11 Wait so does disability payments count as earned income for Roth IRA purposes? I've been on short-term disability for a few months but still contributing to my Roth.

22 No, most disability payments don't count as earned income for Roth IRA purposes. Short-term disability payments from your employer or an insurance company are generally considered taxable income, but they're not considered earned income for IRA contribution eligibility. The only exception would be if you're receiving disability payments from Social Security and you've previously opted to have those benefits taxed as wages. But that's pretty uncommon and requires specific prior arrangements with the SSA.

1 Thank you! I haven't filed yet for 2024, so I'm trying to fix this before I submit anything. Do I still need to file Form 5329 if I withdraw the excess before filing?

What kind of attorney should I look for specifically? Is there a certain specialty that deals with trustee misconduct? And roughly what should I expect this to cost? I'm worried about spending a ton on legal fees when the trust assets have already been diminished.

You want an attorney who specializes in trust and estate litigation specifically - not just any estate planning attorney. Many estate planners focus primarily on creating trusts and wills but have limited experience with litigation when things go wrong. Look for terms like "trust litigation," "fiduciary litigation," or "trust disputes" on their website or firm description. Ideally, find someone who has experience specifically with trustee removal cases and financial misconduct. Regarding costs, most trust litigation attorneys work on an hourly basis, typically $300-$500 per hour depending on your location and the attorney's experience. Many states allow for attorney fees to be paid from the trust itself when the litigation benefits the trust (like removing a dishonest trustee), but this usually happens after the case concludes. You might need to pay upfront and seek reimbursement later.

This is an important point. My family went through something similar, and we found that once we filed a police report, the trustee suddenly became much more cooperative with returning funds. The district attorney in our county had a financial crimes unit that took it quite seriously.

Thanks for bringing up state considerations! I'm in Michigan, so I'll have to look into what the fees are here. Do you know if the liability protection is significantly different between sole prop with good insurance vs an LLC?

Michigan is actually pretty reasonable - filing fee is around $50-75 and annual statement fee is just $25. Much better than California! Insurance and LLCs protect you differently. Insurance covers specific claims up to policy limits, while an LLC creates a legal separation between business and personal assets. Even with good insurance, as a sole prop, someone could still come after your personal assets if they win a judgment exceeding your coverage limits. The LLC creates a legal barrier they'd have to overcome (though not impossible). For graphic design, professional liability insurance is probably more immediately important than an LLC, but having both gives the strongest protection. Many designers start with good insurance, then form an LLC once profits justify the additional paperwork.

The QBI deduction phases out though, right? I think once you make over a certain amount it starts to disappear?

Thanks so much for this! One question - my daughter lives with me 100% of the time, but her dad keeps claiming he's "entitled" to claim her some years because he pays child support. Is that true? The custody agreement doesn't mention taxes at all.

Child support payments do NOT give someone the right to claim a child as a dependent. The IRS has very specific tests for who can claim a child, and the main one is where the child lived for more than half the year (the residency test). If your daughter lives with you 100% of the time, you are the qualifying parent. Your ex might be thinking of the "dependent exemption release" (Form 8332) where the custodial parent can voluntarily release their claim to the non-custodial parent. But this is completely voluntary - you don't have to do this unless it's specified in your custody agreement. No custody agreement means you, as the parent with 100% physical custody, have the right to claim your child.

Did they end up penalizing your ex for filing incorrectly? I'm wondering if there are any consequences for the person who's been claiming my kid.

Yes, they did eventually! The IRS sent him a notice disallowing the child tax credit and earned income credit he'd claimed. He had to pay back all of that money plus interest and a 20% accuracy-related penalty. It took about 14 months from when I filed my paper return with documentation, but the IRS did resolve it in my favor. I also found out he'd been doing this for 3 years, so they went back and audited his previous returns too. Expensive lesson for him!

I've thought about it but wasn't sure if my situation warranted a CPA. Would you mind sharing roughly what you paid for that service? And did they help specifically with tax-loss harvesting strategies or more general tax planning?

I paid around $350 for the initial consultation and tax plan development, and then about $400 for each year's tax return preparation. Considering he saved me over $8,000 in taxes through better loss harvesting strategies and finding missed deductions, it was absolutely worth it. He specifically helped with creating a tax-loss harvesting strategy across multiple years, identifying which specific investments to sell when, and properly documenting everything for the IRS. He also advised on how to structure my investments going forward to be more tax-efficient. For someone with $207k in losses like you have, the potential tax savings would likely be much higher than what I experienced.

Not OP, but I'm guessing crypto or maybe options trading. Those are usually the culprits when you see wild swings like $267k gain followed by $210k loss. Regular stock investing rarely produces that kind of volatility unless you're heavily concentrated in a few speculative stocks.

It was a combination of factors. I had a concentrated position in a few tech stocks that did extremely well in 2022, and I got overconfident. In 2023, I started trading options with larger positions than I should have, and then doubled down when things started going south. I also had some crypto that crashed. The perfect storm basically. I've definitely learned my lesson about diversification and position sizing. I'm working with much smaller position sizes now and have moved a significant portion of my portfolio to index funds. Still have some individual stocks but with strict limits on how much I allocate to any single position.