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.

Do both people have to file at the same time? Like what happens if my mom files first and claims me, but then I file and claim myself?

You don't have to file at the same time, but if your mom claims you as a dependent and then you claim yourself on your own return, it will trigger a red flag in the IRS system. When you e-file and indicate that you can be claimed as a dependent by someone else, the system will check if someone has already claimed you. If there's a conflict (she claimed you and you claimed yourself), typically one or both returns will be rejected, or you might receive a letter from the IRS asking for clarification.

Yeah TurboTax can do this but its kinda annoying. You have to basically complete your whole return, save it, then go back and change the "can someone claim you as a dependent" answer and redo some parts. I did this last year and found I got about $1200 more by not being claimed as a dependent.

Thanks, that's helpful. I already started my return in TurboTax so I'll try doing that comparison before making a decision.

What accounting software would you recommend for someone just starting out? I'm running into the same issues as OP but don't want to spend a fortune on QuickBooks or something if there are cheaper options that would work for a small operation.

For someone just starting out, I'd recommend Wave Accounting - it's free for basic accounting and receipt tracking, which is perfect for a small operation. You only pay if you use their payroll or payment processing features. It's what I used for my first two years before upgrading. If you want something with a bit more features but still affordable, FreshBooks has a starter plan that's reasonable and very user-friendly. Xero is another good option that's more affordable than QuickBooks but still robust enough for a growing business. All of these will let you categorize your income and expenses properly, which makes Schedule C preparation much easier come tax time.

This is super interesting - I never thought about it from the model's perspective! So if I understand correctly, if I'm paying my manager a percentage of my earnings, I should technically be sending them a 1099-NEC? Is that something most models actually do? And does it matter if I'm paying through Cash App vs direct deposit?

That's a great tip about trying a browser instead of the app! Just tried it and it actually worked - I can access my partially completed 2022 return. Looks like everything is still there, I just need to finalize and submit it. Do you think there's any benefit to explaining my situation to the IRS about thinking I had submitted but didn't? Or should I just file and pay the penalties?

Glad the browser trick worked! In my experience, simply filing and paying what you owe plus penalties is the cleanest approach. The IRS generally doesn't waive penalties for "I thought I filed" situations since they consider filing to be your responsibility. However, if this is your first time having penalties, you might qualify for First-Time Penalty Abatement. You can request this after you file and pay. It's worth trying since the worst they can say is no. Just make a phone call after everything is processed and specifically ask about "First-Time Penalty Abatement" for your 2022 return.

I tried the reasonable cause route for my late filing (medical issues) and it was denied. First-time penalty abatement worked though! Much easier process and no documentation needed.

That's encouraging to hear! Did you claim both EITC and CTC? And did your WMR tool show any tax topic numbers during the processing stage or just the generic "still processing" message?

I claimed EITC but not CTC this year. My WMR showed Tax Topic 152 the entire time, which I've read is actually a good sign that means your return is in normal processing. It was stuck on "still processing" with that tax topic for about 3 weeks. The only update I got was when it suddenly changed to approved, and then the money was in my account the next morning. Capital One did not hold the funds at all, it was available immediately when the deposit hit.

I've been trying to access my transcript online but the IRS verification system won't accept my phone number since it's prepaid. Any other ways to check transcripts without waiting for mail?

If you can't verify your identity online, you can also request transcripts by mail using Form 4506-T, but obviously that takes longer. Another option is to try calling the automated transcript request line at 800-908-9946, which sometimes has less stringent verification. Some people have had success verifying their identity by using a family member's non-prepaid phone number for the verification step, then changing their contact info afterward. Not officially recommended, but might work in a pinch if you're desperate for transcript updates.