Quick tip from someone who does taxes for friends and family - if you're filing your taxes by hand, make a copy of that Qualified Dividends and Capital Gain Tax Worksheet after you complete it and keep it with your tax records. The IRS doesn't require you to submit the worksheet with your return, but if you ever get questioned about how you calculated your tax, having that completed worksheet saved will be incredibly helpful.

This is such a common confusion point! I dealt with the exact same issue when I first started getting dividend income. The key thing that finally clicked for me is that the 1040 form itself is just collecting the information - the actual preferential tax treatment happens "behind the scenes" in that worksheet calculation. Think of it this way: Line 3a (qualified dividends) is like flagging "hey, some of my dividend income deserves special treatment" and Line 3b (ordinary dividends) goes into your total income like any other income. But when you get to calculating your actual tax liability on Line 16, that's when the magic happens - the worksheet takes your qualified dividend amount and applies the lower rates (0%, 15%, or 20%) instead of your regular income tax rate. I always tell people to double-check that their 1099-DIV amounts match what they're entering. Box 1a goes to Line 3b, and Box 1b (which should be included in Box 1a) goes to Line 3a. The difference between those two amounts represents your non-qualified dividends that get taxed at regular rates.

Dumb question maybe, but what exactly happens if the statute of limitations runs out while they're still auditing? Does the whole thing just go away magically, or can they still assess taxes based on what they found up to that point?

Based on your situation, I'd actually recommend signing the Form 872 with a negotiated timeframe. Here's why: since you've already provided all documentation and are planning to accept their findings anyway, giving them adequate time to complete a thorough review could work in your favor. When auditors feel rushed by an expiring statute, they often make conservative estimates that lean heavily toward the government's position. With more time, they might catch calculation errors in your favor or give more consideration to borderline deductions. Since you mentioned the proposed increase is $4,200, I'd suggest signing the extension but negotiating it down to 6 months instead of the typical 1-year extension. This gives them sufficient time while still keeping some urgency to wrap things up. You can literally cross out the date on Form 872 and write in your preferred end date - most examiners will accept reasonable modifications. The key is being proactive about it. Contact your examiner and say something like: "I'm willing to sign the extension to give you adequate time to complete a thorough review, but I'd prefer to limit it to 6 months to bring closure to this matter." This shows cooperation while maintaining some control over the timeline.

Something nobody mentioned is how this might affect things if you get certain tax credits like the Earned Income Credit or Child Tax Credit. When there's a dispute and a PIN is assigned, those credits might be held up even after the dependent issue is settled. I had to wait an extra 2 months for my full refund even after the IRS agreed I was the rightful parent to claim my daughter. They did pay interest on the delayed amount though.

I'm going through something similar right now with my ex claiming our son when he shouldn't have. The stress is real! One thing I learned from my tax preparer is that you should definitely keep operating your business normally - this type of investigation is very narrow in scope and shouldn't affect your credit or business operations at all. The IRS agent I spoke with said these dependent disputes are incredibly common, especially around tax season. They see thousands of these cases where separated parents both try to claim the same child. The good news is that if you have your documentation in order (custody agreement, school records, medical records showing your address), it's usually pretty straightforward to resolve. My case has been pending for about 2 months now and I haven't heard anything negative about my business or personal credit. The IRS really does focus just on determining who has the legal right to claim the dependent. Don't let the anxiety get to you - just gather your paperwork and file your return as normal with the PIN they provided.

Has anyone used TurboTax to calculate capital gains taxes? I'm trying to figure out if it accurately handles the step-up in brackets when you have a mix of ordinary income and capital gains.

One thing that often gets overlooked when planning capital gains harvesting is timing throughout the year. I learned this the hard way when I sold a bunch of stock in December thinking I was staying in the 0% bracket, only to realize my year-end bonus pushed me over the threshold. The key is to track your running total of taxable income throughout the year, especially if you have variable income like bonuses, freelance work, or other irregular sources. I now use a simple spreadsheet to monitor where I stand relative to the capital gains brackets before making any major stock sales. Also worth noting - if you're married, make sure you're coordinating with your spouse's income too. We almost made a costly mistake one year when my wife got an unexpected promotion mid-year that changed our joint filing status calculations.

I went through this exact same nightmare last year! The "Audit Status Unavailable" error plagued me for over 3 months. What finally helped was a combination of things: First, I kept detailed records of every error message and time I tried to access the system (screenshots help). Second, I found that the IRS2Go mobile app sometimes shows different info than the website - worth trying if you haven't already. Third, and this was key - I reached out to my local Taxpayer Advocate Service office directly (not just filing Form 911 online). They have physical offices in most major cities and the in-person help was way more effective than anything online or over the phone. The advocate assigned to my case had access to systems that regular IRS phone support doesn't, and she could see my audit status immediately even when the website was broken. It took about 10 days from my first TAS appointment to getting a complete status update and timeline for my audit. Hang in there - the system is definitely broken but there are ways around it!

I'm going through the exact same thing right now! Got my audit letter in November and the website still shows "Audit Status Unavailable" every single time I try to check. It's beyond frustrating especially when you can't get through on the phone either. I've been checking my account transcript religiously but don't see any of those audit codes people mentioned (420, 424, 430). The whole system seems completely broken. Really appreciate everyone sharing their experiences and solutions here - definitely going to try the TAS route and see if I can find a local office. Has anyone had success with the IRS2Go app showing different info than the website? Might be worth a shot while I'm waiting to hear back from other options.