Has anyone looked into how this affects your homeowners insurance? We did something similar last year and our regular policy didn't cover rental use - had to get a special landlord policy for the months we were renting it out.

Great question about the insurance piece! This is something a lot of people overlook when temporarily renting out their primary residence. I went through this exact situation two years ago when we relocated for 6 months to care for my father. Most standard homeowners policies have what's called a "business use exclusion" that can void coverage if you're renting the property without notifying them. Even short-term rentals can trigger this. I learned this the hard way when a pipe burst during our rental period - thankfully our insurance company was understanding since we had called ahead to discuss it. The good news is that many insurers offer temporary rental endorsements that you can add to your existing policy for situations like this. It's usually much cheaper than switching to a full landlord policy if you're only renting for under a year. Just make sure to get everything in writing and keep those records with your tax documentation. Also worth noting - if you do switch to a landlord policy temporarily, that premium becomes a deductible rental expense on Schedule E, which can help offset some of the rental income you're reporting.

Looking at your transcript, Code 807 is the key issue here - it means the IRS removed or reduced your withholding credits, which is why you went from expecting a refund to owing money. This usually happens when they can't verify the withholding amounts on your W-2s or 1099s with what employers reported to them. The penalties and interest (codes 196 and 276) kicked in because once they removed that withholding credit, you technically underpaid your taxes. Code 570 means they froze your account while reviewing, and the 971 codes are just notices they sent you. You'll want to check if your employer correctly reported your withholding to the IRS - there might be a mismatch between what's on your W-2 and what they have on file.

Code 807 is definitely the smoking gun here - that's what flipped you from getting a refund to owing money. When the IRS uses code 807, they're essentially saying "we can't verify this withholding actually happened" so they removed the $11,557 credit from your account. This is usually because there's a mismatch between what's on your W-2 and what your employer actually reported to the IRS systems. The timeline makes sense too - you filed in June (code 150), they put a hold on your account (code 570), sent you notices (code 971), then in November they made the adjustment removing your withholding and hit you with the penalties and interest. Your best bet is to get your Wage & Income Transcript from the IRS website and compare it line-by-line with your actual W-2. If there's a discrepancy, your employer needs to file a corrected W-2c with the IRS. Once that's processed, the withholding should be restored and those penalties should disappear. It's frustrating but this is more common than you'd think, especially with payroll system changes or new employers.

Has anyone used any specific tax software that handles household employee situations well? I tried using [popular tax software] last year for my mother's caregiver and it was a nightmare trying to figure out the Schedule H and W-2 generation.

I went through this exact same situation with my grandmother's caregiver two years ago and learned some hard lessons. First, the IRS classification really does depend on the degree of control you have over the work, not just whether they work for other families. If you're directing what tasks need to be done, when they need to be at your home, and how the care should be provided, you're likely an employer regardless of their other clients. One thing I wish someone had told me earlier: even if you determine she should get a 1099-NEC as an independent contractor, you still need her Social Security Number or Individual Taxpayer Identification Number (ITIN), her full legal name, and address before you can file anything. The deadline for giving her the form is January 31st, and you need to file it with the IRS by the end of February (or March 31st if filing electronically). But honestly, given that you're paying her $26,000+ annually for regular ongoing care work in your home, this sounds like a textbook household employee situation to me. I'd strongly recommend getting professional help to sort this out properly - the penalties for misclassification can be significant, especially when you're dealing with this much money.

Based on what I've seen in previous years, VA paper checks are taking about 10-14 days to arrive. Last year mine was dated Feb 15 and arrived on Feb 26. The explanation letter is usually attached right to the check, so you'll find out what it was for when it arrives. If you're PCSing soon and need that money ASAP, you might want to call the VA Tax Dept and see if they can tell you over the phone what the offset was for - sometimes you can resolve it faster that way.

Hey Nadia! Military family here too, so I totally get the PCS stress. 🪖 I've been through this exact situation with VA twice now. The paper check usually takes 10-14 business days from when they process the DD portion. Since your DD was processed on 2/9, I'd expect the check sometime around 2/25-3/3. Pro tip: If you're really tight on timing for your PCS move, you can call the VA Tax Department and ask them to expedite the explanation letter via email while the check is still in transit. That way you'll at least know what the offset was for and can start working on resolving it if needed. The number is on their website under "Refund Inquiries." Good luck with your move! 🚛

One thing nobody mentioned - if you owe more than $54,000, the IRS can now revoke your passport or prevent you from getting one! They're required to notify you before doing this, but it's definitely beyond a "financial penalty" and could seriously impact your life if you travel internationally for work or family. Also, if you owe more than $25,000, you can't use the online payment plans and things get more complicated. The bigger your balance gets (with all those penalties and interest compounding), the fewer options you have.

The passport revocation process is actually pretty straightforward from the IRS side. Once you have a "seriously delinquent tax debt" (over $54,000 including penalties and interest), the IRS sends your information to the State Department through an automated system. The State Department then either denies your passport application or revokes your existing passport. You get advance notice - the IRS has to send you a Notice CP508C before certifying your debt to State. But once that happens, you basically can't travel internationally until you either pay in full, set up an approved payment plan, or get the debt declared currently not collectible due to hardship. The scary part is how fast you can hit that $54k threshold when penalties and interest are compounding. If you originally owed $20k and let it sit for a few years, you could easily cross into passport revocation territory without realizing it.