One aspect that hasn't been fully explored yet is whether your lump sum payment might qualify for any special averaging or rollover treatment if it's connected to your employer's retirement plan. While most severance payments don't qualify, some early retirement packages that include distributions from employer-sponsored retirement accounts can be rolled over to an IRA to defer taxes entirely. You'll want to get very specific documentation from HR about whether any portion of your $87,500 comes from your 401(k), pension plan, or other qualified retirement accounts versus straight severance/compensation. If even a portion qualifies for rollover treatment, that could be a significant tax-deferral opportunity. Also consider the state tax implications more carefully - you mentioned you're looking at early retirement, so if you're planning to relocate to a no-income-tax state in the next few years, timing this payment could make a big difference. Some retirees strategically establish residency in tax-friendly states before taking large distributions. Finally, don't forget about the Medicare implications if you're getting close to 65. Higher income years can affect your Medicare Part B and Part D premiums through IRMAA (Income-Related Monthly Adjustment Amount) surcharges. While you're in your mid-50s now, this higher income year could impact premiums when you become Medicare-eligible, so it's another factor in the overall cost-benefit analysis of different tax strategies.

This is an excellent comprehensive discussion! I wanted to add one more strategy that could be particularly relevant given your situation - consider whether you have any employer stock or stock options that could be managed strategically this year. If you have any employer stock with losses, you could harvest those losses to offset some of the tax burden from your lump sum (up to $3,000 in ordinary income offset, with additional losses carried forward). Conversely, if you have appreciated employer stock that you were planning to sell anyway, this higher-income year might actually be a good time to realize those gains if you're going to be in a high bracket regardless. Also, since you mentioned you normally take the standard deduction, this could be the perfect year to finally tackle any major home improvements or repairs that might qualify as deductible expenses. If you're planning early retirement, getting these projects done while you have the lump sum available and can potentially deduct some costs makes financial sense. One more timing consideration - if your company allows it, see if you can structure the payment so that the maximum amount of payroll taxes are withheld early in the year when you haven't yet hit the Social Security wage base cap ($176,100 for 2025). This won't save you money if your total wages exceed the cap anyway, but it could help with cash flow timing of the tax burden. The key insight from this whole discussion seems to be that while $87,500 feels like a tax problem, it's actually a fantastic opportunity to accelerate your retirement savings and implement strategies that might not otherwise be available to you.

11 Something nobody mentioned yet - if these transactions were from a mutual fund, sometimes the blank acquisition date is actually correct! Some mutual funds, especially if you were reinvesting dividends, will report using the "average basis method" which doesn't require specific acquisition dates on the 1099-B.

I actually just went through this exact situation with my amended return! For missing acquisition dates on 1099-B forms, the IRS Publication 550 specifically states that if the date acquired is unknown, you can enter "VARIOUS" in the date acquired column on Form 8949. Since your bonds were purchased in 2012 and sold in 2022, they're definitely long-term capital gains regardless of the specific dates. The key thing to check is whether Box 3 on your 1099-B forms is marked - if it is, that means the cost basis was reported to the IRS, which makes the missing dates much less of an issue. Just make sure you're using the correct Form 8949 category (likely Part II for long-term transactions) and you should be fine to proceed with your 1040X amendment. I was worried about the same thing with my corporate bond fund sales, but the IRS accepted my amended return without any questions when I used "VARIOUS" for the missing dates.

Great question about the "placed in service" date! For tax purposes, the IRS considers equipment "placed in service" when it's ready and available for use, not necessarily when you become proficient with it. So if your equipment was functional and ready to use in July (even though you were still learning), that would likely be your placed-in-service date for depreciation purposes. However, the fact that you didn't start generating revenue until November could still support treating some of your July-September expenses as startup costs under the organizational expense rules. This is where it gets a bit nuanced - equipment itself is always capital expenditure, but things like training materials, initial supplies, or professional development related to learning the equipment could potentially fall under startup costs. I'd definitely recommend documenting both dates: when you purchased the equipment, when it was delivered/installed and ready for use, and when you first used it for business purposes. Having this timeline will help your tax preparer make the best determination for your specific situation. Given the complexity here, especially for your first year, it might be worth a consultation with a tax professional who can review your specific timeline and expenses to optimize your deductions.

Most CPAs and enrolled agents should be familiar with startup cost rules, but you're right to look for someone with small business experience, especially manufacturing. When you're shopping for a tax professional, ask specifically about their experience with: 1. Section 179 expensing vs. startup cost treatment 2. Manufacturing equipment depreciation 3. Home-based business deductions 4. First-year business tax optimization A good tax pro will want to review your timeline of expenses and help you decide between different depreciation methods (Section 179, bonus depreciation, or regular MACRS) based on your income situation and future business plans. Also, don't forget to ask about quarterly estimated tax payments for next year - since you'll likely have much more income in 2024 than the $130 you had in 2023, you'll want to plan ahead to avoid underpayment penalties. One more thing - make sure to get organized records of ALL your expenses from when you started planning the business through now. Even small things like business cards, initial marketing materials, or professional association memberships can add up and qualify as deductible startup costs or business expenses depending on timing.

I'm going through something very similar right now! My employer did the same thing - gave everyone a "holiday advance" in December that was taxed as regular income, but now they're taking it back as straight deductions from our net pay. Reading through all these responses has been super helpful. I had no idea this could create a double taxation issue, but it makes total sense now. When I got the advance, I paid taxes on it like it was regular wages. But now when they're taking it back after taxes, I'm essentially paying the full amount back while having already paid taxes on money I don't actually get to keep. I'm definitely going to talk to our payroll department tomorrow and ask them to switch to reducing gross wages instead of taking post-tax deductions. If they won't do it, at least now I know I need to document everything carefully for tax time. Thanks everyone for sharing your experiences and solutions! This thread probably just saved me from overpaying my taxes this year.

This is exactly the kind of payroll issue that catches so many people off guard! Your instincts are absolutely correct - when an employer gives a taxed advance and then recovers it through post-tax deductions, it does create a double taxation problem. The proper way to handle this is for your employer to reduce your gross wages (pre-tax amount) when collecting the advance, not take it from your net pay. This way, your tax withholding automatically adjusts downward proportionally, making you whole on the tax side. I'd recommend approaching your payroll department with a specific request: ask them to modify their collection method to reduce gross wages instead of taking after-tax deductions. If they're resistant or claim they're doing it correctly, you might want to escalate to HR or even consult with a tax professional who can provide documentation showing the proper handling. In the meantime, keep detailed records of everything - the original advance amount, taxes paid on it, and how much they're deducting with each paycheck. If they don't fix this process, you'll need this documentation to claim the overpaid taxes when you file your return. The missing pay stubs are also a red flag - you should definitely push for those as they're your primary documentation for proving how this advance situation was handled for tax purposes.

I'm so glad you asked this question! I was in literally the exact same situation last year with my 18-year-old son who worked at a grocery store part-time. The whole thing seemed so confusing at first, but it's actually much simpler than I thought. Here's what worked for us: my son filed his own return using TurboTax Free Edition and checked the box indicating he could be claimed as a dependent. Even though he only made about $3,800, he had federal taxes withheld from his paychecks and got a nice little refund of around $280. The process was totally smooth - no conflicts with my return at all. I helped him through it the first time, which was actually really valuable for both of us. He learned how taxes work, and I felt confident we were doing everything correctly. One tip: if you use tax software, it should automatically guide you through the dependency questions and prevent any issues with credits he's not eligible for. Just make sure to answer those questions accurately at the beginning. It sounds intimidating, but honestly, once you do it once, you'll wonder why you worried so much! Your 40+ years of tax experience will definitely help guide him through it smoothly.

Coming into this discussion as someone who's about to face this exact situation next year! My 17-year-old just started her first job at a local coffee shop, and I've been wondering how we'll handle taxes when she turns 18. Reading through everyone's experiences here has been incredibly helpful - it's clear that this is a much more common and straightforward process than I initially thought. The consistent message seems to be: yes, your son can file his own return, he just needs to check the "can be claimed as dependent" box, and it won't interfere with your return at all. What really stands out to me is how many people mentioned this being a great learning opportunity. I think I'll definitely plan to sit down with my daughter when the time comes and walk through the process together. It sounds like a perfect way to teach her about taxes, withholdings, and financial responsibility while making sure everything is filed correctly. Thanks for starting this thread - it's going to save me a lot of stress next year when I'm in your shoes!