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 But remember, you'll still owe income tax on those earnings if withdrawn before 59½ and before the account has been open 5 years.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.

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.

I hadn't even thought about checking if the amounts are correct! Where exactly would I find Box 1 and Box 5 on the form? And if something isn't right, do I just call the financial aid office?

Box 1 is near the top of the form labeled "Payments received for qualified tuition and related expenses" and Box 5 is labeled "Scholarships or grants." Compare those amounts to your actual payment records and financial aid statements. If you notice a discrepancy, yes, call your school's financial aid office or sometimes they have a dedicated bursar or student accounts office. Explain the issue and ask them to issue a corrected 1098-T. They're usually pretty good about fixing these errors since they're required by law to report accurate information to the IRS.

This is good advice! I lost access to my 1098-Ts after graduating and had to pay my old university $25 per form to get copies when I needed them later. Such a pain.

Thanks for the response! Do I need to send the physical copies of Form 8949 or can I do this electronically? Also, should I be calling the number on the notice or is there a better way to handle this?

You should respond in the same format as the notice you received. If they sent a physical letter, send back physical forms. The notice should have specific instructions about how to respond - follow those exactly. There should be an address listed specifically for responses. Calling can be helpful, but honestly, with basis issues like this, written documentation is more important since you need to provide proof of your purchase prices. Make sure to keep copies of absolutely everything you send them. I'd also recommend sending it certified mail so you have proof of when it was delivered.

Do you need to include statements from the exchanges too or is the spreadsheet enough? I'm in a similar situation but some of my records are incomplete.

Does H&R Block have a free version? Cash App and FreeTaxUSA are appealing because they offer free or really cheap filing options. I don't want to spend $50+ on tax prep if I can avoid it.

H&R Block does have a free version but like all the "free" tax services, it's only free for simple returns. If you have anything slightly complicated (investment income, self-employment, itemized deductions, etc.), you'll end up having to upgrade to a paid version. Honestly, FreeTaxUSA is probably your best bet for affordable filing - their federal filing is free and state is only like $15. Cash App might be convenient for banking, but as you've discovered, it's pretty limited as a tax service. Whatever you choose, just stick with ONE service next year to avoid this headache!

Nothing complicated really - just standard W-2 income from one job and some basic interest income from my savings account. No major life changes or anything fancy. I just got lured in by Cash App's free filing and didn't realize they couldn't do my state taxes until after I'd already submitted the federal return.

If it's a simple return like OP described, they should definitely be able to file state-only through most services. I've used TurboTax for state-only before when I had a similar situation. Just make sure to select "I've already filed my federal return" option when you start.