That's really helpful to know about your experience. How difficult was the Tax Court filing process? Did you end up needing a lawyer or were you able to do it yourself?

The Tax Court filing was actually pretty straightforward. I used the simplified procedure since my dispute was under $50k. The petition form is available on the Tax Court website, and it's mostly just explaining what the IRS got wrong and why. I did it myself without a lawyer. You basically need to state the facts clearly - that the crypto exchange reported incorrect information, what the correct numbers should be, and what evidence you have. Include copies of your documentation with the petition. One tip: be very specific about the error. In your case, explain that the exchange reported the full value as gain instead of just the interest earned, and provide your actual purchase records showing your cost basis.

Audit reconsideration is a terrible approach for this situation! Why would you voluntarily give up your Tax Court rights when that's literally the best protection you have? Paying thousands in taxes you don't owe and then HOPING the IRS gives it back through audit reconsideration is a recipe for disaster.

Would that mean the grandfathering would apply to existing 401k balances or to existing participants? Like if i already have a 401k would all my future contributions be grandfathered or just the current balance?

Great question - typically grandfathering can be structured in different ways, but most commonly it would apply to existing balances as of a certain date, not to future contributions. So your existing 401k balance might be protected under the old rules, but new contributions after the law changes would fall under the new system. There's also sometimes a phase-in period where the changes are implemented gradually over several years to avoid sudden shocks to people's financial plans. Without seeing the actual legislation it's impossible to know exactly how it would be structured, but these types of accommodations are standard practice for major retirement tax changes.

I read something about this! The proposal might include income thresholds where the full impact only hits higher earners, with partial or no changes for lower/middle incomes. Would make sense if they're trying to keep the "no new taxes under 400k" promise.

This is exactly what I was missing! So even though my Roth is 7 years old, if I converted some money from my Traditional IRA to the Roth only 2 years ago, I can't touch THAT money without penalties for another 3 years? But I could still withdraw my regular contributions anytime?

You've got it exactly right! Your regular contributions can come out anytime without taxes or penalties. And yes, that conversion from 2 years ago has its own 5-year clock - you'd need to wait 3 more years to withdraw those specific funds without the 10% penalty. The IRS treats withdrawals in a specific order: regular contributions come out first (always tax/penalty free), then converted amounts (in order of conversion date), and finally earnings. So you would need to withdraw all your regular contributions first before touching any converted amounts.

Yes! Qualified higher education expenses are one of the exceptions that waive the 10% early withdrawal penalty on Roth IRA earnings. But remember, you'll still owe income tax on those earnings if withdrawn before 59½ and before the account has been open 5 years. Eligible expenses include tuition, fees, books, supplies, and equipment required for enrollment at an eligible educational institution. Room and board also count if the student is at least half-time.

13 Oh crap, I totally forgot about this! We both have marketplace insurance with subsidies. How quickly do you need to report the marriage? Is there a grace period?

4 You should report your marriage to the marketplace within 30 days to qualify for the Special Enrollment Period. This allows you to either combine your insurance plans or choose a new one based on your combined household. There's no formal "grace period" for reporting income or household changes, but the sooner you do it, the better. If you wait too long, the subsidy adjustment only happens from the date you report the change, not retroactively from your marriage date. This means you could still end up owing back some subsidy at tax time.

16 The marriage penalty still exists in 2023 for higher-income couples. It's not really something they "fix" because it's built into the tax bracket structure. For couples where both spouses earn similar high incomes, filing separately sometimes helps but usually not completely. Look at the bright side though - at least you're not in my situation where my spouse had a bunch of old tax debt I didn't know about, and now my refunds get intercepted to pay for it thanks to filing jointly! 🤦‍♀️

Thanks for pointing that out! I didn't realize the 403(b) conversion would be handled differently from my direct contributions. I'll make sure to specifically mention both components when I contact my IRA provider about the recharacterization. Do you know if I'll need to file any special forms with my 2024 taxes to show that I've recharacterized both the conversion and the direct contributions? Or does the IRA provider handle all that reporting?

You'll need to report the recharacterization on your tax return. Your IRA provider will send you a Form 5498 showing your contributions and a 1099-R showing the recharacterization. With the combination of a conversion and direct contributions being recharacterized, you should definitely complete Form 8606 with your tax return. This form tracks nondeductible contributions to Traditional IRAs, and it's where you'll report the recharacterization. Your IRA provider handles their end of the reporting, but you're responsible for reporting it correctly on your return.

True, but there's always the backdoor Roth option if you don't have existing Traditional IRA balances. Make non-deductible contributions to Traditional, then convert to Roth right away. Since the conversion happens when there's minimal/no growth, there's minimal tax impact. It's an extra step but works even with MFS status.