That's a good point I hadn't considered. Do you know if he would need to amend all three years of returns if he decides to recontribute now? Or is there a simpler process?

Yes, he would need to file amended returns for any tax year where he reported income from the distribution. So if he reported 1/3 of it on his 2020, 2021, and 2022 returns, he would need to file amended returns for all three years to get back the taxes he paid on those amounts. There's no shortcut process unfortunately - each year needs its own amended return. The sooner he does it the better, especially for 2020, since the time limit for amendments is approaching. One strategy some people use is to only recontribute the amount necessary to avoid being pushed into a higher tax bracket for those years.

This is correct. I worked at H&R Block that year, and Form 8915-E was specifically for reporting coronavirus-related distributions. Without that form being filed, the IRS would have processed the distribution as a regular early withdrawal subject to the 10% penalty.

Did your cousin actually get penalized financially or just had to correct his taxes? I'm still on the fence about how much effort I want to put into this for potentially just a few bucks back.

He had to pay a small accuracy-related penalty of about $50 plus interest on the additional tax he ended up owing after properly reporting everything. The bigger pain was having to go through the amended return process which took months to resolve. The thing is, you might be leaving more money on the table than you realize. When properly claimed, education credits can be worth up to $2,500 for the American Opportunity Credit. Even if you only got $69 last year, it's worth double-checking if you entered everything correctly before deciding it's not worth the effort.

Do you have any tips for figuring out if grants were used for qualified expenses vs living expenses? My 1098-T just shows the total amount billed and total scholarships/grants, but doesnt break down what was used for what.

Oh geez, I didn't even think about state taxes! I moved from California to Texas during this period, so I guess I'll need to file a partial year return for California? This is getting complicated fast.

Yes, you'll need to file a part-year resident return for California covering the period you lived there. The good news is that Texas doesn't have state income tax, so you won't need to file there. California is particularly aggressive about collecting taxes, so definitely prioritize getting that part-year return filed. They'll want to see exactly when you established residency in Texas. Keep any documentation showing your move date (lease agreements, utility setup, driver's license change, etc.).

That's a really important point! The IRS has a 3-year limit on claiming refunds, but there's no time limit on them collecting what you owe them. Completely unfair system if you ask me.

Thanks for the tip! I do use H&R Block usually, but I never thought about using it mid-year. Do I need to buy the current tax year version now or can I use last year's until the new version comes out?

You'll need the current year version, but you don't have to pay for it yet. H&R Block and most other tax software companies let you create an account and start entering information for free. You only pay when you actually file. So you can use their calculators and worksheets now to estimate your quarterly payments without paying for the full software. Just make sure you're using the 2025 version (for taxes you'll file in 2026), not the 2024 version that was for filing this past April.

Yes, there is a threshold. Generally, you need to make quarterly estimated tax payments if you expect to owe at least $1,000 in tax for the year after subtracting withholdings and credits, AND your withholding and credits will cover less than 90% of your current year tax or 100% of your prior year tax. For $2,200 in crypto gains, it depends on your overall tax situation. If you have a regular job with withholding that covers most of your tax liability, you might not need to make estimated payments for this relatively small amount.

That's a really good point I hadn't considered. I've been so focused on figuring out the right donation value that I didn't step back to look at the bigger picture. I'm single and definitely won't have anywhere near $13,850 in itemized deductions. So you're saying this whole thing is basically moot for me since I'll be taking the standard deduction anyway? Ugh, I've spent hours researching this for nothing!

Yes, that's exactly right. Many people get caught up in the details of specific deductions without considering whether they'll actually itemize at all. The 2017 tax law changes nearly doubled the standard deduction while eliminating or limiting many itemized deductions, so now only about 11% of taxpayers itemize. However, your research wasn't entirely wasted! This knowledge will be helpful for future tax planning. If you know you'll be close to the itemization threshold in a particular year, you might strategically bunch charitable donations into that year to exceed the standard deduction amount and get tax benefit from them.

This is really good advice! I live in Colorado and was able to claim charitable donations on my state return even though I took the standard deduction federally. Saved me about $75 on my state taxes.