Make sure you're also considering the state tax implications! I did something similar with my boat and found out my state had different reporting requirements than federal. Also check if you properly transferred the title - in some states, if the title is still in your name and your friend gets in an accident, you could be liable!

Has anyone considered that the IRS might view this as a gift if the loan terms are too favorable? Interest-free loans between friends can sometimes be seen as having "imputed interest" if they're below market rates. Just something to consider.

Something else to consider - the way you're calculating the interest might still be a bit off. The formula you're using assumes continuous compounding, but the IRS uses daily compounding. For daily compounding over 24 months (approximately 730 days), the formula would be: Amount = Principal × (1 + r/365)^730 Where r is the annual interest rate. But again, since the rate changes quarterly, you'd need to break this down into segments for each quarter with different rates.

This is such a helpful thread! I'm dealing with a similar situation but for 2021 taxes that I just discovered I underreported. Reading through all these responses, it sounds like the manual calculation approach is pretty complex with all the quarterly rate changes. I'm curious about one thing though - when you file the amended return (Form 1040X), do you need to include your own calculation of the penalties and interest, or does the IRS automatically calculate and bill you for the correct amounts after they process your amendment? I want to make sure I'm paying the right amount upfront rather than getting hit with additional bills later. Also, for anyone who used the First Time Penalty Abatement mentioned by @Micah Franklin - did you request it at the same time as filing your amended return, or wait until after receiving the penalty notice? Trying to figure out the best timing for this.

Don't forget to check the math yourself! I had a similar situation and it turned out the IRS actually calculated correctly - I had missed a tax credit I was eligible for when I did my amended return. Pull out all your documents and try to reverse-engineer their math. Sometimes what looks like an error is actually them finding something in your favor that you didn't claim.

As someone who's dealt with IRS overpayments before, I'd echo the advice about not spending the extra money and being proactive about contacting them. One thing to keep in mind is that the IRS has up to 3 years to identify and request repayment of overpayments, and they will charge interest from the date you received the refund. When you do contact them, ask specifically for them to put a note in your account that you called to report the potential overpayment. This creates a paper trail showing you acted in good faith, which can be helpful if there are any disputes later about interest or penalties. Also, make sure to keep detailed records of everything - copies of your original return, amended return, the CP24 notice, the refund check, and any correspondence. If this does turn out to be an error, having all the documentation organized will make the resolution process much smoother. The silver lining is that dealing with this proactively now is much easier than trying to sort it out years later when memories are fuzzy and documents might be harder to find.

My wife just finished her first year as a realtor and we learned some hard lessons on taxes. If your wife plans to work from home, you NEED to have a dedicated space used ONLY for work to claim the home office deduction. We tried claiming our guest bedroom that she sometimes used for work and got flagged for audit. Also, quarterly estimated taxes caught us by surprise. If she starts making decent money, you'll likely need to start making those payments to avoid underpayment penalties. We ended up owing an extra $850 in penalties because we didn't know this.

One crucial thing to add - make sure your wife understands the difference between business expenses and startup costs. The IRS treats them differently for tax purposes. True business expenses (like MLS fees, gas for showings, marketing materials) can be deducted in full the year they're incurred. But startup costs (like getting licensed, initial training, setting up the business) have to be amortized over 15 years, though you can deduct up to $5,000 in startup costs the first year if total startup costs are under $50,000. Also, since real estate is heavily relationship-based, keep receipts for any client entertainment or meals - you can deduct 50% of legitimate business meals. This includes taking clients to lunch, coffee meetings with other agents, or meals during real estate events. The key is documentation for everything. The IRS loves to audit Schedule C filers, especially in the first few years when there are losses. Keep a detailed business diary showing your wife's activities, time spent, and business purpose for every expense.

Something nobody mentioned yet - the threshold for requiring a 1099 was $600 for 2023. Since you earned $4200 from these jobs, technically your clients SHOULD have given you 1099s if you earned more than $600 from any single one of them. But that's on them, not you! You did your part by reporting the income correctly. I'd just make sure you keep some basic records of who paid you and when, just in case questions ever come up. Even simple notes or a spreadsheet would be helpful.

Hey Alexis! I totally understand your anxiety - I went through something similar a few years ago with freelance graphic design work. The good news is that you did everything right by reporting the income honestly, even without 1099s. Your situation is actually pretty textbook for what the IRS considers "compliant taxpayer behavior." You reported income that you weren't even required to have documentation for, took reasonable business deductions, and filed on time. The fact that your return was processed quickly and you received your refund is definitely a positive sign. The $450 increase in your tax credit is completely normal - that's just how the math works out when you have self-employment income that qualifies for certain credits. Nothing suspicious about that at all. As for audit risk, with your income level and straightforward situation, you're statistically very unlikely to be selected. The IRS audits less than 1% of returns with income under $25,000, and yours sounds like it has all the right documentation and reasonable numbers. Just keep your records (receipts, mileage logs, client payment records) for at least 3 years in case you ever need them. But honestly, you can probably stop worrying about this one!