Thanks for the perspective! Do you think this is something I could learn to handle myself after the initial setup? Or is this the kind of thing where I'll need professional guidance throughout the entire 10-year period?

You could definitely learn to handle much of this yourself after the initial setup. The first year is the most complex because you're establishing the strategy and understanding the rules. Once you have a solid distribution plan in place, managing the annual distributions becomes more straightforward. I recommend having a tax professional review things at least every 2-3 years or whenever there are significant changes in your father's financial situation or tax laws. This hybrid approach gives you the benefit of professional guidance at key points while allowing you to handle the routine aspects yourself, saving considerable money on professional fees over the 10-year period.

I tried using TurboTax last year for my mom's inherited IRA and ended up having to hire a CPA anyway to fix several mistakes. The software just doesn't ask enough detailed questions about inherited IRAs to capture all the nuances. Wasted $89 on TurboTax and then still had to pay a professional $650 to correct everything. Wouldn't recommend it for this specific situation.

Thanks for mentioning this! I looked into it, and my wife works for a public community college, so it's definitely a standard ERISA-governed 403(b) plan. I checked her plan documents just to be sure, and they explicitly state that contributions are pre-tax and should reduce federal taxable income.

Gotcha! In that case, it's definitely a payroll error. Community college plans are almost always standard ERISA plans where traditional contributions should absolutely reduce Box 1. Glad you checked the plan documents - that will be helpful evidence when you contact HR. With the plan documents and IRS guidelines, they should issue a corrected W2 without too much resistance.

It really depends on their tax bracket and how much was contributed to the 403b. If she's putting 100% of her income as stated, it could be significant. For example, if she earned $15k and contributed all of it while in the 22% bracket, that's $3,300 in overpaid taxes.

I had to amend my F-1 tax return last year. You'll need to use Form 1040-X for federal amendments. Unfortunately, Sprintax charges another fee to prepare an amended return. If it's a simple change, you might be able to do it yourself. For scholarship income specifically, check if it should be reported as taxable first. Qualified education expenses covered by scholarships are usually tax-exempt for F-1 students, but money for living expenses is typically taxable.

This is good advice. I'm a bookkeeper (not a CPA) and I always tell people that the best time to hire a tax pro is BEFORE the tax year ends, not after. By April 15, most of what can be done has already been determined by your actions the previous year.

Thanks, this really helps put things in perspective. We definitely fall into the simpler category. I did adjust my W-4 after this surprise, but I was mainly wondering if we were missing something obvious that a professional would catch. Sounds like for our situation, probably not enough to justify the cost.

I've been using TaxCaster from Intuit (free app) to do quarterly check-ins on our tax situation. It's not perfect but it helps me see if we're on track or need to adjust withholding. Saved us from a surprise last year when my wife got a big bonus that was under-withheld.

So does this mean I need to go back and amend previous years' tax returns if I sold any of these funds before? Or does this only matter for future sales?

This only matters for future sales of your holdings. You don't need to amend previous tax returns for sales you've already reported. The WHFIT reporting adjustment is for your current holdings going forward. If you sold shares in previous years before your broker was providing this detailed WHFIT basis information, you reported based on the best information available at that time, which is completely acceptable. The IRS doesn't expect you to have information that wasn't provided to you.

Yes, WHFIT reporting can absolutely apply to ETFs as well as mutual funds. Many broad market ETFs are structured in a way that makes them subject to WHFIT reporting requirements. If you're not seeing it on your forms, it could be for a few reasons: either your specific ETFs didn't have reportable adjustments this year, your brokerage is reporting it differently (perhaps under a different label or section), or potentially your brokerage isn't fully compliant with the reporting requirements yet. Some brokerages implement these reporting details at different rates.