Just to add another perspective here - I went through this same confusion when I started my consulting business. One thing that helped me understand accrual accounting better was thinking about it this way: you're essentially recognizing the "economic reality" of when transactions happen, not just the paperwork timing. So in your case, the economic reality is that you earned that $4,300 in December 2024 when you completed the work and delivered value to your client. The fact that you didn't get around to invoicing until January doesn't change when you actually earned it. I'd recommend keeping good records of when work was actually completed vs when invoiced vs when paid - it'll make tax time much easier and help if you ever get audited. I use a simple spreadsheet with columns for service date, invoice date, and payment date. Makes it crystal clear which tax year everything belongs to.

As someone who just went through this exact same situation with my freelance business, I can confirm what others have said - it's definitely a 2024 income since that's when you performed the work. One thing I learned the hard way though is to be really careful about projects that span multiple months. I had a client project that I started in November 2024 but didn't finish until February 2025, and I made the mistake of booking all the revenue in February when I invoiced. My accountant had to help me correct it by recognizing the revenue proportionally based on work completed each month. For your December project, since it sounds like it was completed entirely in December, the full $4,300 should go on your 2024 taxes. Just make sure you have good documentation showing when the work was actually finished - I keep copies of final deliverables with timestamps, client approval emails, and project completion notes. This backup documentation has been super helpful during tax prep. The timing differences between when you earn, invoice, and get paid can definitely be confusing at first, but once you get the hang of accrual accounting it becomes much clearer!

Another option to consider if your employer is hesitant about the formal processes - you could suggest they simply agree not to contest your unemployment claim when you file. Even if they don't want to deal with reclassification paperwork right now, this would at least solve your immediate need for unemployment benefits. Most state unemployment offices will investigate worker classification when there's a dispute between a 1099 filing and an unemployment claim. If your work situation clearly shows you were functioning as an employee (set schedule, company equipment, integrated into their business operations, etc.), the state will often rule in your favor regardless of how you were originally classified for tax purposes. This approach gives your boss an easy "yes" that doesn't require him to admit fault or deal with IRS paperwork immediately, while still getting you the unemployment benefits you need. You can always pursue the tax classification issues separately later, but at least you'll have some income while job hunting. Just make sure to document your work arrangement thoroughly before you leave - save emails about schedules, screenshots of company systems you used, records of any training they provided, etc. This documentation will be valuable whether you're dealing with unemployment claims or potential IRS forms later.

This is a really comprehensive discussion with lots of great advice! I wanted to add one more consideration that might be helpful - timing your conversation strategically within your remaining time at the company. Since you mentioned you're getting laid off at the end of the month, I'd suggest having this conversation as soon as possible, but also being prepared for the possibility that your employer might accelerate your departure if they feel threatened by potential liability issues. Some employers unfortunately react to these conversations by immediately terminating the relationship to avoid further exposure. That said, since you're already being laid off anyway, you don't have much to lose by bringing this up now rather than waiting until after you leave when you'll have much less leverage. I'd also suggest keeping detailed records of your current work arrangement before you have the conversation - things like emails showing you report to a supervisor, any company handbook materials you received, records of using company equipment or software, etc. Having this documentation ready will be valuable whether your employer is cooperative or if you end up needing to file formal complaints later. The unemployment benefits angle really is the best starting point since it's immediate and doesn't require your employer to admit fault or navigate complex tax procedures. Good luck with your conversation - you've got a lot of good strategies to work with here!

Great question! I went through the same confusion a few months ago. The trace number is basically the IRS's internal tracking ID for your specific refund payment. When you see "funded to you" with a trace number, it means your refund has been fully approved and is now in the payment pipeline. You should see your money within 3-5 business days for direct deposit or 1-2 weeks for a mailed check. The hardest part is over - your return cleared all their checks and reviews. Now it's just a matter of the payment system doing its thing. Hang in there, you're almost done!

I see you're getting great answers here! Just wanted to add that you can also check your bank account for any pending deposits - sometimes the money shows up there before the IRS website updates to "refund sent" status. I've noticed with my credit union that refunds often appear as pending a day or two before they actually clear. The trace number is definitely your green light though - you're in the final stretch! Fingers crossed it hits your account soon. 🤞

I understand the frustration with custody/tax situations. Based on what you've described, you have a strong case for claiming your children since they live with you 95% of the time - that clearly meets the IRS residency test regardless of what your divorce agreement says on paper. A few additional points to consider: 1. Document everything NOW - start keeping a detailed calendar of which nights the kids spend where, save school enrollment records showing your address, medical appointments, etc. This documentation will be crucial if there's ever a dispute. 2. The IP PIN strategy should work as others described, but make sure you're prepared for the potential escalation it might cause with your ex. Having all your documentation ready will help if things get contentious. 3. Consider consulting with a tax attorney who specializes in family situations before taking action. They can review your specific circumstances and help you understand all your options, including whether it's worth pursuing the court modification first. 4. If you do get the IP PINs, make sure to file your return as early as possible each tax season. Even with IP PINs, being first to file correctly can avoid complications. The tie-breaker rules are definitely on your side here given the actual living situation, but having proper documentation and a clear strategy will make everything much smoother.

I went through almost the exact same situation a few years ago. The IP PIN route worked well for me, but I learned a few things that might help you: First, yes - only you will receive the IP PINs once you request them. Your ex won't be able to get them by calling the IRS, even if he proves he's their father. The PINs get mailed to the address associated with your IRS account. One thing I wish I'd known earlier: start documenting NOW if you haven't already. I created a simple spreadsheet tracking which nights the kids were with me vs. their father, plus I saved copies of school pickup/dropoff records, medical appointment records, and even photos with timestamps showing them at my house. This documentation became crucial later. When your ex tries to file without the IP PINs, his e-file will be rejected with a message saying the SSN can't be used without an IP PIN. If he paper files, it'll eventually get flagged and the IRS will send him a notice. Either way, it stops him from successfully claiming them. The court modification is definitely worth pursuing too - it'll help eliminate his argument about the "50/50" language, even though the IRS cares more about where they actually lived than what the divorce decree says. One heads up: be prepared for this to escalate tensions. My ex was pretty angry when his return got rejected, but having proper documentation ready made the eventual IRS dispute process much smoother. The key is being able to prove they lived with you for more than half the year.

Has anyone tried using the IRS's own free file options? I'm wondering if those let you itemize for free too. The commercial options all seem to have some kind of catch.

I went through this exact same situation last year! H&R Block kept pushing their $35 upgrade on me too. What I learned is that they're technically correct about the potential savings, but you definitely don't need to pay them for it. Here's what I'd recommend: First, gather up all your tax documents - mortgage interest statement (1098), medical bills, charitable donations, property tax records, etc. Then add them up yourself to see if they exceed the standard deduction ($13,850 if you're single, $27,700 if married filing jointly). If your itemized deductions are legitimately higher than the standard amount, then yes, you should itemize. But don't pay H&R Block for it! I switched to FreeTaxUSA mid-process last year and saved the upgrade fee while still getting the higher refund. Their interface is actually cleaner than H&R Block's too. The key thing to remember is that H&R Block's "free" version is really just a marketing tool to get you to upgrade. Other services like FreeTaxUSA, TaxAct, and the IRS Free File options include itemizing in their actual free versions.