Thanks for the warning! Do you know where I can figure out if we need to make an estimated payment? The inheritance was about $47,000 and they withheld around $5,600. We both make about $70k each yearly if that helps.

With a combined income of around $140k plus this $47k inheritance, you're looking at potentially being in the 22% federal tax bracket for 2025 (assuming you're married filing jointly and tax brackets stay similar to 2024). At 22%, the tax on $47k would be about $10,340, but they only withheld $5,600. So you might be under-withheld by around $4,740. To avoid a potential underpayment penalty, you could make an estimated tax payment using Form 1040-ES. The IRS website has a withholding calculator that can help determine the exact amount based on your full financial picture.

I used TurboTax last year for this exact situation. It actually does a good job with inherited IRAs. There's a specific section for reporting distributions, and it asks if it's from an inherited account. Just make sure you have the 1099-R form from the financial institution (they'll send it in January/February) and enter everything exactly as shown on that form.

That's a great point about industry differences. Do you think this will lead to changes in how companies structure their operations? Like will we see tech companies suddenly investing in more physical assets in certain jurisdictions just to benefit from those exclusions?

I definitely expect to see behavioral changes in how companies structure their operations. We're already seeing some of our tech industry clients evaluating whether to increase substantive operations in certain jurisdictions. This doesn't necessarily mean building factories, but could involve relocating actual R&D teams or other high-value functions to jurisdictions that still offer competitive advantages while meeting substance requirements. Singapore and Ireland, for instance, are promoting their educated workforces and business-friendly environments rather than just low tax rates. The key is having genuine economic activity that justifies the profit allocation, not just paper arrangements.

You're right about the basic framework. The Income Inclusion Rule (IIR) has priority and allows the parent entity's jurisdiction to collect the top-up tax. The Undertaxed Profits Rule (UPR) is a backstop that kicks in if the parent jurisdiction doesn't have an IIR in place. What makes this complex is the implementation timeline. The EU countries are generally moving forward with coordinated implementation, while the US implementation remains uncertain given the political challenges of passing tax legislation. This creates potential for inconsistent application and even double taxation in some scenarios. For your 8-country structure, you'll need to map out which jurisdictions are implementing which rules and when. The OECD has a hierarchy for which country's rules take precedence, but transitional issues are likely during the rollout phase.

What happens if you miss a quarterly payment? I just realized I should have been doing this for my Etsy shop but I haven't made any payments this year at all...

If you miss quarterly payments, you might have to pay a penalty for underpayment. The penalty is basically interest on the amount you should have paid by each quarterly deadline. The more you earn from your business, the larger the potential penalty. For a small Etsy shop, the penalty might not be huge, but it's still something you want to avoid in the future. You can start making the payments now for the remainder of the year to minimize any potential penalties. Form 1040-ES is what you'll use for these payments. And definitely plan to make these payments next year - it's much easier to pay a little each quarter than to get hit with a big tax bill plus penalties at filing time!

The latest information is that the threshold is $5,000 for tax year 2024 (filing in 2025), and is scheduled to drop to $600 for tax year 2025 (filing in 2026). Congress has pushed back the $600 threshold implementation several times, so it's possible it could change again.

That's a really interesting approach I hadn't considered! My daughter is definitely talking about grad school already (she's interested in research). How did you handle the estimated tax payments during those years? And did you run into any issues with the financial aid office regarding how you were allocating the scholarship funds?

We calculated her quarterly estimated tax payments based on the taxable scholarship amount. Since her only income was the taxable portion of the scholarship, it was pretty straightforward - we just divided her expected tax liability by four and made the quarterly payments. She never owed more than about $800 per year in total federal taxes because her taxable income was relatively low. We didn't have any issues with the financial aid office at all. They actually helped us understand how to properly document the allocation between tuition/fees and the room/board expenses. The key was communicating with them about our plan. They provided documentation showing which expenses were considered qualified education expenses versus living expenses, which made tax filing much easier. Most financial aid offices deal with this situation regularly and can provide the documentation you'll need for tax purposes.

That's a really important point. Do you know what the threshold is where the kiddie tax kicks in? Is it just the standard deduction amount or is there some other limit?

I did this for my job as a martial arts instructor. It took about 6 months but the IRS determined I was misclassified and I was able to file as self-employed, which saved me thousands in deductions.

This is actually a really important point! When I switched from W2 to 1099 for my coaching job, I was excited about the deductions but then got hit with that self-employment tax. Wasn't prepared for it.

I hadn't even thought about that aspect. My last pay stub shows I'm paying about 7.65% for Social Security and Medicare combined. So I'd basically be paying double that as a 1099? That definitely changes the math on whether pushing for reclassification makes sense. I'll need to calculate if the deductions would offset that extra cost.