Mixed straddle accounting is a whole different beast. You need to make an election to use it, and it has to be done by the due date of your return for the year the straddle was established. If you didn't make that election already, you probably can't use it retroactively.

That's good to know. I did make the election last year since I knew I'd be implementing these strategies. Do you know if using the mixed straddle accounting would solve the issue with reporting short positions that cross year-end? I'm trying to avoid the same reporting problems the original poster mentioned. I've read that mixed straddle accounting lets you avoid the mark-to-market rules for the 1256 contracts that are part of the straddle, which might simplify things.

Only options on "broad-based" indices qualify as Section 1256 contracts. Foreign indices generally don't qualify unless they're specifically listed by the IRS. If your foreign index has fewer than 10 stocks or if the options aren't regulated by the CFTC, they're probably just regular capital assets with standard short/long term treatment.

8 I used FreeTaxUSA last year when I had a similar 1099-K issue. They do give you more control, but they still directed me to Form 8949 rather than Schedule 1 line 24z. The interface was pretty straightforward for entering each item, though.

14 Thanks for sharing your experience! I'm starting to accept that Form 8949 is just the way I'll have to go, regardless of which software I use. At least FreeTaxUSA is more affordable than some of the other options I was looking at.

11 The threshold is supposed to be $5,000 for tax year 2024 (filing in 2025). The IRS announced this change after delaying the $600 threshold implementation multiple times. That should give occasional sellers some breathing room.

Nothing changed really. Still single, no kids, same job until November. I don't have investments other than my 401k. That's why I'm so confused and frustrated. Thanks for the suggestions though.

One other thought - the timing of when you left your job in November could be significant. If you were making, say, $3,300 per month and expected to earn $39,600 for the full year, your withholding would be calculated based on that projection. But if you only worked until November, you earned less than projected, but your withholding was calculated as if you'd earn more. This can actually result in OVERWITHHOLDING for each paycheck, which usually means a BIGGER refund, not smaller. So that makes your situation even more puzzling. Something else must be at play here.

You're absolutely right. The IRS did adjust withholding tables slightly, which affects how much is taken out of each paycheck. It's supposed to make withholding more accurate (closer to your actual tax liability), which ironically means smaller refunds for many people. A refund is just the government returning money you overpaid throughout the year - it's not a bonus or benefit. If your withholding is more accurate, your refunds will be smaller but you'll have more money in each paycheck. Many people don't notice the slightly larger paychecks but definitely notice the smaller refund.

Thanks for that advice! My settlement papers do actually specify that the entire amount is for "emotional distress damages" and not for lost wages or punitive damages, so that's helpful. I hadn't thought about keeping extra documentation from my attorney though. Would it be helpful to get a specific letter about the tax treatment, or is the settlement agreement itself sufficient?

The settlement agreement should be sufficient if it clearly states the damages are for emotional distress. However, having a supplementary letter from your attorney that specifically addresses the tax treatment can be helpful if you're ever audited. I'd recommend asking your attorney for a brief letter confirming that the settlement represents compensation for emotional distress and not for lost wages or punitive damages. If possible, have them reference any relevant tax code sections that apply to your situation. Keep this letter with your tax records for at least seven years (the typical IRS audit window for most situations).

This is bad advice. Different types of settlements have very different tax treatments. Personal physical injury settlements are tax-free. Emotional distress settlements are taxable but not subject to self-employment tax. Lost wages are taxable as regular income. Punitive damages are taxable as ordinary income. Just putting it on "other income" without properly documenting and reporting each component could lead to paying too much in taxes or, worse, an audit. The specific instructions from the expert in Comment 1 are much more accurate.

You're right that different settlements have different tax treatments. I should have been clearer - I meant the OP should report it as "other income" and specifically label it as "emotional distress settlement" as the expert suggested, not just lump it in with random miscellaneous income. My main point was that tax software can be helpful for situations like this. TurboTax Premium, for example, has specific sections for reporting legal settlements and will guide you through the correct forms and line items based on the type of settlement. It also helps you properly deduct attorney fees in these situations. I didn't mean to suggest taking a casual approach to the documentation - keeping all records is absolutely essential.

Did the community college course cover things like estimated quarterly taxes? That's the part I always struggle with.

Yes, the course definitely covered quarterly estimated taxes! The instructor spent an entire session on how to calculate them properly and how to avoid penalties. They even provided spreadsheet templates that made the math much easier. The course also covered when you actually need to make quarterly payments (since not everyone does) and how to adjust them if your income fluctuates throughout the year. It was honestly the most practical and helpful part of the entire course for me.

I've been watching their videos for about a year now. The information is solid - the channel is run by a CPA with small business experience. The playlist on "Small Business Basics" is especially good for beginners. Just be aware that some older videos might not reflect the latest tax law changes, so always check the upload date.