also peep your wage and income transcript to make sure everything matches up with what you filed.

Code 507 is definitely income verification review. Had the same thing happen to me last year - took about 10 weeks but got my full refund plus interest. The IRS is just making sure your W-2s and 1099s match what you reported. Don't stress too much, just be patient and avoid calling unless you get a CP notice asking for documents. Most of these resolve automatically once their systems finish cross-checking everything.