Anyone have a recommendation for good tax software that handles self-employment taxes well? I've been using FreeFileWhatever but it gets confusing with all the schedules.

Just wanted to add something that might help with the quarterly payment calculations - the IRS safe harbor rule can be really useful for self-employed folks. If you pay at least 100% of last year's total tax liability (or 110% if your prior year AGI was over $150,000), you won't face underpayment penalties even if you end up owing more at filing time. This is especially helpful when your self-employment income varies throughout the year. You can use last year's numbers as a baseline for your quarterly payments and then adjust up or down based on how your current year income is tracking. Also, remember that your quarterly payments are due on the 15th of January, April, June, and September (not every three months like you might expect). The IRS has specific due dates that don't follow a regular quarterly calendar. One more tip - if you're just starting with self-employment, consider opening a separate savings account just for taxes. I transfer about 25-30% of each payment I receive into that account to cover both the self-employment tax and federal income tax. Makes it much easier to handle the quarterly payments and avoid scrambling for cash when they're due.

Heads up - don't forget state tax implications too! My S-Corp has owners in 3 different states and each state has different rules about estimated payments. Some require the S-Corp to make composite payments on behalf of non-resident shareholders, while others require each shareholder to file their own estimated payments. This created a huge mess for us at tax time last year because we didn't plan properly. Had to pay penalties in two states.

One thing that hasn't been mentioned yet is the importance of establishing clear procedures early in the year for tracking each owner's quarterly payments. We learned this lesson the hard way when tax season came around and nobody could remember who had paid what. I'd recommend creating a shared spreadsheet or using accounting software to track each partner's quarterly payments throughout the year. Include columns for each owner's projected annual tax liability, quarterly payment amounts, actual payment dates, and any adjustments made based on updated income projections. Also, make sure your S-Corp provides regular profit updates to all owners (at least quarterly, preferably monthly if income is volatile). This allows each owner to adjust their estimated payments if the business is performing significantly better or worse than projected. The last thing you want is for someone to underpay all year because they were working off stale projections. Consider having a brief quarterly meeting where you review actual vs. projected income and discuss any needed adjustments to individual estimated payments. It takes maybe 30 minutes but can save everyone from penalties and surprises at tax time.

Double check if your 1099-R has code J or T in Box 7. Those codes indicate a distribution for a first-time home purchase. If not, that might be part of the problem - the IRS doesn't know the purpose of your withdrawal.

I went through almost exactly the same situation last year! The key thing to understand is that the IRS penalty notice is likely wrong because they're missing the proper documentation showing what portion of your withdrawal was contributions vs. earnings. Here's what I learned from my experience: 1. You absolutely CAN withdraw Roth IRA contributions tax and penalty-free at any time - you were right about that 2. The problem is proving to the IRS which portion was contributions vs. earnings 3. Form 8606 is crucial - it tracks your basis (contributions) in the Roth IRA Since you've been contributing since 2008 and you're 42, your account has definitely been open for more than 5 years, which is great. This means even the earnings portion that qualifies under the first-time homebuyer exception should be completely tax-free. You'll need to: - File Form 8606 for 2023 showing your contribution history - File an amended return (1040-X) to properly report the distribution - Include documentation proving your total contributions over the years The scary notice from the IRS is likely just their automated system assuming the worst case scenario. Once you provide the proper documentation, most or all of that tax bill should disappear. Don't panic - this is fixable!

Anyone else confused about what counts as "taxable" across state lines? I bought a laptop online last year and can't remember if I paid tax on it or not. Would that definitely count for use tax?

This is exactly the kind of situation that trips up so many people! Living on state lines makes tax filing way more complicated than it should be. For your grocery shopping, the good news is that many states exempt basic groceries from sales tax entirely, so you might not owe anything on those cross-border trips. But prepared foods, household items, and definitely online purchases are a different story. The key thing to remember is that use tax is really about making sure your home state gets its fair share when you buy things elsewhere. If you paid sales tax in the other state that's equal to or higher than your home state rate, you're usually good. It's only when you paid less (or nothing) that you owe the difference. Most states have made this easier by offering those lookup tables based on income that others mentioned. For someone spending $300-400/month on cross-border shopping, using the table is probably your best bet unless you made some really big purchases that would push your actual use tax way above the table amount. Don't stress too much about perfect record keeping for routine shopping - the states know this is impractical for most people, which is why they created these simplified methods.

I'm in a very similar situation right now - collecting donations through my Zelle account for a coworker whose family was in a car accident. Reading through all these responses has been incredibly helpful, especially the specific advice about Form 8275 and the documentation requirements. One thing I want to add from my research: make sure you transfer the funds as quickly as possible after receiving them. The IRS looks at how long money stayed in your account when determining whether you had "control" over it. The faster you move it to the intended recipient, the stronger your case that you were just a conduit. Also, for anyone dealing with this situation, consider setting up the official fundraiser (GoFundMe, etc.) BEFORE you start collecting donations if possible. It's much cleaner from a tax perspective if people donate directly to the platform rather than going through your personal accounts first. @Nick - definitely keep every screenshot, text message, and email that shows the donations were intended for your sister, not you. The IRS will want to see evidence of intent if they ever question this.

This thread has been incredibly helpful! I'm dealing with something similar where I collected about $8,500 through my personal Venmo for a neighbor's house fire, then transferred it all to their official fundraiser. One thing I want to emphasize that I learned from my accountant: keep a detailed spreadsheet showing EVERY transaction with dates, amounts, donor names (if available), and transfer details. The IRS wants to see a clear money trail that proves you never commingled these funds with your personal money or used them for anything else. Also, when you transfer the money to GoFundMe, make sure to do it in chunks that match your Venmo deposits as closely as possible. Don't just transfer one lump sum - it makes the paper trail harder to follow. I transferred mine in 3-4 batches over a few days, keeping screenshots of each transfer. @Nick - since you mentioned you kept detailed records, make sure those records include the PURPOSE of each donation if donors mentioned it in their Venmo messages. Having evidence that people explicitly stated the money was "for your sister's family" or "for the fire victims" really strengthens your case that this was never intended as income to you personally.