Thanks for this idea. We've already filed an extension for other reasons, but I never thought about asking the brokerage to issue the 1099-R early. I'll definitely call them tomorrow to see if that's possible. Would save us a lot of hassle if they can do that before October.

Extensions are great for situations like this. Just remember that while the extension gives you more time to file, it doesn't give you more time to pay the tax you owe. You should estimate the tax on the earnings portion and pay it with your extension request (Form 4868) to minimize interest. From my experience, about half the brokerages are willing to issue these 1099-Rs early when asked specifically. Be sure to speak with someone in their tax department rather than just a general customer service rep, as they're more likely to understand what you need and why.

I used TurboTax last year for this exact scenario. In the Income section, there's an "Other Income" category where you can enter the earnings amount. I labeled it as "Earnings from excess Roth IRA contribution withdrawal" and entered the estimated amount. Then I attached a statement explaining the situation to my e-filed return. Worked fine, no issues from the IRS.

Thanks for this list! The notice I got actually has a few of these red flags. It does have a regular payment link but also mentions I can "expedite processing" by paying via gift card "to avoid processing delays" which seemed weird. And now that I look closer there are some grammar issues. I think I'm going to report this to the authorities.

You're making the right call by reporting it. The "expedite processing" via gift card is a MASSIVE red flag - the IRS would never accept gift cards as payment under any circumstances. This is definitely a scam targeting contractors and self-employed individuals. When you report it, try to include the original notice (or copies) if possible, as this helps authorities track down the source. The Treasury Inspector General for Tax Administration (TIGTA) has an online form specifically for reporting IRS impersonation scams at www.tigta.gov, or you can call them at 800-366-4484.

How did you figure out it was fake? Did you call the IRS or was there something obvious that gave it away?

Thanks for sharing your experience! How many trades would you say justifies paying for a specialist vs using software? I did around 800 trades last year, mostly stocks and some options, but no futures or forex.

At 800 trades, you're right on the borderline where it could go either way. The key question isn't just trade count but whether you might qualify for trader tax status (TTS). If you're trading frequently with substantial account size, hold positions for short periods, and depend on trading income, a specialist can help you claim TTS which opens up huge deduction possibilities like home office, health insurance, retirement plans, and more. Software works fine for accurately reporting your trades and basic gain/loss, but won't provide strategic advice on entity structure, elections, or maximizing deductions. Consider having a one-time consultation with a specialist to see if you're missing opportunities, then decide if ongoing help makes financial sense based on potential tax savings.

I tried one last year (TradeLog I think it was called). It was decent for organizing trades but still required a lot of manual work for wash sales and proper categorization. Ended up having to amend my return when I realized it wasn't handling my VIX futures correctly. You definitely get what you pay for with these specialized programs.

It's a standard brokerage account, not retirement or anything special. She's owned it for about 12 years. The original investment was around $165k and it's grown to about $270k now. No special conditions other than she had to keep it for 10 years minimum per some agreement with the investment company.

Thanks for clarifying - that makes a huge difference! Since it's a standard brokerage account, she'll only pay capital gains tax on the growth portion (about $105k based on your numbers), not the entire $270k. If she's held it over 1 year (which she has at 12 years), she'll pay long-term capital gains rates, which are much lower than ordinary income tax rates - likely 15% for most people. Instead of withdrawing everything and then gifting cash, she could consider transferring shares directly to her children (in-kind transfer). This passes the tax obligation to the kids, who might be in lower tax brackets. They'd inherit her cost basis but could sell according to their own tax situations.

Good point. I ended up using both an advisor AND some tax software to model different scenarios when distributing my dad's investment account last year. The advisor cost me $400 but saved us about $8k in taxes by structuring the withdrawals properly.

This is super helpful! I don't think I'll meet the safe harbor since my income went up quite a bit in 2024 compared to 2023. How complicated is the Form 2210 to fill out? And what kind of documentation would I need to provide to show this was an unusual circumstance?

Form 2210 is admittedly one of the more complex IRS forms, but you only need to complete certain parts depending on your situation. For the waiver request, you'll fill out Part I, check box A for "Request a waiver," and attach a statement explaining the circumstances (the timing of your RSU vest vs. the sell-to-cover transaction). You don't necessarily need formal documentation upfront, but keep your RSU statements and any communications with your company about the transaction timing. The key is to clearly explain that this was a one-time timing issue outside your control - the vest occurred in one tax year but the withholding happened in the next tax year. If you're using tax software, it should walk you through the process. The penalty itself is usually fairly modest compared to the tax owed, so some people just pay it rather than going through the waiver process, but it's worth trying if the amount is significant.

Our company actually adjusted our year-end bonuses to help offset the tax impact when this happened. Worth asking your HR department if they're aware of the issue and if they have any programs to help employees caught in this situation. Some companies offer tax advance programs specifically for equity compensation.