Just a heads up - what you're describing sounds like you're trying to evade taxes, which is illegal. There's a difference between tax avoidance (legally minimizing taxes through deductions, credits, etc.) and tax evasion (hiding income or providing false information). Even if the bank doesn't report the transaction, if you get audited, the IRS can look at the other party's records. If a business paid you and deducted it as an expense, but you didn't report the income, that creates a discrepancy that raises red flags.

The whole "cash the check elsewhere" thing comes from people trying to avoid bank levies or garnishments, not taxes. Like if you owe child support and they're garnishing your bank account, some people cash checks instead of depositing them. It still doesn't avoid the obligation, just makes it harder to collect. For tax purposes, income is income regardless of how you receive it or what you do with it after. Heck, even illegal income is technically supposed to be reported on taxes (though most drug dealers don't file Schedule C's lol).

My wife and I went through this exact situation! In case it helps, we found the best solution was for both of us to check the "Married but withhold at higher Single rate" box (if using the old W-4) or checking box 2(c) on the new form. We make almost identical incomes, so this worked perfectly. If your incomes are very different though, you might want to use the IRS withholding calculator or the Multiple Jobs Worksheet (Step 2(b) on the W-4) for more precise withholding.

I went through this exact same situation when I got married! The key thing to understand is that when you select "married filing jointly" without any other adjustments, the tax tables assume you're the only income earner in the household, which dramatically reduces withholding. Here's what worked for me and my spouse (we have similar incomes): 1. **Use the IRS Tax Withholding Estimator** - It's free and way more accurate than guessing. You'll need both of your most recent pay stubs and last year's tax return. 2. **Only ONE of you should check box 2(c)** - If both spouses check this box, you'll likely overwithhold significantly. 3. **Consider using Step 4(c) for additional withholding** - Based on the estimator results, you might want to have an extra $50-100 withheld per paycheck to catch up on the underwithholding from earlier in the year. Since you mentioned you're only having $35 withheld on $1,300 biweekly pay, that's definitely too low for most tax situations. The estimator will give you specific guidance based on both your incomes combined. Don't wait until next year to fix this - you can submit a new W-4 anytime!

Has anyone used TurboTax Self-Employed for this kind of situation? Would it flag this issue or just let you incorrectly deduct the W2 wages on Schedule C?

This is exactly why I always recommend consulting with a tax professional BEFORE making any major payroll decisions. That said, you're not the first person to find themselves in this situation, and there are definitely paths forward. Given the substantial income amount ($135k), I'd lean toward the S-corp election route rather than trying to deduct the wages on Schedule C. The IRS has specific procedures for late S-corp elections with reasonable cause, and "lack of knowledge of the filing requirements" is often accepted if you can document it properly. Key steps I'd recommend: 1. Have your accountant prepare Form 2553 with a detailed reasonable cause statement 2. File Form 1120S for the corporate return immediately 3. Be prepared to show you acted in good faith and are now trying to comply properly The Schedule C route is risky because those wage deductions will almost certainly trigger an audit - the IRS systems will match your SSN as both the payer and recipient of those W2s. Time is critical here since there are deadlines for the S-corp election, so work with your accountant to get this filed ASAP. The sooner you address it, the better your chances of approval.

I'm in a similar situation and just wanted to share what finally helped me get answers. After months of those dreaded 60-day letters, I found that the key was actually understanding what those cryptic codes on my tax transcript meant. Like others mentioned, you can download your own transcript from the IRS website (irs.gov - look for "Get Transcript Online"). The transcript shows all the behind-the-scenes activity on your account that the "Where's My Refund" tool doesn't reveal. Those transaction codes and dates tell the real story of what's happening with your return. What really opened my eyes was realizing that most of these reviews aren't about catching fraud or major errors - they're often triggered by simple discrepancies like employer reporting differences, missing forms, or even just routine verification checks. The IRS computer systems flag returns automatically, and then it takes human reviewers forever to work through the backlog. The most frustrating part is that sometimes the issue has already been resolved internally, but you won't know until you either get lucky enough to reach someone by phone or learn to read those transcript codes yourself. Don't lose hope - most people do eventually get their refunds, even after multiple letters!

Those 60-day letters are absolutely the worst! I went through the exact same thing earlier this year - got THREE of them between March and August. The complete lack of real information is what made it so stressful. Like everyone else here, I was stuck with that useless "Where's My Refund" tool showing "still processing" for months. What finally gave me peace of mind was downloading my tax transcript from the IRS website (irs.gov - look for "Get Transcript Online"). You have to create an account, but once you see those transaction codes, you'll finally understand what's actually happening behind the scenes. In my case, it was just a routine income verification that had been flagged automatically - nothing scary like I'd been imagining! The transcript shows WAY more detail than that generic "still processing" message. You can see dates, transaction codes, and the actual progress of your return through their system. It's honestly frustrating that the IRS makes this information so hard to find when it would eliminate so much anxiety for taxpayers. Hang in there - the vast majority of these cases are just routine reviews that got backed up in their system. Once you can see what's actually flagging your return, you'll probably find it's much less dramatic than all the worst-case scenarios your mind has been creating!

I've been helping people with IRS issues for years, and one thing that often gets overlooked is the browser's JavaScript settings. The IRS payment portal relies heavily on JavaScript for form validation and submission, and if your browser has strict JavaScript blocking (either through extensions like NoScript or built-in privacy settings), it can cause those generic error messages. Try temporarily disabling any ad blockers, privacy extensions, or script blockers while setting up your payment plan. Also, make sure your browser allows third-party cookies for the IRS site, as the payment system uses multiple subdomains that need to share session data. If you're still getting errors after trying all the technical fixes mentioned here, there's also the option to call the IRS Automated Phone System at 1-888-353-4537. It's not as user-friendly as the website, but it can sometimes process payment plan requests when the online system is having issues. You'll need your SSN, filing status, and the exact refund or amount owed from your return. The early morning timing tip is excellent advice - I always tell people to try between 6-8 AM EST when possible. The system definitely seems more stable during off-peak hours.

I've been following this thread and wanted to share another potential solution that worked for me last month. If you're still getting errors after trying all the browser troubleshooting steps, check if you have any pending correspondence or notices from the IRS in your online account. I was getting the same generic error messages when trying to set up a payment plan, and it turned out there was an unresolved notice about a minor discrepancy on my return that was blocking the payment plan system from working. Even though the notice wasn't related to my payment arrangement, the system wouldn't let me proceed until I acknowledged it. Log into your IRS online account (separate from the payment plan portal) and check if there are any alerts, notices, or required actions. If there are, you might need to respond to those first before the payment plan system will work properly. Also, just wanted to echo what others have said about the early morning timing - I finally got through at 6:15 AM on a Tuesday after failing for over a week trying during normal business hours. The system definitely seems less glitchy during off-peak times.