Has anyone used TurboTax for this situation? Will it guide me through the process correctly for both my return and my kid's return?

This is such a common situation and you're absolutely on the right track! Your daughter can definitely file her own return while you claim her as a dependent - happens all the time with college students. Just to reinforce what others have said: since you're providing over half her support (housing, utilities, insurance, groceries, phone) and she's a full-time student under 24, she qualifies as your dependent. The $800-900/month she makes for personal expenses doesn't change that. When she files her return, she'll need to check the box indicating someone else can claim her as a dependent. This is crucial - if she forgets to check that box, it can cause issues when you file your return claiming her. One thing I'd add: keep good records of what you pay for vs. what she pays for. The IRS support test looks at the total cost of her support for the year, and you need to provide more than 50%. Given that you're covering all the major living expenses, you should be well over that threshold, but it's good to have documentation just in case. Your daughter should definitely file her own return if she had any taxes withheld from her paychecks - that's likely the only way she'll get those refunds back. Plus it's good practice for her to learn the process!

Based on all the discussion here, it sounds like you need to weigh the actual tax impact against the stress of rushing distributions. The key insight from everyone's responses is that there's no direct penalty for going past the 2-year deadline - the main consequence is having to file separate returns with higher trust tax rates. Here's what I'd recommend: calculate the approximate additional tax cost of missing the deadline by a month. If your trust doesn't generate much income, the extra cost might be minimal and worth the peace of mind of doing distributions properly rather than rushing. But if you have significant investment income or business income like some others mentioned, those compressed trust tax brackets could cost thousands. The documentation points raised by Santiago and others are crucial either way. Make sure you have clear paper trails for whenever you do complete distributions - formal resolutions, bank records, everything dated properly. One thing I didn't see mentioned - have you considered doing partial distributions now to reduce the trust's income-generating assets, then completing the rest after the deadline? This could minimize the tax impact of the higher trust rates while giving you more time to handle the final distributions properly.

The partial distribution strategy is excellent advice from @37b3aea8aa57. To answer your questions @3889e6ce151f - there are no specific restrictions on which assets to distribute first, but cash and liquid investments are definitely the smart choice for partial distributions before the deadline. The key thing to understand is that the Section 645 election doesn't require complete distribution of all trust assets within 2 years. The election period simply ends after 2 years (or earlier if you complete all distributions), and then you start filing separate returns for whatever remains in the trust. So yes, partial distributions absolutely count and can significantly reduce your tax exposure. If you distribute the income-producing assets now, you'll have much less income subject to those compressed trust tax brackets after the deadline passes. I'd suggest prioritizing distributions in this order: 1) Cash and money market funds, 2) Dividend-paying stocks and bonds, 3) Any business interests that generate regular income, and 4) Save non-income producing assets like growth stocks or vacant real estate for after the deadline when you have more time for proper documentation. This way you get the tax benefits of the partial distributions while giving yourself breathing room to handle the more complex asset transfers properly. Just make sure to document everything clearly as others have mentioned.

Eva, I can definitely relate to your concerns about the treaty termination - it's natural to worry about potential double taxation when you hear that kind of news. But after reading through all the responses here, I think you're getting some really solid advice that should put your mind at ease. What strikes me most is how many people have successfully navigated similar situations in non-treaty countries. The combination of FEIE ($126,500 exclusion for 2024) plus Foreign Tax Credits for income above that threshold really does prevent the "nightmare" scenario you're worried about. One thing I'd add that hasn't been mentioned much: consider the broader financial picture beyond just taxes. Hungary's significantly lower cost of living, access to excellent healthcare, and your ability to travel freely throughout the EU as a resident could provide substantial value that outweighs the additional tax complexity. If you're serious about this move, I'd suggest creating a simple spreadsheet comparing your total costs (including taxes, living expenses, healthcare, etc.) between staying in the US versus moving to Hungary. You might be surprised to find that even with some additional tax obligations, you could come out ahead financially while gaining a much better quality of life. The tools to manage international taxation are well-established and proven - don't let the fear of complexity prevent you from pursuing what sounds like an exciting opportunity!

Eva, I've been following this thread and wanted to share some practical insights from my own experience as a US citizen living abroad without treaty protection. The anxiety you're feeling about potential double taxation is completely understandable, but the reality is much more manageable than it initially appears. I've been living in a non-treaty country for over two years now, and while the paperwork is definitely more complex than it would be with treaty benefits, the actual tax burden isn't nearly as scary as you might think. Here's what I wish someone had told me before I made my move: focus on the FEIE first - that $126,500 exclusion for 2024 covers the vast majority of what most people earn, and it applies regardless of treaty status. For income above that threshold, the Foreign Tax Credit system works quite well to prevent true double taxation, even if it requires more documentation. One practical tip that's saved me headaches: start documenting your Hungarian ties from day one if you decide to move. Keep copies of everything - lease agreements, utility setup, bank account opening, local registration documents. The IRS wants to see genuine establishment of foreign residence, not just extended tourism. Also, don't underestimate the value of connecting with the existing American expat community in Budapest before you move. They've already navigated these exact challenges and can provide real-world guidance that goes beyond theoretical tax advice. The treaty termination adds complexity, but it shouldn't derail what sounds like an exciting opportunity for personal and professional growth!

Does anyone know if TurboTax handles this better than FreeTaxUSA? I'm in the same boat with about 50 transactions and a couple wash sales. Would switching tax software make this easier?

I've been dealing with this exact same issue! For what it's worth, I called my brokerage (Charles Schwab) directly and they were able to provide me with a supplemental report that breaks down exactly which transactions had wash sales applied. It turns out most brokerages can generate this detail if you ask - it's just not included in the standard 1099-B. Once I had that breakdown, I was able to use the summary method for about 80% of my transactions and only had to list the specific wash sale transactions individually with code W. Saved me hours of data entry and I felt confident I was reporting everything correctly according to IRS rules. If your brokerage can't provide this detail, you might want to consider keeping better records next year or using a portfolio tracker that identifies wash sales in real-time as you trade.

In my experience, handling a 401k over-contribution isn't as scary as it sounds. My accountant had me do the following: 1. Contact second employer's plan administrator 2. Request withdrawal of excess deferral (they knew exactly what this meant) 3. They issued a special 1099-R coded for the excess 4. Reported both the excess and earnings properly on my tax return The most important thing is getting it done rather than ignoring it. The penalties add up over time!

Just wanted to add a few practical tips from someone who dealt with this exact situation: First, when you contact your 401k administrator, be specific and use the term "excess deferral distribution" - this is the official terminology and will get you routed to the right department faster. Don't just say "I contributed too much." Second, ask them to calculate the earnings on your excess contribution. This is required and they have specific formulas they must use. The earnings portion will be taxable in 2024, not 2023, so make sure you understand which year each amount gets reported. Finally, if you're using TurboTax, there's actually a specific interview section for excess 401k contributions. Look for it under "Deductions & Credits" > "Retirement Plans" > "401k and Other Workplace Plans." It will walk you through exactly how to report both the excess contribution and the corrective distribution. The key is acting quickly - every month you delay means potential additional penalties, and it becomes much more complicated if you cross into the next tax year without addressing it.