Is there an easy way to calculate what percentage should be withheld? I always just use the IRS calculator but it's super complicated.

The simplest rule of thumb is to look at your effective tax rate from last year (total tax paid divided by total income) and make sure you're withholding at least that percentage. For most middle-class married couples, it's usually between 12-18% depending on your exact situation. The more accurate way is to use the IRS Tax Withholding Estimator on their website. It takes about 15 minutes if you have your most recent pay stubs and last year's tax return handy. It will tell you exactly what to put on your W4 to get the result you want (whether that's breaking even or getting a specific refund amount).

Did your company offer to help fix it? Mine just told me it was my responsibility to check my paystubs regularly 🙄

This makes so much sense now! I think I was overthinking the questions because unemployment feels different than a regular job, but from a dependency perspective, I'm still supporting myself. Did you end up just answering "yes" to the question about supporting yourself with earned income even though unemployment was part of your support?

Yes, I answered "yes" to supporting myself with earned income, even though a good chunk of my income was unemployment. The key is understanding what TurboTax is really asking - they're trying to determine dependency status, not doing a technical breakdown of income types. For dependency test purposes, the important thing is that you're supporting yourself (versus being supported by parents), not the technical classification of each income source. Once I answered "yes" to supporting myself, TurboTax correctly skipped Form 8615 and everything else fell into place. Form 8615 is specifically for children/students who ARE dependents and have unearned income above certain thresholds. Since you're not a dependent, that form shouldn't apply to you regardless of how much of your income is "earned" vs "unearned.

No, unemployment benefits are definitely considered unearned income for tax purposes. Even though you might have paid into the system while working, the IRS classifies unemployment compensation as unearned income - similar to interest, dividends, or other income you didn't directly work for. This distinction matters for things like the Earned Income Tax Credit (which requires earned income), but in OP's case, the key issue isn't about earned vs. unearned income - it's about dependency status. Since they support themselves and can't be claimed as a dependent, Form 8615 wouldn't apply regardless of how their income is classified.

I think you're onto something! I just checked the detailed calculations and it does show a self-employment tax amount even though I filed the 8919. Is there any way to fix this in the software or do I need to file a paper return?

Unfortunately most tax software doesn't handle this situation perfectly. You have a few options: You can try entering the income as W2 with zero withholding for now, and then attach an explanation letter with your return explaining the misclassification and your pending SS8. Many people do this since the end result is usually more accurate. Alternatively, you can file a paper return with the correct forms and calculations, which gives you more control but is obviously more work. If you go this route, include a clear explanation letter. Either way, keep detailed records of everything. Once your SS8 determination comes through (which can take 6+ months), you'll likely need to file an amended return anyway, especially if the IRS rules in your favor.

I filed in Feb last year and got my determination in December - so like 10 months. They ruled in my favor and then I had to file an amended return. The company had to pay their share of the taxes, and I got a nice refund for the extra I'd paid. Long wait but worth it in the end.

This is super important! Alaska has some unique property rules. OP should definitely check if the property was in an area with subsurface rights or native corporation interests because that can change everything about how it's reported.

Absolutely right about the subsurface rights. The other thing to consider is whether the property was received via a Native allotment or corporation, as these have different tax treatments than standard inherited property. There are special provisions for Alaska Native lands that don't apply elsewhere. If the property was in a remote area, sometimes the assessment records aren't as detailed as they would be in more populated areas, so you might need to look for comparable sales from newspapers or other records from 2007. Some Alaska boroughs have surprisingly good historical data available online now.

Which software did you end up using that worked? I'm in a similar situation for 2024 and worried about making the same mistake.

Thanks for bringing this up, but these are both primary residences. We've lived in our current home for 6 years, and the childhood home will become our new primary residence once we complete the purchase. So I think we should qualify for the capital gains exclusion rather than needing the like-kind exchange rules.

You're absolutely right that the primary residence exclusion is your best option here. Since you've lived in your current home for 6 years, you easily meet the 2-out-of-5 years requirement. I mentioned like-kind exchanges just as an alternative for readers in different situations, but your plan to use the Section 121 exclusion for primary residences is perfect for your situation. Just make sure to keep good records of both transactions for your tax files.

I used TurboTax last year for my home sale. It asks all the right questions about how long you lived there and the purchase/sale prices. Just make sure you have all your closing documents handy. The land contract part might be trickier though.