Just a heads up - make sure the financial institution that issued the 1099-R has your correct address and personal info. I had a similar inherited IRA situation last year but never received the 1099-R because it went to my dad's old address. Ended up with a CP2000 notice from the IRS and had to sort it out after the fact. Also, keep records of when you closed the account and withdrew the funds. The IRS sometimes gets confused with inherited IRAs when the distribution code doesn't match what they expect to see.

I went through something very similar when I inherited my father's 401(k) that was rolled into an IRA. A few additional things to keep in mind: First, make sure you have documentation showing you were the proper beneficiary. Sometimes the IRS will ask for proof of your relationship to the deceased and confirmation that you were designated as the beneficiary on the account. Second, if your grandmother had already started taking Required Minimum Distributions (RMDs) before she passed, there might have been a remaining RMD for that year that needed to be satisfied. Since you withdrew the entire amount, this shouldn't be an issue, but it's worth knowing for future reference. Finally, consider the timing of when you report this income if you're planning to get married next year. Since you're filing as single this year, your tax brackets will be different than if you were married filing jointly. The $7,200 might actually be taxed at a lower rate this year depending on your other income sources. The distribution code 4 is definitely correct and will save you from the early withdrawal penalty. Just double-check that TurboTax is calculating your tax correctly - the software should automatically recognize the code and not apply the 10% penalty.

One thing nobody's mentioned: if you're expecting refunds for these years, you probably won't get interest on the 2020 and 2021 refunds because you filed more than 45 days after the due date. But for some reason the IRS has been adding interest to my 2022 refund even though I just filed it late last month. The interest rates are actually pretty decent too - like 5-7% depending on the quarter.

Don't panic! You're definitely not going to jail - the IRS is much more interested in getting their paperwork than punishing people who just got overwhelmed. I went through something similar a few years back. Since you mentioned you're W-2 only and likely owed refunds, you're in a pretty good position. The IRS doesn't penalize you for filing late when you're owed money. However, definitely prioritize getting that 2020 return filed ASAP since you only have until April 15th, 2024 to claim that refund. For gathering your documents, start by creating an account on IRS.gov and requesting your wage and income transcripts. This will show you all the W-2s, 1099s, and other tax documents that were filed with your SSN for each year. It's like getting a cheat sheet of what you need to report. You can absolutely use tax software for this - most companies like TaxAct, FreeTaxUSA, and TurboTax offer prior year versions. Just remember that 2020 and 2021 will likely need to be mailed in as paper returns, while 2022 can probably still be e-filed. Take it one year at a time, starting with 2020, and you'll get through this faster than you think!

Another thing worth considering - if you expect your 2025 income to be significantly different from 2024 (like getting a big raise, changing jobs, etc.), that might impact WHEN you want to recognize the interest income. Interest is taxed at your ordinary income rate. So if you expect to be in a lower tax bracket in 2024 than 2025, getting that interest in 2024 might save you some money. Conversely, if you expect 2025 to be a lower income year, maybe waiting makes sense.

Great question! I've been dealing with HYSA taxation for a few years now and wanted to add one more practical tip that helped me a lot. Keep detailed records of when you make deposits and any promotional bonuses you might receive. Some banks offer signup bonuses for new HYSA accounts (like $200 for depositing $10k+), and these bonuses are also taxable income in the year you receive them - they'll show up on a separate 1099-MISC form. Also, if you're comparing rates between banks, don't forget to factor in any monthly fees or minimum balance requirements. A 4.8% APY with no fees might actually be better than 5.0% APY with a $15 monthly fee, especially on your $13,500 balance. One last thing - set up automatic transfers if your bank allows it. The compounding effect of consistent deposits plus that 5% rate will really add up over time, and you won't have to think about the timing as much. Just make sure you understand your bank's specific interest payment schedule so you can plan for tax time!

One thing nobody has mentioned yet - if your parents are charging you LESS than the minimum interest rate set by the IRS (the Applicable Federal Rate or AFR), there could be tax implications. The IRS might consider the "forgone interest" as a gift from your parents to you. Make sure your loan document specifies an interest rate at least equal to the AFR for the month the loan was made. You can find historical AFR rates on the IRS website.

Just making sure everyone understands - the reason that loans from family members aren't considered income is because you have an obligation to repay them. That's why documentation is so important. If the IRS ever reclassifies your "loan" as a gift (because of poor documentation, below-market interest rates, or lack of repayment), then gift tax rules would apply. And while the recipient doesn't pay tax on gifts, the giver might have to file a gift tax return if it exceeds the annual gift exclusion amount.

Something else to consider: insurance costs differ significantly between short-term and long-term rentals. I pay about 60% more for insurance on my Airbnb property vs my long-term rental. This is deductible, but affects your bottom line. Also, if you're comparing profitability, remember to account for vacancy rates with short-term rentals and management fees if you're not handling everything yourself. These factors can drastically change which option makes more financial sense after taxes.

Great discussion everyone! As someone who's been through this exact decision, I'd add that you should also consider the depreciation recapture implications long-term. With short-term rentals classified as business income, you might face different recapture rules when you eventually sell the property compared to long-term investment property. Another factor that helped me decide: cash flow timing. Short-term rentals give you more frequent income but also more frequent expenses (cleaning, restocking, maintenance between guests). Long-term rentals are more predictable but you're stuck if you get a problem tenant. Given your $95k salary, you might also want to look into whether you qualify for real estate professional status if you go the short-term route and put in enough hours. This could potentially allow you to deduct rental losses against your W-2 income, though the requirements are pretty strict (750+ hours annually in real estate activities). One last tip: whichever route you choose, set up a separate business checking account from day one. Makes bookkeeping and tax prep so much easier, and the IRS likes to see clear separation between personal and rental activities.