I had this exact situation! My grandparents had apparently set up a 529 for me as a baby and never told my parents. Years later, the distributions started going to my university. Check with extended family members too - might be a surprise gift someone forgot to mention.

That's a great point about checking with extended family! Sometimes these accounts are set up as surprises or the person who created it might have forgotten to mention distributions were starting. Another thing to consider is that the amount might be higher than your tuition because it could include room and board, books, supplies, and other qualified expenses. The 529 administrator might have sent a distribution that covered more than just the direct tuition bills.

This happened to me. My scholarships covered most of my tuition, but my parents still distributed funds from my 529 plan. We ended up having to pay taxes on a portion because you can't double-dip on tax benefits. Definitely worth getting professional help to sort it out.

Thank you so much for sharing your experience! Did your WMR tool update before the deposit hit your account? Mine still shows the first bar even though the transcript has the 570 code.

The WMR tool hardly ever updated correctly for me. It was still showing "return received" even after my refund was deposited! The transcript is much more accurate and reliable than WMR. If you check your transcript again in a week or so, you'll probably see the 571 code pop up, followed by code 846 with your refund date. That's the real indicator to watch for.

Does the hold still apply if you're only claiming a small EITC amount? I only qualified for about $340 in EITC this year, but my total refund is over $3,000 from withholding. Seems silly to hold the entire amount for such a small credit.

What happened after you got hit with the tax bill? Did you ever try to get it corrected or did you just pay it? I'm in a similar situation but with a restaurant that closed down, so I'm not even sure if the owner is still around to issue a corrected form.

I ended up paying it the first year because I didn't know any better. The second year, I filed the SS-8 form proactively and got a determination letter from the IRS saying I was indeed an employee. I took that to the owner, who initially resisted but changed his tune when I mentioned the potential penalties for misclassification. He issued a corrected W-2 for that year. For the previous year, I filed an amended return with the determination letter and got about $1,600 back. Even if your restaurant closed, you can still file the SS-8 and possibly get a determination that helps with your taxes. The owner being gone doesn't prevent the IRS from making a ruling on your status.

Getting paid through Cash App doesn't determine your worker status - that's based on the nature of your working relationship. However, you're right about the reporting change. Cash App (and similar payment services) are required to issue 1099-Ks for accounts receiving over $600 in payments for goods and services. This is separate from whether your employer issues a 1099-NEC or W-2. The IRS may notice if you receive a 1099-K from Cash App but don't report that income, regardless of whether you also get a 1099 or W-2 from the employer. So the income definitely needs to be reported either way, but the classification as employee vs. contractor determines HOW you report it and how much tax you pay.

Thanks for explaining! So if I'm understanding right, I could potentially get both a 1099-K from Cash App AND either a 1099-NEC or W-2 from my employer for the same income? That seems like it would cause confusion with the IRS. How would I make sure I'm not double-reporting the same income?

How exactly do you request this abatement thing? Is it something you can do online or do you have to call them?

You can request First Time Penalty Abatement by calling the IRS directly after you've paid your balance in full. There's a specific phone number on your bill notice. You can also write a letter, but calling is usually faster. When you call, specifically ask for "First Time Penalty Abatement" - use those exact words. The agent will check if you qualify by looking at your tax compliance history. You mainly need to have filed all required returns and not have had penalties in the prior 3 years. Have your notice or letter handy when you call, along with your tax ID number, and be polite but direct in your request.

That seems way too low for penalties and interest. Are you sure it was only $35 for being 6 weeks late on $1200? Everything I've read suggests it would be more.

This is extremely helpful, thank you! One question - when creating this transaction log, should I calculate the USD value of the BTC at each transfer point? Or just focus on the final gain/loss numbers?

Yes, you should definitely record the USD value of the BTC at each transfer point. This is crucial because the IRS considers each crypto-to-fiat or crypto-to-crypto exchange a potentially taxable event, and those values establish your cost basis. When you transfer BTC to your forex broker and convert to fiat, you technically have a taxable event based on whether your BTC gained/lost value since purchase. Then your forex trading creates separate taxable events. Finally, when converting back to BTC, there's another taxable event. Recording the USD values at each step creates a clear audit trail that properly separates the crypto transactions from the forex transactions.

Forex trades under Section 988 (which is the default for most retail forex traders) are NOT subject to wash sale rules. They're treated as ordinary income/loss rather than capital gains/losses. However, if you elected to use Section 1256 treatment (which most retail traders don't), then different rules would apply. Make sure you're consistent in your treatment though. You can't cherry-pick which trades fall under which section to maximize tax benefits.

Thanks for clearing that up! I've definitely been treating everything as Section 988 since I'm doing short-term day trading, so I should be good. I'll override the flag in my tax software and make a note explaining that these are forex trades under Section 988 and therefore exempt from wash sale rules.