Do you know if this would be the same process in TurboTax? I have a similar situation but use different software.

Yes, the process is similar in TurboTax, though the screens look different. In TurboTax, you'll also enter code P first when asked for the distribution code. Then during the interview process, TurboTax will ask additional questions where you'll indicate it was a return of excess contributions. The underlying tax treatment is the same regardless of which software you use - the original contribution isn't taxable (since Roth contributions are after-tax), but the earnings are subject to income tax and potentially the 10% early withdrawal penalty depending on your age and situation.

Freetaxusa does have a section where you can add notes to your return. It's in the "Miscellaneous" section under "Notes" - you can add explanations there for your own records. However, these notes don't get transmitted to the IRS with your e-filed return. For your specific 1J code, you should use code 1 as the primary code, and then in the follow-up questions, indicate it was a hardship withdrawal if that option is available. The IRS receives the full 1099-R from your plan administrator with both codes, so they'll have the complete information.

Thanks! I'll check out that notes section. Good to know the IRS still gets the full code information from the plan administrator. That makes me feel better about only being able to enter one code in the software.

That's a good point! He only has the restaurant job, no side gigs. But I'm not sure about the W-4 thing - I don't think he knew to check any specific box when he filled out his paperwork. Is that something the employer might have done automatically because of his age?

Employers shouldn't automatically mark anyone as exempt based on age alone. When your brother filled out his W-4, he would have had to specifically claim exemption from withholding by writing "Exempt" in the appropriate space. It's possible he did this without understanding it, or maybe the employer made an assumption based on his age and income level (which they shouldn't do). For his new W-4 this year, if he expects to earn more than the standard deduction ($12,950), he should definitely not claim exempt status, as he'll likely owe taxes.

Is that really true? I thought if you don't owe any taxes, there's no penalty for not filing when you're under the threshold. Why would the IRS come after someone for not filing when they weren't required to?

This is super helpful! Do you track your electricity use daily or just do a sample period? And for the solar panels, would it help if I kept logs showing the power production and how much is being directed to the mining rigs versus household use?

I do a sample tracking period of about 2 weeks each quarter to establish an average, then apply that to my bills. Seasonal changes affect both mining performance and solar output, so regular monitoring helps establish a realistic business percentage. Absolutely keep detailed logs for your solar setup. Document the total production and what portion powers your mining operation. Photos of your setup can help too. I actually have my mining rigs on a separate circuit with its own meter, which makes it extremely clear what power is being used for business versus personal. That kind of separation makes audits much easier if they ever happen.

Good point about state differences. I'm in California and they basically follow the federal treatment but I've heard some states have exemptions for certain crypto activities. Anyone know which states are most crypto-friendly tax-wise? Considering relocating my mining operation...

Do they offer any support if you get confused during the process? I'm not super tax-savvy and that's why I've always used a preparer.

They do offer customer support through email for free, and if you upgrade to their deluxe version (which is still only about $7), you get access to live chat support. Honestly though, their interface is really straightforward and they explain things in simple terms throughout the process. Their help sections are actually really good at explaining tax concepts in plain English, much clearer than what I got from my previous tax preparer who just rushed through everything. And even with the deluxe upgrade for priority support, you're still paying less than $25 total, which is a fraction of what you'd pay a professional.

Yep, this happened to me too. Started with "free" TurboTax, ended up paying $175 after state filing and all their add-ons. Still better than the $350 I was paying before, but definitely not the "free" they advertised.

I prepared everything myself using TurboTax. This was definitely my first submission attempt. I called the Identity Protection Specialized Unit like someone suggested above, and they confirmed someone else tried filing with my SSN! Currently working through the identity theft affidavit process now. Thankfully I caught it early.

That's definitely more concerning then. Glad you called and confirmed! The earlier you catch these things and get the identity theft affidavit filed, the better. Make sure you also request an Identity Protection PIN from the IRS for next year - it's an extra 6-digit code that prevents anyone from filing electronically with your SSN without the PIN.

You absolutely still need to file the extension separately! The identity theft affidavit (Form 14039) doesn't extend your filing deadline. Make sure to submit Form 4868 by mail ASAP with "POTENTIAL IDENTITY THEFT" written at the top so they flag it for special processing.

Thanks for clarifying! That's super helpful to know. I'll make sure to do both if I ever run into this problem.