If they file an extension, do they miss out on getting their refund until October? I'm confused about how that works with the payment vs. filing distinction.

If you're expecting a refund, you won't get it until after you file your complete tax return. So yes, filing an extension would delay your refund until whenever you actually submit your completed return (which could be anytime between now and October 15th). The distinction is important for people who owe taxes. The extension gives you more time to complete the paperwork, but you still need to pay what you estimate you owe by the original deadline to avoid penalties and interest. But since you mentioned having a new child and home purchase, there's a good chance you qualify for additional credits and deductions that might result in a refund.

I used FreeTaxUSA last year when we bought our house! It was actually pretty good for the price. The interface isn't as slick as TurboTax, but it walks you through everything step by step. The only thing is you have to know what forms you need - it doesn't really give advice about your specific situation like a human preparer would. But for $7 it was totally worth it.

Normally yes, 529 contributions are subject to gift tax limits (currently $17,000 per donor per recipient annually without filing a gift tax return). However, qualified rollovers from one education account to another are exempt from these limits. Since this was a rollover from a Coverdell ESA to a 529 for a qualifying family member, it doesn't count against the annual gift tax exclusion - it's treated as a transfer of an already-existing education benefit rather than a new gift. That's one of the many advantages of doing a proper rollover rather than taking a distribution and making a new contribution.

Are there any gotchas with these out-of-state trusts? Like do you need to visit that state regularly or have some connection to it? Just trying to understand if there are hidden downsides.

Yes, there are definitely some potential "gotchas" to be aware of. First, you'll need some legitimate connection to the state - typically this means having a trustee (individual or corporate) who resides in or has a significant presence in that state. Simply naming a friend who lives there isn't usually sufficient. The second big consideration is ongoing administration costs. Out-of-state trusts often require hiring a professional trustee or trust company in that state, which can cost anywhere from $2,500-$8,000 annually depending on the complexity and trust assets. For smaller trusts, these fees might outweigh the tax benefits.

I did some shopping around for a South Dakota trust last year. Initial setup with a decent trust attorney was about $5k, then annual trustee fees with a SD trust company were $3k. But I was putting significant assets in it ($3M+) so the math worked out in the long run. Probably not worth it for smaller estates.

Creating a formal partnership with an undocumented person doesn't magically solve immigration issues. There are complicated legal implications beyond just taxes. Some business structures could create bigger problems.

Not really helpful. People in mixed-status partnerships still need to handle their taxes properly. Tax compliance is separate from immigration issues, and staying tax compliant is actually important regardless of status.

You're right, my comment wasn't very helpful. I was coming from a place of concern but didn't express it well. Tax compliance is definitely important and separate from immigration matters. The IRS has specifically created systems like ITINs to ensure everyone can meet their tax obligations regardless of status.

I've heard about the checkbook IRA LLC approach but wasn't sure if it actually helps with the UBIT issue or just makes property management easier. Does the LLC structure actually change how the IRS views development activities for UBIT purposes?

The LLC structure by itself doesn't eliminate UBIT concerns. The IRS looks through the LLC to the underlying activity. The main advantage is operational flexibility - you can manage the property without going through the custodian for every transaction. Regarding UBIT specifically, the LLC doesn't change the fundamental rules about what constitutes a business activity versus an investment. What it can do is give you more control over how activities are structured and documented, which might help in borderline cases. For example, you can more easily document the investment purpose of improvements if you're managing the books directly.

That's playing with fire! Intentional prohibited transactions can have consequences beyond just the taxes and penalties. The IRS doesn't look kindly on deliberate end-runs around the rules. I'd be super cautious about this approach.