I feel you on the stress! I had code 971 pop up back in March and waited almost 6 weeks for the actual letter to arrive. Turns out they needed me to verify my identity because I had moved during the tax year. The whole process took about 3 months total once I sent back their requested documents. Pro tip: you can call the IRS directly at 1-800-829-1040 and they can sometimes tell you what the review is about even before the letter arrives. Just be prepared for long hold times! Hang in there - most of these reviews do get resolved eventually.

I'm going through the exact same thing right now! Got code 971 about 2 weeks ago and have been checking my mailbox obsessively every day. Filed in early February and was expecting my refund by now. The waiting is killing me because I really need that money for some unexpected medical bills that came up. Has anyone found that calling the IRS actually helps, or do they just tell you to wait for the letter? I'm torn between being patient and trying to be more proactive about figuring out what's going on.

This is exactly why I love this community - seeing real people help each other navigate complex tax situations! Sofia, I'm really glad you got the clarification you needed. Your CPA was definitely wrong about losing grandfathering status from a simple rate refinance. I went through something similar a few years ago and it's frustrating when even tax professionals don't fully understand these nuanced rules. The mortgage interest deduction changes from the Tax Cuts and Jobs Act created so much confusion, especially around the grandfathering provisions. For anyone else reading this thread, the key takeaway is: if you had a mortgage before December 15, 2017, and you refinanced without increasing the principal balance (other than rolling in closing costs), you keep the $1M limit. It's that simple, but apparently not widely understood even among tax preparers. Thanks to everyone who shared their experiences and resources - this thread is going to help a lot of people!

As someone who's been lurking in this community for a while but never posted, this thread convinced me to finally join the discussion! I'm a mortgage loan officer and I see this confusion ALL the time - both from borrowers and their tax preparers. The grandfathering rules are actually pretty straightforward once you understand them, but the Tax Cuts and Jobs Act created so much confusion that even seasoned CPAs sometimes get it wrong. I've started including a simple one-page explanation of the mortgage interest deduction rules with my refinance packages because of situations exactly like Sofia's. What really bothers me is when borrowers miss out on legitimate deductions because their tax preparer doesn't fully understand these rules. The difference between the $750K and $1M limit can be thousands of dollars in tax savings for people with larger mortgages. Sofia, definitely push back on your CPA with the specific Publication 936 references that Aaron mentioned. And for anyone else reading this - if you're refinancing a pre-2017 mortgage, make sure to discuss the grandfathering rules with your tax preparer BEFORE they file your return!

Has anyone dealt with this same situation but with dependent children involved? My ex and I have 2 kids and I'm wondering how the filing status and child tax credits would work if we're doing married filing separately with one person itemizing.

Just want to emphasize something important that might get overlooked - make sure you keep detailed records of ALL your attempts to communicate with your ex about the filing requirements. Save emails, text messages, certified mail receipts, etc. If the IRS ever questions why there was a mismatch in filing methods (if she tries to take the standard deduction after you itemize), having documentation that you properly notified her of the requirement can protect you from penalties. The IRS understands that divorced couples don't always cooperate, but they expect the spouse who chooses to itemize to make a reasonable effort to inform the other spouse. Also, consider having your tax preparer send a formal letter to her explaining the requirement - sometimes official communication from a third party gets through when direct communication doesn't. This also creates a paper trail showing you followed proper procedure.

This is exactly the kind of detailed discussion I was hoping to find! Thank you everyone for sharing your experiences and insights. Based on all the advice here, I think my action plan is: 1. Get formal documentation from my employer confirming each repayment amount and date (as suggested by several of you) 2. Calculate both the deduction and credit methods for each year's repayment to see which gives better tax savings 3. Make direct payments rather than payroll deductions to keep cleaner documentation 4. Consult with a tax professional for at least the first year to make sure I'm doing the calculations correctly The point about state tax conformity is something I hadn't considered at all - I'm in Texas so no state income tax to worry about, but that's definitely something others should check. One follow-up question: For those who have been through this process, how far in advance of tax season did you start gathering documentation and doing the calculations? I want to make sure I'm not scrambling at the last minute, especially since this involves comparing multiple calculation methods. Also, has anyone had experience with the IRS questioning these types of deductions during an audit? I want to make sure my documentation is bulletproof.

This has been an incredibly informative thread! I'm dealing with a similar bonus repayment situation and wanted to add one more consideration that I learned about recently. If you're making repayments over multiple years like the original poster, be aware that the tax benefit you receive might vary significantly between years depending on your other itemized deductions. Since the IRC 1341 repayment is claimed as an itemized deduction (when using the deduction method), you need to exceed the standard deduction threshold to get any benefit. For 2024, the standard deduction is $14,600 for single filers. So if your only itemized deduction is the $33,750 bonus repayment, you'll get the full benefit. But in years where you have fewer itemized deductions, you might hit situations where the credit method becomes more attractive even if the raw numbers suggest otherwise. I'd also recommend keeping a spreadsheet tracking all your repayment-related expenses (certified mail costs for sending payments, any bank fees for wire transfers, etc.) as these might be deductible as well, though they're usually small amounts. The documentation advice from everyone here is spot-on. I created a dedicated folder with copies of everything - original W-2 showing the bonus, employment contract sections about repayment obligations, payment confirmations, employer letters, etc. Better to have too much documentation than not enough if the IRS ever has questions.

The distinction between gifts and payments for services is crucial here. Occasional babysitting by a family member with some money given afterward isn't necessarily taxable income - the IRS looks at factors like regularity, formality of the arrangement, and whether it's truly a business relationship. If it's truly sporadic (like when she happens to be home from college) and you're giving her spending money as a parent rather than paying her as an employee, that's generally fine. The key is that it shouldn't look like a regular job arrangement. However, if it becomes a consistent weekly gig where she's essentially working as your regular babysitter, then yes, that could be considered income she should report. The IRS guidance generally focuses on whether there's an expectation of payment for specific services rendered. For peace of mind, you could structure it as separate transactions - give her normal parental support/gifts when she's home, and if you do need regular childcare, consider the tax implications of that arrangement separately. Documentation showing these are parental gifts rather than service payments can help if questions ever arise.

As someone who's been through IRS scrutiny before (unrelated to family transfers), I can confirm that normal family financial help is not something they typically flag. The IRS is more concerned with unreported business income and large unexplained deposits than they are with siblings helping each other out. Your transfers sound completely normal and well within the bounds of typical family assistance. The amounts you mentioned ($200-$1,200 occasionally) are nowhere near the gift tax reporting threshold of $18,000 per person per year. Even if they were larger, gifts between family members are generally not taxable to the recipient anyway. The key thing is keeping reasonable records showing these are personal transfers, not payments for services. Your Venmo descriptions like "rent help" and "happy bday" actually help demonstrate the personal nature of these transactions. If you're ever questioned (which is unlikely), having a clear explanation of what each transfer was for is all you'd need. Don't let workplace rumors keep you up at night - the IRS has much bigger fish to fry than people helping their siblings with bills!