One thing nobody has mentioned - make sure you're claiming the Earned Income Tax Credit too! With $8,500 income and two children, you should qualify for a substantial EITC which is fully refundable. This might help offset some of the disappointment from the reduced Child Tax Credit.

@Dylan Cooper makes an excellent point about the Earned Income Tax Credit! With your income of $8,500 and two qualifying children, you should definitely be eligible for EITC, which could be worth around $5,000-6,000 depending on your exact situation. This is completely separate from the Child Tax Credit and is fully refundable. Also wanted to mention - if you're planning to return to full-time work soon, you might want to consider the timing of when you do. If you can increase your earned income for this tax year (maybe through some part-time work before December 31st), it could boost both your Child Tax Credit and EITC for when you file next year. I know it's frustrating that the system seems to penalize lower incomes for the Child Tax Credit, but the EITC is specifically designed to help working families with lower incomes, so make sure you're not missing out on that significant credit!

I did some research on this and found something interesting. When the Social Security Act was first passed in 1935, benefits weren't taxable at all. The taxation of benefits only started in 1983 as a way to shore up the program's finances during a crisis. The original idea was only to tax "wealthy" seniors, but they never indexed the income thresholds for inflation! So what was considered "wealthy" in 1983 ($25,000 for individuals) would be about $75,000 in today's dollars. But the threshold is still $25,000, which means more and more middle-class retirees get their benefits taxed every year. It's a sneaky tax increase that happened through inflation rather than legislation.

This is such a common frustration and you're absolutely right to feel confused about it! I went through the same thing with my parents' taxes last year. Here's what I learned: the key is understanding that Social Security operates on what's called "combined income" - which includes your adjusted gross income, plus non-taxable interest, plus half of your Social Security benefits. If that total exceeds certain thresholds ($25,000 for single filers, $32,000 for married filing jointly), then a portion of your Social Security becomes taxable. The really frustrating part is that these thresholds haven't been adjusted for inflation since they were set decades ago, so more middle-class retirees get caught in this tax trap every year. It's not exactly double taxation since the benefits often exceed what was paid in through FICA, but I totally get why it feels unfair. One thing that helped my family was understanding that the taxation only applies to a portion of benefits (maximum 85%), and there are some strategies around managing other income sources to potentially reduce the taxable amount. But yeah, the whole system could definitely be clearer and more fair to retirees.

As a newcomer to this community, I just want to say how incredibly helpful this entire discussion has been! I was also completely stressed about my 2021 amendment deadline, thinking I had to rush everything by this April. Learning that I actually have until April 2025 is such a huge relief. What really impresses me is how this thread has evolved from a simple deadline question into this comprehensive guide for handling amendments properly. The systematic approach everyone has developed here - starting with thorough document gathering, then using tools like taxr.ai for a complete review, followed by Claimyr for IRS contact if needed - is exactly what someone like me needed. I'm particularly motivated by all the success stories - Alice finding $650, Myles discovering $1,200 including that Recovery Rebate Credit, and so many people uncovering home office deductions they'd forgotten about. I also worked remotely for part of 2021 and completely overlooked that possibility. Gabriel's audit warning is definitely noted - I'll make sure to be thorough and verify everything else on my return is accurate before filing. But seeing how methodical and successful everyone has been gives me confidence this can be done safely. Thank you all for sharing such detailed experiences and creating this amazing roadmap. You've turned what felt like an overwhelming crisis into something I can actually handle properly. Time to start gathering those 2021 documents!

This entire discussion has been incredibly enlightening! As someone who's been putting off dealing with my 2021 tax situation, I can't express how relieved I am to learn about the April 2025 deadline instead of thinking I had to rush everything by this month. What's really impressive is how this thread has developed into such a comprehensive resource. The systematic approach everyone has shared - starting with thorough document gathering, using taxr.ai for a complete review, then Claimyr for IRS contact when needed - gives me a clear roadmap I never would have figured out on my own. I'm particularly intrigued by all the success stories about unexpected deductions. Like many others here, I transitioned to remote work in 2021 and completely forgot about potential home office deductions. Plus reading about the Recovery Rebate Credit issues has me wondering if I handled my stimulus payments correctly. Gabriel's audit warning is definitely something I'll keep in mind as I move forward. It sounds like the key is being thorough upfront and making sure everything else on the return is solid before filing any amendments. Thanks to everyone who's shared their experiences and resources here. You've transformed what felt like a stressful emergency into a manageable project I can actually approach methodically. Time to start digging through those 2021 documents and following the proven strategy you've all outlined!

Has anyone used TurboTax or similar software to handle these loss carryovers from closed businesses? I'm in a similar situation and wondering if the mainstream tax software can correctly handle these situations or if it's worth paying a CPA one last time.

As someone who recently went through a similar situation with closed business entities, I'd strongly recommend getting professional help one more time to ensure you handle these carryovers correctly. The rules around passive loss disposition and QBI carryforwards can be tricky, and making mistakes could cost you significant tax benefits or trigger an audit. If you're determined to DIY, make sure you have all your prior year tax documents showing the original sources of these losses. You'll need to trace back to the Forms 8582, 8582-CR, and Form 8995-A from previous years to properly calculate what becomes deductible versus what carries forward. The passive losses should indeed become fully deductible in the year of complete disposition, but you'll need to prove the businesses were completely closed and disposed of. Keep documentation like final bank statements showing zero balances, state dissolution certificates, and any asset sale records. For the QBI loss carryforward, unfortunately that's likely going to remain unused unless you generate qualifying business income in the future. There's no mechanism to convert unused QBI losses to ordinary deductions when you permanently exit business activities.

Double check your 1099-R coding carefully! When I took a distribution for my first home purchase, Vanguard initially coded mine as a regular early distribution (Code 1) instead of a first-time homebuyer distribution (Code J). I had to call them and have them issue a corrected 1099-R. Also remember that the first-time homebuyer exception is limited to $10,000 lifetime across all IRAs, so even if you used $8,000 now, you only have $2,000 left for this exception in the future. Just something to keep in mind.

The $10,000 first-time homebuyer limit applies per individual, not per household! So if you and your husband both qualify as first-time homebuyers (haven't owned a home in the past 2 years), you can each withdraw up to $10,000 from your respective IRAs penalty-free - that's potentially $20,000 total for your down payment. Just make sure you both meet the first-time buyer definition and that your IRA custodians properly code the distributions with Code J on your 1099-Rs. Also remember this limit is lifetime across all your IRAs, so if either of you has used this exception before, that reduces your available amount. The same contribution vs. earnings rules apply to both of you - if you're withdrawing amounts equal to or less than your total Roth contributions, those should be tax-free regardless of the 5-year rule or your age.