Thanks, that's really good to know! Can I just move my existing savings directly into a Roth IRA? And do banks offer these or do I need to go somewhere special?

You can definitely move your savings into a Roth IRA, but there are annual contribution limits ($6,000 for 2025 if you're under 50). Your regular bank might offer them, but typically people open them with investment companies like Vanguard, Fidelity, or Charles Schwab. The advantage is that in a Roth IRA, you can invest in things that potentially grow much faster than a savings account - like index funds that might return 7-10% annually compared to the 1-2% you'd get from a high-yield savings account. Just remember that while you can withdraw contributions anytime, you generally can't touch the earnings until retirement age without penalties.

Any specific recommendations for good high yield accounts? I hear ads for them all the time but not sure which ones are legit.

9 Curious - what specific documentation did you keep that satisfied the IRS during their questions? I'm exercising some QSBS-eligible options next month and want to make sure I'm saving everything I might need years down the road.

22 The most important documents were my option exercise agreement showing the exact date of exercise, company financial statements from that quarter showing assets under $50M, a letter from the company CFO confirming C-Corp status and qualifying business activities, and proof of continuous ownership through statements showing I held the shares the entire time. I also had emails from company executives discussing QSBS eligibility that I'd saved just in case. The IRS didn't even ask for those, but I was glad to have everything thoroughly documented. They were primarily concerned with verifying the company's status at exercise time and proving I'd held the shares for the required period.

19 I claimed QSBS exclusion two years ago. TurboTax Premier technically supports it, but the interface was confusing. You basically report the sale on Form 8949 with code "Q" and then make an adjustment for the excluded gain. I ended up hiring a CPA because I was nervous about doing it wrong - the potential tax savings were too significant to risk messing up the forms.

I had mine rejected once when I used the wrong AGI. If that happens, you can usually try again with a different number. Usually you get 3-5 attempts before it becomes a bigger issue. If all else fails, you can always print and mail your return as a last resort.

Thanks for the info! I'm going to try the method of adding up my W-2s first and see if that works. Good to know I'll have multiple attempts if I need them.

But if someone's selling drugs, wouldn't reporting the income create a paper trail that could get them arrested? I thought there was some law that protected people from having to incriminate themselves on tax forms?

You're thinking of the Fifth Amendment protection against self-incrimination. It's a complex legal area where tax law and constitutional rights intersect. While the Fifth Amendment can protect you from having to provide incriminating information, courts have generally held that it doesn't excuse individuals from filing tax returns or reporting income. The requirement to file and pay taxes applies to everyone. However, the specific way information is reported can sometimes be handled to minimize self-incrimination. This is precisely why someone in this situation should work with both a tax attorney and criminal defense attorney - not just a regular tax preparer. It requires specialized legal knowledge to navigate properly.

There's no specific line for "illegal income" on IRS forms. All income, regardless of source, gets reported in the appropriate categories based on how it was earned (business income, capital gains, etc.). The IRS is concerned with whether income is taxable, not whether it's legal.

Wow, that's a great idea! So I could just have my company job take out extra from each paycheck instead of doing the quarterly thing? Would I need to tell them it's for side income or just put down a higher withholding amount?

You don't need to explain why you're changing your withholding - just submit a new W-4 with the adjusted amount. On the current W-4 form, there's a section specifically for "extra withholding" where you can put a dollar amount to withhold from each paycheck. I used the withholding calculator, which asked for info about both my W-2 job and estimated side income, then it told me exactly what to put on each line of the W-4. Just make sure you're setting aside enough to cover both income tax and self-employment tax (the SE tax is the one that catches most people by surprise).

Oh crap, I didn't even think about state taxes. Do you know if the thresholds are different? My side gig only makes like $900 a month.