Has anyone actually done this successfully? I started something similar last year and ended up with a donor-advised fund instead because the legal and compliance requirements for a private foundation were too intense. The annual reporting alone was going to cost me thousands in accounting fees.

I've been through this exact process and can share some practical insights. You're right that this sounds like a private foundation structure, and yes, it's absolutely doable with proper planning. A few key things I learned during my setup: 1. The "sole member" aspect is perfectly legal, but you'll still need independent directors on your board to satisfy IRS requirements. I structured mine with me as the sole voting member, but with 3 independent directors who handle day-to-day operations and conflict of interest oversight. 2. For the investment growth strategy - this works, but be very careful about the types of investments you choose. The "jeopardizing investments" rules are stricter than most people realize. Stick to conservative, diversified portfolios initially. 3. Your 5% annual distribution plan is solid, but make sure you're calculating it correctly. It's based on the fair market value of your non-charitable use assets, averaged over the prior 3 years. The IRS has specific rules about what counts toward this requirement. 4. Documentation is crucial. Keep detailed records showing that all decisions benefit the charitable purpose, not personal interests. The IRS will scrutinize transactions between you and the foundation very closely. One unexpected benefit: having this structure has actually made my charitable giving more strategic and impactful. The multi-year planning horizon lets you tackle bigger projects than you could with annual donations. Happy to answer specific questions about the setup process if helpful.

Based on all the excellent advice here, I want to emphasize one more practical consideration: even if you successfully get more of your bonus upfront through questionable W-4 changes, you're essentially giving yourself an interest-free loan that you'll have to pay back at tax time. Instead of risking compliance issues, consider these cash flow alternatives: - If you have urgent expenses, look into a short-term personal loan or line of credit - Ask family or friends for a temporary loan if possible - See if you can negotiate payment plans for your urgent expenses - Check if your employer offers payroll advances or emergency hardship programs Many people don't realize that most financial institutions offer short-term lending options that might cost less in interest than the potential penalties and stress of IRS scrutiny. Plus, you maintain a clean tax compliance record. The tax professionals and compliance experts in this thread have made it clear that the risks far outweigh the temporary benefits. Your future self will thank you for handling this situation legally and responsibly, even if it means less immediate cash in hand.

After reading through all these responses, I'm really glad I asked this question here before doing something I would have regretted. The consensus is pretty clear that claiming exempt when you don't qualify is a bad idea, both legally and practically. What's been most helpful is learning about the legitimate alternatives - adjusting allowances temporarily instead of claiming exempt, understanding how different companies handle bonus withholding, and exploring other cash flow options like short-term loans or employer hardship programs. The point about IRS algorithms flagging suspicious W-4 timing patterns really opened my eyes. I had no idea they actively monitor for these kinds of changes around bonus payments. That alone makes it not worth the risk. I think my next steps will be: 1) Talk to payroll about how they specifically handle bonus withholding, 2) Look into whether my company has any emergency assistance programs, and 3) Maybe consult with a tax professional about legitimate ways to optimize my withholding for the rest of the year. Thanks everyone for steering me away from what could have been a costly mistake. Sometimes the "quick fix" isn't actually the smart fix!

Great question! I went through this exact situation with my father's estate last year. You definitely want to use the 2023 Form 1041 since that's the tax year when your fiscal year ends (November 2023). A few things that helped me when I was preparing the return: - Make sure you have all the investment transfer documentation organized. Since you mentioned investments were still being moved to the estate's EIN, you'll need to be really careful about which income belongs to the estate vs. what should be reported elsewhere. - The fiscal year election is actually pretty smart given your situation. It sounds like you made the right call there, even if settling is taking longer than expected. - Consider getting Publication 559 from the IRS - it's specifically for survivors, executors, and administrators. Much clearer than trying to figure things out from the general 1041 instructions. - Don't forget that estates get a $600 exemption, and you can deduct reasonable administration expenses. One word of caution: if this is your first estate return and there are significant assets or complex investments, you might want to at least have a consultation with a different CPA (one who specializes in estates) before filing. I know you had a bad experience, but estate returns have some unique rules that are easy to miss. Good luck with everything!

As someone who's been through estate administration, I want to emphasize a few key points that haven't been fully covered: First, yes, use the 2023 Form 1041 for your fiscal year ending November 2023. That's definitely correct. Second, since you mentioned you're "nowhere close to settling the estate by December," you'll likely need to file another 1041 for the following fiscal year (November 2023 to November 2024). Estates can remain open for years, and you'll need to file annual returns until everything is distributed and the estate is closed. Third, be very careful about estimated tax payments. If the estate owes more than $1,000 in tax, you may need to make quarterly estimated payments for the current fiscal year. This caught me off guard with my mother's estate. Finally, regarding your investment transfers - make sure you understand the difference between estate income and distributable net income (DNI). If you distribute assets to beneficiaries during the fiscal year, there are specific rules about how much taxable income flows through to them versus staying with the estate. The learning curve is steep, but it's absolutely doable if you're methodical about it. Keep detailed records of everything - dates, amounts, purposes. You'll thank yourself later if the IRS has questions.

Has anyone dealt with the situation where some accounts were individual (not joint) accounts of the deceased spouse? I'm dealing with this right now - some accounts were joint, but others were solely in my husband's name. I'm the executor of his estate, but I'm confused about how to report interest from his individual accounts.

I'm sorry for your loss, Sophia. This is actually a very common situation, and you're handling it correctly by asking for guidance. Since these were joint accounts, you should report all the interest income on your single tax return, even though some 1099-INT forms show your wife's SSN. The key thing to remember is that joint account income belongs to the surviving spouse. Here's what I recommend: 1. Report all interest on Schedule B of your tax return 2. List each payer exactly as shown on the 1099-INT forms 3. Include a brief statement with your return explaining that some 1099-INT forms were issued under your deceased spouse's SSN because she was the primary account holder on joint accounts You do NOT need to file a separate return for your deceased wife in the second year after her death. That would only be necessary if she had income that belonged solely to her estate. Make sure to contact those financial institutions to update the primary account holder information so future tax documents will be issued with your SSN. Most institutions will need a certified copy of the death certificate and may have specific forms to complete. The IRS is familiar with this situation, so don't worry too much about automatic flags - your explanatory statement should resolve any questions.

As someone who's been investing in MLPs within retirement accounts for over a decade, I wanted to add a few practical points that might help Diego and others in similar situations. First, Energy Transfer LP is actually one of the "cleaner" MLPs when it comes to UBTI generation - they typically produce minimal amounts compared to some other partnerships, so your $85 UBTI that you mentioned earlier is pretty typical and nothing to worry about. Second, I'd recommend creating a simple spreadsheet to track your MLP K-1s each year, even though you don't report them. Include columns for the partnership name, account type (Roth vs Traditional IRA vs taxable), total income amounts, and UBTI. This makes it easy to monitor if you're approaching any thresholds and gives you a clear record if you ever need to reference historical data. Finally, if you decide to add more MLP positions to your Roth in the future, consider spreading them across different partnerships rather than concentrating in one. This diversifies your UBTI risk - if one partnership has an unusually high UBTI year, you're less likely to hit the $1,000 threshold that would require Form 990-T filing. But for your current situation with just the Energy Transfer position, you're in great shape. File away that K-1 and enjoy the tax-free growth in your Roth!

As a newcomer to this community, I just wanted to say how incredibly helpful this entire discussion has been! I've been holding some MLP investments in my own retirement accounts and had similar confusion about the K-1 treatment. What really stands out to me is how this thread evolved from Diego's straightforward question into such a comprehensive resource covering everything from basic tax treatment to operational considerations with custodians, UBTI thresholds, and even portfolio diversification strategies. The consensus is crystal clear - K-1 income from investments held in Roth IRAs doesn't need to be reported on personal tax returns because the income stays within the tax-advantaged retirement account structure. But the additional insights about proper registration, recordkeeping, and custodian capabilities have been equally valuable. This is exactly the kind of collaborative knowledge-sharing that makes online communities so powerful. Diego asked one question and got expert-level guidance that will help not just him, but anyone else facing similar situations with partnership investments in retirement accounts. I'm definitely bookmarking this thread as a reference and will be implementing some of the practical suggestions like the UBTI tracking spreadsheet that StormChaser mentioned. Thanks to everyone who contributed their expertise and real-world experience!