Andre, you're in a great position! Everyone's advice here is spot-on - no penalties when you're owed a refund, but definitely file soon to get your money and take advantage of those tax credits. One practical tip that saved me time when I was in a similar situation: before you dive into the full filing process, do a quick "refund estimate" using one of the free tax calculators online. Just plug in your basic info (income, withholdings, filing status, number of dependents) and you'll get a ballpark figure of what to expect. This helped me prioritize when I was juggling multiple financial tasks after my own cross-country move. Also, since you mentioned the new job - if your employer offered any relocation assistance or reimbursements, make sure you understand the tax implications. Some of those benefits might be taxable income that should be reported, while others aren't. Your HR department should have provided details, but it's worth double-checking since it could affect your refund amount. The peace of mind you'll get from finally having this filed will be worth way more than the time investment. Plus, that refund money could probably come in handy after all the moving expenses! Good luck!

Andre, I completely understand the stress you're feeling about this! I went through something very similar when I moved states and started a new job a few years back. The relief when I finally learned there are no penalties for filing late when you're owed a refund was enormous. Everyone here has given you excellent advice, but I wanted to add one more perspective: as someone who's been through the multi-state move situation, make sure you keep detailed records of your moving timeline and expenses. Even though moving expense deductions are limited now, there might still be some job-related costs that are deductible, and having good documentation will make the filing process much smoother. Also, since you mentioned having a child and being 4 months late, I'd really encourage you to prioritize this soon. That Child Tax Credit money (up to $2,000 per qualifying child) plus any potential Earned Income Credit could be substantial - money that could really help after the financial strain of relocating. The 3-year window gives you plenty of time, but there's no benefit to waiting longer. You've already done the hard work of calculating that you're owed money - now just file and claim what's rightfully yours! The peace of mind alone will be worth it.

One thing to keep in mind with the home office deduction for your shed - make sure you're clear on whether to use the simplified method or actual expense method. The simplified method is $5 per square foot up to 300 sq ft maximum ($1,500 total), so for your 240 sq ft shed you'd get a $1,200 deduction. It's super easy but you can't depreciate the shed separately. The actual expense method lets you deduct the actual percentage of home expenses plus depreciation on the shed itself. Given that your shed is a separate insulated structure with its own utilities, you might come out ahead with actual expenses - especially since you can depreciate the shed's value over 39 years as nonresidential real property. I'd calculate both methods to see which gives you the bigger deduction. The actual expense method requires more record keeping but could save you significantly more than the simplified $1,200, especially with a nice setup like you described.

Another consideration I haven't seen mentioned yet - if you're planning to sell your house in the next few years, be aware that claiming home office deduction can have capital gains implications. When you sell, the portion of your home that was depreciated for business use may be subject to depreciation recapture taxes. This might not be a big deal if you're planning to stay put for a long time, but it's something to factor into your decision between the simplified method (which doesn't involve depreciation) versus the actual expense method. The simplified method avoids this issue entirely since you're not depreciating any part of the property. Also, since your shed is a separate structure, you might want to check with your homeowner's insurance to make sure business use is covered. Some policies exclude or limit coverage for business activities, and you don't want to find out after something happens that your embroidery equipment isn't covered.

Wait I'm confused. If Amazon gives me a $10 promotional credit just for being a Prime member and I use it for a business purchase, is that considered a discount (deduct only what I paid) or is it considered income (deduct full amount but report the $10 as income)?

This is such a helpful discussion! I'm dealing with a similar situation but with gift cards instead of store credit. Last year my client paid me with a $200 Amazon gift card for some freelance work. I used part of it ($75) to buy business supplies. Should I report the full $200 gift card as income when I received it, and then deduct the $75 when I used it for business? Or do I only report income/expenses when I actually use the gift card? The timing seems tricky since I received payment in December 2024 but didn't make the business purchase until January 2025.

Pro tip: If your regular job income makes up most of your earnings, you can also increase your W-4 withholding at your main job instead of dealing with quarterly 1040-ES payments for your smaller side gig. I do photography on weekends and just have my employer take out an extra $75 per paycheck to cover the taxes on that income. Just calculate roughly how much extra tax you'll owe for the year from your side hustle, then divide by the number of paychecks from your main job. Ask your HR department to withhold that additional amount.

Welcome to the world of freelance taxes! It's definitely overwhelming at first, but you'll get the hang of it. Just to clarify a few things based on what others have shared: The quarterly estimated tax payments using Form 1040-ES are separate from your 2024 tax debt. Think of it this way - the $3,800 you owe is for income you already earned in 2024, while the quarterly payments are advance payments for taxes on income you'll earn in 2025. Since this is your first year with significant freelance income, the estimates might be a bit high if you're not sure your photography work will be consistent. You can always adjust your payments throughout the year if your income changes. The key is to avoid underpayment penalties by paying either 90% of this year's tax or 100% of last year's tax (whichever is smaller). Also, don't forget to track ALL your photography expenses - equipment, software, mileage to shoots, even a portion of your phone bill if you use it for business. These deductions can significantly reduce your quarterly payment amounts. The learning curve is steep, but once you understand the system, it becomes much more manageable!

Just wondering - would it make sense for the in-laws to sell their portion of the house to OP and his wife instead of gifting it? Would that avoid the whole gift tax issue entirely?

Based on what you've described, I'd strongly recommend getting professional help with this situation since there are multiple tax implications at play. When your in-laws initially added your wife to the deed 7 years ago, that was technically a gift of partial ownership interest in the property, and they should have filed Form 709 if the value exceeded the annual exclusion limit at that time. For the current quit claim situation, yes - transferring their remaining ownership interest to your wife would be another taxable gift based on their portion of the current fair market value. However, as others mentioned, this likely won't result in actual tax owed due to the lifetime gift tax exemption. One thing I haven't seen mentioned yet is the potential impact on your homestead exemption or other property tax benefits. In some states, changing ownership structure can affect your property tax assessment or eligibility for certain exemptions. You'll want to check with your local tax assessor's office before proceeding. Also consider the timing - if your in-laws are elderly, it might be worth discussing whether keeping the property in their names until inheritance could provide better tax treatment through stepped-up basis. A tax professional can help you model the different scenarios to see which approach saves the most money long-term.