Omg thank you for mentioning this! I didn't realize there was a difference between withdrawing contributions vs earnings from my Roth. Is there an easy way to tell which is which when I go to make a withdrawal? And yeah I'll definitely try for the payment plan route first!

Your Roth IRA provider should be able to tell you exactly how much of your account balance is from contributions versus earnings. Generally, withdrawals come from contributions first, so if you've contributed more than you're planning to withdraw, you should be able to take that amount out without tax consequences. For example, if you've put in $12,000 over the years and your account is now worth $14,000, you can withdraw up to $12,000 penalty-free. Just contact your provider before making any withdrawals to confirm the exact amount of your contributions. And definitely pursue that payment plan with the IRS - they offer reasonable terms, especially for first-time issues.

I amended returns for 2 years of unreported scholarship income about 3 years ago. The process wasn't as bad as I expected. I used Form 1040-X for federal and had to fill out amended state returns too. The IRS charged interest on the unpaid taxes (inevitable), but I qualified for First Time Penalty Abatement which saved me hundreds in failure-to-file penalties. I wrote a letter explaining that I genuinely didn't understand scholarships were taxable, and they were pretty reasonable. Set up a payment plan for $150/month and it's almost paid off now.

That's exactly what's confusing me! The $11,250 in scholarships (Box 5) was disbursed in January 2025 for my final semester, but it's showing up on my 2024 1098-T. The expenses those scholarships covered were also from January 2025. So both the scholarships and expenses are for the same semester, but the scholarships are on my 2024 form while the expenses aren't showing up anywhere.

If your scholarship was disbursed in January 2025 but showing on your 2024 1098-T, something's definitely not right. Generally, schools report transactions in the calendar year they occur. If both the scholarship disbursement and the expenses were from January 2025, they should both be reported on your 2025 1098-T next year, not your 2024 form. I'd recommend contacting your school's financial aid or bursar's office to ask why the January 2025 scholarship is appearing on your 2024 form. There could be a reporting error, or they might have actually disbursed it in December 2024 even though it wasn't applied to your account until January.

This is actually backwards - Box 8 being checked means they're reporting based on amounts BILLED during the calendar year, not amounts paid. It's super confusing because schools can choose either reporting method.

You're absolutely right - I had it backwards! Box 8 checked means they're reporting based on amounts billed during the calendar year, not when payment was received. Thanks for the correction.

Thanks so much for sharing your experience! That's really helpful. Did you guys use any specific software to compare both options? I'm worried about making a mistake if I try to calculate everything manually.

We used TurboTax and just ran through the process twice - once for joint and once for separate. It was tedious but worth it. I'd definitely recommend using some kind of tax software that lets you save different scenarios. The student loan part was trickier - had to use the loan servicer's calculator separately to figure out how much payments would change under each filing status.

This is such an important point! We got hit with this last year and had to file an amendment. Cost us extra in prep fees and delayed our refund by months.

Yep, it's one of those weird tax rules that nobody tells you about until you make the mistake! The other thing that surprised us was that if you file separately, you often can't contribute to a Roth IRA if your income is over a certain threshold, which is much lower for separate filers than joint.

I second this! My closing agent was super helpful when I had a similar question. Sometimes the simplest solution is best.

I didn't even think of that! I just emailed my agent and she got back to me right away. You're right - she had everything on file and sent me the state withholding form with the ID number clearly printed at the top. I was definitely overthinking this whole thing. Thanks for suggesting the obvious solution that I completely missed! Just finished my taxes and everything went through perfectly.

I had the opposite problem! TurboTax kept rejecting my entry when I included the dashes, but accepted it when I removed them. Seems like it might vary by state.

That's so strange! Must definitely depend on the state then. I'm in Illinois - where are you located? Maybe we should specify which states have which requirements when sharing advice like this. I guess the safest approach is to try both with and without special characters if the first attempt gets rejected. TurboTax isn't always clear about the exact format they want for these state-specific entries.

Can you explain more about how this might affect Social Security? I'm planning to sell a rental property next year and I'm already receiving Social Security benefits.

For Social Security, if your combined income (your adjusted gross income + nontaxable interest + half of your Social Security benefits) exceeds certain thresholds, more of your Social Security benefits become taxable. For 2025, if you're filing single and this combined income exceeds $25,000, up to 50% of your benefits may be taxable. Above $34,000, up to 85% can be taxable. For married filing jointly, those thresholds are $32,000 and $44,000 respectively. So a large capital gain could definitely push you over these thresholds, causing more of your Social Security to be taxed.

The tax rate would be the same whether you sell one property or multiple properties in the same year. However, selling multiple properties might give you more flexibility with timing - you could spread the sales across different tax years to potentially keep yourself in a lower capital gains bracket each year.