Just wanted to chime in and say your parents might notice in other ways even if they don't see it on taxes. My parents found out about my "secret" job when they saw deposits in my bank account that I couldn't explain. If you share any bank accounts with them or they can access your statements, they might notice that way.

As someone who went through this exact situation a few years ago, I can confirm what others have said - your parents absolutely will NOT see your income on their tax return when they claim you as a dependent. The dependency claim is completely separate from your earnings. However, I'd recommend being proactive about a few things: 1) Make sure your employer has an address where your parents won't see mail (like a PO box or friend's address), 2) Set up your own bank account if you haven't already, and 3) File your own tax return since you're over the $2,300 threshold - but mark that you can be claimed as a dependent. The tax system is designed to keep individual returns private, even within families. Your parents' return will only show that they're claiming you - nothing about what you earn or where you work. You've got this!

Just to add a data point - I've been in this exact situation (work in Nevada, live in Arizona) for 3 years. I use FreeTaxUSA and it handles it perfectly. You're right that Nevada has no state income tax so you only need to file an Arizona return, but you do need to report all your income to Arizona since you're a resident. One thing nobody mentioned yet - if you spend a lot on gas for that commute, keep track of those expenses! While you can't deduct commuting expenses generally, if your employer reimburses you for any business travel (separate from commuting), that could be tax-relevant.

Great thread! I'm actually a tax preparer and wanted to clarify a few things I'm seeing in the responses. You're absolutely correct that Nevada has no state income tax, so ignore any "withholding" you think you're seeing for Nevada state taxes - that's likely something else on your paystub. Since you're an Arizona resident, you'll file a full Arizona resident return reporting ALL your income, including what you earned in Nevada. Arizona taxes you on worldwide income as a resident. A few practical tips: 1) Consider asking your employer to withhold additional federal taxes that you can apply toward your Arizona state tax liability, 2) You might want to make estimated quarterly payments to Arizona to avoid underpayment penalties, and 3) Keep excellent records of your work location if you ever work from home in Arizona - those days create Arizona-sourced income. The standard tax software like TurboTax, H&R Block, or FreeTaxUSA can absolutely handle this situation. You don't need a professional unless you have other complicating factors. This is actually one of the simpler multi-state scenarios since Nevada has no income tax!

I've been dealing with IRS issues for years and wanted to share some additional tips that might help. First, definitely keep detailed records of all your installment agreement payments - bank statements, canceled checks, money order receipts, whatever you used to pay. This documentation will be crucial if the IRS questions the overpayment. Also, be aware that if you filed joint returns, the refund will typically be issued to both spouses even if only one person's name was on the installment agreement. Make sure your current address is updated with the IRS before requesting the refund, as they'll mail the check to your address of record. One more thing - if you're expecting a large refund like this, consider having it direct deposited instead of receiving a paper check. You can request this when you contact them, and it's much faster and more secure. Just have your bank routing and account numbers ready when you call or include them in any written correspondence. Good luck getting your money back! The IRS definitely owes it to you.

I just wanted to add my experience with a CP-89 negative balance situation. Like others have mentioned, it definitely means the IRS owes you money. In my case, I had overpaid on a 2013 installment agreement and received a similar notice. One thing I learned that might help - if you're having trouble getting through to the IRS by phone, you can also visit a local Taxpayer Assistance Center (TAC) if there's one near you. You'll need to make an appointment through the IRS website, but I found the in-person service much more helpful than trying to navigate their phone system. The representative was able to pull up my entire payment history on the spot and confirm the overpayment. They processed my refund request right there, and I received my check about 3 weeks later. Just make sure to bring your CP-89 notice, a copy of your ID, and any payment records you have from the installment agreement. You can find TAC locations and schedule appointments at irs.gov/help/contact-your-local-irs-office. It's definitely worth considering if the phone route isn't working out for you!

Don't forget to consider state taxes too! Federal treatment is one thing, but states can be weird about divorce settlements.

I just want to echo what others have said about getting the wording right in your divorce decree - this is absolutely critical! I went through a similar situation two years ago where my ex withdrew from his 401(k) to pay me as part of our settlement. The key thing that saved me from tax headaches was having our lawyer include very specific language that this was "an equalization of marital property" and not spousal support. We also had to include a statement that the withdrawal and any associated taxes/penalties were solely my ex-husband's responsibility. One thing I'd add that I learned the hard way - make sure you get a copy of the 1099-R that your ex will receive from his IRA custodian showing the withdrawal. You don't need to report it on your taxes, but having that documentation helps if the IRS ever questions where the settlement money came from. My tax preparer said it's good to keep with your divorce papers as backup documentation. Also, since you're in Texas (lucky you with no state income tax!), you shouldn't have any state-level complications, but definitely confirm this with your divorce attorney. The federal treatment should be straightforward - no taxes for you as long as it's properly documented as property division.

Just FYI, tax software makes this WAY easier to figure out. You don't need to understand all the details about gross vs net income yourself. Programs like TurboTax, FreeTaxUSA, or even the IRS Free File options will walk you through entering your different income sources and expenses. I use HR Block and it automatically figures out my taxable income after I enter all my 1099 income and business expenses. The interview style questions make sure I don't miss any deductions too.

I'm a tax professional and wanted to add some clarity here. You're absolutely correct that taxes are based on your net income after legitimate business expenses, not gross income. However, I'd caution against relying solely on third-party tools or services without understanding the fundamentals yourself. For your specific situation with $42,000 in design income and $8,500 in business expenses, you'll report both amounts on Schedule C. Your net profit of $33,500 will be subject to both regular income tax AND self-employment tax (15.3%). This is important because many people forget about the self-employment tax component. A few key points: 1) Make sure all $8,500 in expenses are truly business-related and properly documented, 2) Consider whether any purchases should be depreciated over multiple years rather than deducted in full this year, 3) Track your home office expenses and vehicle mileage if applicable, and 4) Remember that your standard deduction will further reduce your taxable income after calculating your adjusted gross income. The quarterly payment advice mentioned earlier is spot-on - with $33,500 in net self-employment income, you should definitely be making estimated payments to avoid penalties. I'd recommend consulting with a local CPA for your first year with significant self-employment income to make sure you're set up correctly going forward.