This thread has been so helpful! I was in the same boat a few months ago - completely confused about the W-4 because everything I found online was talking about the old allowance system. Like everyone else has mentioned, the 2020 redesign really simplified things. For your situation (single, no dependents, one job), you literally just check "Single or Married filing separately" in Step 1, fill out your basic info in Steps 2-3, and sign in Step 5. That's it! I did exactly this and ended up with a $38 refund last year - pretty much perfect. The IRS really did design the new form to automatically withhold the right amount for straightforward situations like ours. If you're still worried about owing, the IRS withholding calculator at irs.gov/W4App is great for double-checking, but honestly the standard withholding should work perfectly for you!

This thread has been incredibly informative! I'm actually an IRS employee and wanted to confirm that everyone here is giving excellent advice. The 2020 W-4 redesign was specifically created to eliminate the confusion around allowances that you're experiencing. For single filers with one job and no dependents, the standard withholding (just checking "Single" in Step 1 and signing) is designed to get you within $100 of your actual tax liability in most cases. The new form uses more precise calculations based on your filing status and pay frequency. If you want to be extra cautious, you can use the official IRS Tax Withholding Estimator at irs.gov/W4App, but honestly for your straightforward situation, the standard approach should work perfectly!

Can I ask how much the recharacterization paperwork cost you? My broker wants to charge me $50 for excess contribution correction and I'm wondering if that's standard. Also, did the backdoor Roth conversion work well right after the recharacterization?

I went through this exact nightmare last year and finally got it sorted out. The key insight that nobody mentions is that TurboTax processes these transactions in sequence, so the ORDER you enter them matters a lot. Here's what finally worked for me: 1) Enter the Roth IRA 1099-R (code R) FIRST and clearly mark it as a recharacterization 2) Then enter the traditional IRA 1099-R (code 2) and mark it as a conversion 3) Most importantly - when TurboTax asks about the traditional IRA contribution source, you MUST indicate these were "previously taxed" or "non-deductible" contributions The software has a really confusing workflow where it doesn't automatically connect your Form 8606 basis to the conversion calculation. I had to actually go back to my Form 8606 entry three separate times and re-confirm the $4,250 basis before TurboTax finally stopped treating the conversion as taxable income. Also, print out your Form 8606 when you're done and double-check that line 18 shows zero taxable amount for the conversion. That's your proof that everything calculated correctly.

I'm surprised no one's mentioned the simplest solution. Just adjust your W-4 withholdings so you're not getting a big refund in the first place! My wife and I each claim the right allowances so we break even or get a very small refund each year. This way your money stays in your separate accounts all year instead of giving the government an interest-free loan. Problem solved!

This hits close to home! My spouse and I went through the exact same thing last year. What worked for us was creating a simple spreadsheet that tracked not just our tax withholdings, but also our quarterly estimated payments (I'm self-employed) and any other tax payments we made throughout the year. We found that even though our withholdings looked fairly even, I had made several large quarterly payments that really changed the proportions. Once we had all the numbers laid out, it was much easier to have a calm discussion about what felt fair. One thing that helped was also factoring in who was claiming the kids as dependents if you alternate years, or who's handling more of the tax prep work. These aren't monetary contributions but they do have value. For what it's worth, 65/35 split based on your contribution sounds completely reasonable to me, especially if you're also covering more childcare costs. Money is money, regardless of when it was paid to the IRS.

Has anyone used TurboTax to handle this type of repayment situation? I'm wondering if the regular version can handle the claim of right credit or if I need to upgrade to their premium version.

This is a complex situation that definitely requires careful handling. One important point to add to the excellent advice already given - make sure you get proper documentation from your LTD carrier showing the exact breakdown of what you're repaying and for which time periods. When dealing with the claim of right repayment, the IRS will want to see clear records showing that this was income you previously reported and paid taxes on. Keep all correspondence with the LTD company, including their demand letter and any settlement agreements. Also, since you mentioned you had substantial capital gains this year, be aware that the timing of your repayment could affect your overall tax bracket and potentially impact other aspects of your return (like net investment income tax or additional Medicare tax). The claim of right credit calculation takes this into account, but it's another reason why consulting with a tax professional might be worth the cost given the amounts involved. One more thing - if you're making the $76k repayment in installments rather than a lump sum, you'll need to determine how to handle the tax treatment. Generally, you'd claim the credit in the year you actually make the payments, not when you agree to the repayment terms.

Don't forget that if the Statutory Employee box is checked incorrectly, you need to report this income differently on your tax return. If it's wrong and you file with that box checked, it could cause problems later. For Statutory Employees, income is reported on Schedule C rather than as regular W-2 wages. This affects how deductions work and potentially your tax liability. If he wasn't classified this way last year, and his job duties didn't change, there's a good chance it's an error that happened during the payroll system transition. Most tax software (including FreeTaxUSA) will handle this differently if that box is checked, so getting a corrected W-2 if it's wrong is really important!

This is definitely a tricky situation, but you're handling it well by being cautious! Based on what you've described, here are the key steps I'd recommend: 1. **Contact the employer first** - Call their HR or payroll department and explain that you received two W-2s with different EINs after their payroll system change. Ask them to verify if both forms are correct or if one needs to be amended. 2. **Verify the Statutory Employee classification** - Since this is different from last year, specifically ask if this was intentional or a mistake during the transition. This classification has significant tax implications. 3. **Check for double-counting** - Compare the combined wages from both W-2s against his final paystub of the year to make sure income isn't being counted twice. 4. **Don't file yet** - I'd hold off on submitting the return until you get clarification from the employer. It's much easier to fix this now than to deal with IRS notices later. The good news is that payroll system changes often cause these kinds of issues, and most employers are used to fixing them once they're made aware. Document everything when you call them - get names, dates, and reference numbers for any corrections they agree to make. You're absolutely right to be cautious here. Better to take a few extra days to sort this out than to potentially trigger an audit or have processing delays!