That's really helpful advice about spreading out the withdrawals. Do you think there's any advantage to starting withdrawals now versus waiting closer to the 10-year deadline? I'm wondering if we should just let it grow for a while since our income is pretty high right now.

It really depends on your current income situation and future expectations. If your income is particularly high right now, it might make sense to delay distributions until a later year when you might be in a lower tax bracket. However, if you expect your income to increase in coming years or if the account might grow substantially, earlier withdrawals could make sense. There's also the benefit of tax-loss harvesting opportunities in down markets. I'd recommend running some projections with different withdrawal scenarios to see what makes the most sense for your specific situation.

Is there any situation where growth in an inherited traditional IRA would actually be tax-free? Maybe the advisor was confusing it with something else?

Thanks! Do you know if they have a "review" feature that checks for potential mistakes or missed deductions before filing? That's one thing I did like about TurboTax.

Yes, they absolutely have a review feature! It runs through everything before you file and flags potential issues or missed opportunities. It's actually pretty thorough - last year it caught that I hadn't entered a 1099-INT from a small savings account I had forgotten about. They also have a "maximize refund" pledge similar to other tax services, so they're incentivized to help you find all eligible deductions and credits.

Can confirm this limitation. I tried using it when I moved mid-year between states and it was confusing. Ended up using a different service for that year, but went back to FreeTaxUSA the next year when my situation was simpler.

That makes so much more sense! I was worried my entire income would get hit with the higher rate. What about the freelance income though? Is that taxed differently than my regular job income?

Your freelance income is subject to both income tax (at the same progressive rates as your W-2 income) AND self-employment tax, which is an additional 15.3% to cover Social Security and Medicare. This is because when you're self-employed, you're paying both the employer and employee portions of these taxes. You can deduct business expenses from your freelance income though, which helps reduce both taxes. Things like supplies, software subscriptions, and potentially a portion of your home office if it's used exclusively for the freelance work. Just keep good records of everything!

This is correct! I work as a tax preparer and see this mistake ALL THE TIME. The home office deduction is only for self-employed people (Schedule C filers) or certain statutory employees. Regular W-2 employees can't take this deduction anymore after the Tax Cuts and Jobs Act.

Is there an easy way to figure out the state difference? I'm in New York and now I'm wondering if I've been leaving money on the table for years.

For New York specifically, the differences can be significant because NY has a pretty progressive tax rate structure. The easiest way is to run the calculations both ways using NY's tax tables, which you can find on the NY Department of Taxation website. The key thing to check is whether you and your spouse would fall into different tax brackets individually versus where your combined income lands. Also, NY has some credits that follow federal rules about filing status, so if you'd lose certain credits federally by filing separately, you might lose the corresponding NY credits too. I usually just run a quick calculation both ways in our state's online tax calculator to see the difference. Takes about 15 minutes but has saved us hundreds some years.

The Tax Cuts and Jobs Act significantly reduced the impact of AMT for many taxpayers by increasing the exemption amounts and phase-out thresholds. But it's still something to consider for higher incomes, especially if you have lots of certain types of deductions or exercise stock options. I got caught by this too, but in reverse - filing separately actually triggered AMT for us when jointly didn't. It's definitely worth running the numbers both ways if you're near those thresholds.

Can you walk me through exactly where in FreeTaxUSA I should be entering this? I keep getting stuck at the part where it asks if I want to file Schedule C. Should I be saying no to that?

You should definitely say NO to filing Schedule C since you're not claiming to be self-employed. In FreeTaxUSA, go to the Income section, then select "Wages paid by an employer who did not withhold Social Security and Medicare taxes" (not the 1099-NEC section). When you get to the screen asking for details, enter your income amount from the 1099-NEC, select reason code G, and enter the employer information exactly as it appears on your 1099. The software will calculate only the employee portion of FICA taxes rather than self-employment tax.

H&R block was terrible when I tried to file with Form 8919 last year. They kept adding the income back as self employment even after I removed it. Ended up having to paper file.