Has anyone tried using the IRS's own free file options? I'm wondering if those let you itemize for free too. The commercial options all seem to have some kind of catch.

I went through this exact same situation last year! H&R Block kept pushing their $35 upgrade on me too. What I learned is that they're technically correct about the potential savings, but you definitely don't need to pay them for it. Here's what I'd recommend: First, gather up all your tax documents - mortgage interest statement (1098), medical bills, charitable donations, property tax records, etc. Then add them up yourself to see if they exceed the standard deduction ($13,850 if you're single, $27,700 if married filing jointly). If your itemized deductions are legitimately higher than the standard amount, then yes, you should itemize. But don't pay H&R Block for it! I switched to FreeTaxUSA mid-process last year and saved the upgrade fee while still getting the higher refund. Their interface is actually cleaner than H&R Block's too. The key thing to remember is that H&R Block's "free" version is really just a marketing tool to get you to upgrade. Other services like FreeTaxUSA, TaxAct, and the IRS Free File options include itemizing in their actual free versions.

Just want to add one more important detail that could save you money - make sure you're calculating the penalty correctly on Form 5329! I made the mistake of applying the 10% penalty to my entire $18,500 withdrawal initially, then trying to claim the $10k exemption as a separate line item. The correct way is to report only the $8,500 ($18,500 - $10,000) as subject to the early withdrawal penalty. So you'd pay the 10% penalty on $8,500 = $850, not $1,850 minus $1,000. It sounds like the same math but the IRS computers can flag it if you don't report it correctly on the form. Also, double-check that your 1099-R shows the correct distribution code. If it shows code "1" (early distribution, no known exception), you'll definitely need Form 5329 to claim your exemption. If it shows code "2" (early distribution, exception applies), your plan administrator may have already recognized the exemption, but you should still verify the amount. Hope this helps with your filing!

I'm in a similar situation with a 401k withdrawal for my first home purchase! One thing I want to add that hasn't been mentioned yet - make sure you understand the timing requirements. The IRS is pretty strict about the 120-day rule. The withdrawal needs to be used within 120 days of when you receive it, OR you can take the withdrawal up to 120 days after the home purchase. So if you closed on your house in December but didn't take the 401k withdrawal until January, you could still qualify as long as it's within that 120-day window. I almost missed out on the exemption because I thought the withdrawal had to happen before the purchase. My tax preparer caught this and saved me from paying the penalty on money I was eligible to exempt. Also, "qualified acquisition costs" include more than just the down payment - closing costs, settlement fees, and other costs directly related to acquiring the home can count toward that $10k limit. Just make sure you have receipts for everything!

The rollover option @Yuki Tanaka mentioned is crucial - if you took that pension distribution within the last 60 days, you can still roll it into an IRA and it would be treated as if the distribution never happened for tax purposes. This would bring your AGI back down significantly and potentially make you eligible for EITC again. Even if the 60-day window has passed, there are sometimes hardship exceptions available. Given that you mentioned needing the money for home repairs, it might be worth exploring whether any exceptions apply to your situation. If rollover isn't possible, definitely look into maximizing traditional IRA contributions for both you and your husband to reduce AGI. Also consider whether the home repairs qualify for any energy efficiency credits or other tax benefits that could help offset the higher tax burden from the pension distribution.

This thread has been incredibly helpful! I've been dealing with a similar situation with my late father's pension that I inherited. The distinction between earned vs unearned income for EITC purposes has always confused me. What I learned from my tax preparer is that inherited pensions/retirement accounts have even more complexity - they don't count as earned income either, but the required minimum distributions can really mess with your AGI calculations for various credits and deductions. The rollover advice mentioned here is gold - I wish I had known about that 60-day window when I first received the distribution. For anyone reading this thread, definitely explore that option first before just accepting the tax hit. Even if you've already spent the money, you might be able to find other funds to complete the rollover and avoid the immediate tax consequences. Also worth noting that some states have their own EITC programs with different income thresholds, so even if you don't qualify for the federal credit, you might still be eligible for state benefits depending on where you live.

Don't forget about state taxes too! I caught up on my federal returns and completely forgot I needed to do state returns as well. Had to go back and do the whole process again. Most states have similar rules for prior year returns (paper filing only).

Great advice in this thread! One thing I'd add that helped me when I caught up on my back taxes - consider filing in chronological order (oldest first) rather than all at once. This can help avoid potential processing delays or confusion at the IRS, especially if there are carryover items like net operating losses or credits that might affect multiple years. Also, if you discover you made errors on returns you've already filed while working on the older ones, you can file amended returns (Form 1040X) to correct them. Just keep in mind the 3-year deadline for claiming additional refunds applies to amended returns too. The IRS actually has a pretty helpful "Get Transcript" tool on their website where you can see what they have on file for you for each year. It's worth checking before you start to see if they've already processed substitute returns for any years (they sometimes do this when people don't file). If they have, you'll want to file your actual returns to replace their estimates, which are usually not in your favor.

I'm a retired railroad worker who dealt with this confusion for 30+ years! One thing that might help is to think of your paystub as having two completely separate "buckets" of taxes: Bucket 1: Federal Income Tax - This is what goes toward your annual tax return obligation. Only the "Tax withholding federal" amount counts here. Bucket 2: Railroad Retirement System - All those RRB codes (T1 Dis, Tier 2, T1 Med) are like your pension contributions. These never come back as tax refunds because they're not income tax - they're building your future retirement benefits. The Railroad Retirement system is actually pretty generous compared to regular Social Security. Your Tier 1 benefits will be roughly equivalent to what you'd get from Social Security, but Tier 2 is like having an additional pension plan on top of that. Plus, railroad retirement often allows you to retire earlier with full benefits. So don't think of those RRB taxes as "extra" taxes you're paying - think of them as forced savings for a better retirement than most workers get. When you retire, you'll be glad you paid into this system instead of regular Social Security!

This thread has been incredibly helpful! I'm a new railroad employee and was completely overwhelmed looking at my first few paystubs. Seeing all those different tax codes made me panic that I was somehow paying double taxes or something. The "two buckets" explanation really clicked for me - federal income tax in one bucket, railroad retirement contributions in the other. It's actually reassuring to know that those RRB deductions are going toward better retirement benefits rather than just disappearing into the tax void. One follow-up question though - when I get my W-2 at the end of the year, will it clearly separate these amounts? I want to make sure I'm reading it correctly when tax season comes around so I don't accidentally claim the wrong withholding amounts.