I'm confused about whether I need to issue a 1099 for a settlement. I own a small business and we settled a dispute with a customer for $4,500. Do I need to send them a tax form since we paid them?

Based on what you've described, the good news is that most of your $23,750 settlement is likely NOT taxable! Since this was from a car accident and the money was specifically for medical expenses and car damage, those portions generally aren't considered taxable income by the IRS. Here's the breakdown for your situation: - Medical expense reimbursement from physical injuries: NOT taxable - Car damage compensation (up to your basis in the vehicle): NOT taxable - Money sitting in your bank account from these sources: Also not taxable You should look for a 1099-MISC from the insurance company - if they didn't send you one, it's a good indicator they didn't report it as taxable income to the IRS either. The key question is whether any portion of your settlement included compensation for lost wages, pain and suffering beyond physical injuries, or punitive damages. If the settlement agreement specifically states it was only for medical expenses and property damage from physical injuries, you're in the clear. Keep all your settlement paperwork and receipts for the medical expenses and car repairs - you'll want documentation in case the IRS ever has questions. But for a straightforward car accident settlement like yours, you most likely don't need to report anything on your tax return.

Does anyone know a good resource that compares 2024 vs 2025 tax brackets? I've heard they're adjusting for inflation and I'm in a similar income range as OP.

I was in a similar situation last year with comparable income and completely understand the confusion! The ~$53,000 estimate is probably close to accurate, but here's what helped me wrap my head around it: Think of it like climbing stairs - you don't jump straight to the top tax rate. You pay 10% on the first "step" of income, then 12% on the next step, and so on. So even though part of your $233K hits the 24% bracket, most of your income is taxed at much lower rates. The key insight that finally clicked for me: your effective tax rate (total tax divided by total income) will be much lower than that 24% marginal rate. In your case, it's probably around 15-16% effective rate, which makes that $53K number make more sense. Also, don't forget about pre-tax retirement contributions - if you're not maxing out 401(k)s, that's an easy way to reduce your taxable income and move more dollars into lower brackets. We saved about $7,000 in taxes just by increasing our retirement contributions.

Random question but has anyone used TurboTax Self-Employed for calculating the QBI deduction for an engineering LLC? I tried last year and it seemed to automatically disqualify me completely when I selected "engineering services" even though my income was under the threshold. Had to override it manually and now I'm worried about getting audited.

Great question about the QBI deduction! As an engineering consultant myself, I can confirm that you can absolutely qualify for the 20% deduction even though engineering is considered an SSTB. The key is your income level - since you're married filing jointly and under the $340,100 threshold, you should get the full deduction regardless of the SSTB designation. One thing I'd add to the excellent advice already given - when you do convert to S-corp (which sounds like a smart move for your income level), make sure you understand that the QBI deduction applies to the K-1 income from the S-corp, not your W-2 wages. So if you're paying yourself $120k in salary and taking $80k in distributions, only the $80k would be eligible for the QBI deduction. Also, definitely keep detailed records of your business activities. I've found that many engineering consultants actually do work that falls outside the strict SSTB definition - things like project management, training, or business process consulting. These activities might qualify for QBI even above the income thresholds if properly documented.

Don't forget that you need to file FBAR (FinCEN Form 114) if your foreign bank accounts exceed $10,000 combined at any point during the year! This is separate from your tax return and has crazy high penalties if you forget to file. My partner and I almost got caught out by this when we moved to Denmark. We filed our taxes correctly with the FTC and standard deduction (which did result in $0 owed, exactly like you're hoping for), but completely missed the FBAR requirement until someone mentioned it to us.

This is exactly the situation I was in last year! Yes, you can definitely use both the standard deduction AND the Foreign Tax Credit - they work together, not against each other. Here's what happened in my case (I'm in the UK with similar US dividend income): I reported all my worldwide income, took the standard deduction which brought my taxable income way down, and then applied the FTC to cover any remaining tax liability from my foreign earnings. Since your US dividends are only $1,500 and the standard deduction is $13,850, you'll likely have very little (if any) taxable income left to apply the FTC against. One tip: make sure you understand which "basket" your income falls into for Form 1116 purposes. Your salary will be "general income" but your dividends will be "passive income" - they need to be calculated separately on the form. The foreign taxes you paid in Germany can only offset US tax on the same type of income. Also, keep excellent records of all taxes paid to Germany throughout the year. You'll need this documentation for the FTC calculation and it's much easier to collect as you go rather than trying to reconstruct it at tax time!

I'm going through the exact same thing right now! Got my 120-day review letter about 3 weeks ago and like you, zero prior notices. I was panicking at first but after reading through everyone's responses here, I feel a lot better. I actually tried that taxr.ai tool that @Gianni Serpent mentioned and wow - it broke down my transcript in a way that actually made sense! Turns out my review is pretty standard verification stuff, nothing scary. The AI explanation was way clearer than trying to decode all those cryptic IRS codes myself. Also took @Leeann Blackstein's advice about calling early morning and actually got through to someone in 45 minutes (which felt like a miracle). The agent confirmed it's just routine verification and should wrap up within the next month or so. Hang in there OP - from what I'm seeing in this thread, most of these reviews are just the IRS being extra cautious, not because they found actual problems. The waiting sucks but you're definitely not alone in this! 💪

I'm dealing with something similar right now! Got my 120-day review notice about 2 months ago and it's been radio silence since then. Reading through all these responses has been super helpful - especially the tip about calling early morning and checking the transcript for codes. @Gianni Serpent I'm definitely going to try that taxr.ai tool you mentioned. Trying to decode IRS transcripts on my own has been like reading a foreign language 😵‍💫 One thing I learned from calling (after being on hold for literally 3 hours) is that these reviews are way more common than I thought. The agent told me they're backed up from pandemic processing delays and are being extra thorough with verification now. She said as long as I filed everything correctly, it should resolve without me needing to do anything. @Levi Parker - try not to stress too much about it. From what everyone's saying here, it sounds like most of these end up being routine checks that just take forever to process. The IRS really needs to work on their communication though - getting a random 120-day review letter with zero context is terrifying! Hang in there everyone! 🤞