I ran into this exact issue last year! The key question is: who has the payment relationship with the freelancer? With Fiverr, YOU pay FIVERR, and then FIVERR pays the FREELANCER. So Fiverr is responsible for issuing any required tax forms to the freelancer, not you. You're basically paying for a service from Fiverr the company, not directly employing the freelancer. But beware! If you ever take the relationship off-platform (like if you hire a Fiverr freelancer directly after working with them on the platform), then you DO need to issue a 1099-NEC if you pay them $600+ in a year. I learned this the hard way lol.

Just wanted to chime in as someone who processes a lot of 1099s for small businesses - everyone here is giving you solid advice! When you use Fiverr, you're essentially purchasing services from Fiverr Inc., not directly contracting with individual freelancers. The $600 threshold for 1099-NEC reporting only applies to direct business relationships where you're paying independent contractors yourself. Since Fiverr acts as the middleman collecting payment from you and then paying their freelancers, they assume the responsibility for any required tax reporting. Your $2,800 in Fiverr purchases should just be treated as regular business expenses - keep your receipts from Fiverr for your records, but no 1099s needed on your end. The freelancers will receive their tax documents directly from Fiverr if they meet the reporting thresholds. One tip: make sure you're categorizing these expenses correctly in your books as "Professional Services" or "Contract Labor" so you can deduct them properly as business expenses!

This thread has been incredibly helpful! I've been putting off dealing with my withholding for months because the IRS estimator seemed so confusing, but reading everyone's experiences here finally motivated me to tackle it. Just completed the estimator using my gross pay amounts (thanks for clarifying that!), and I discovered I'm actually having too much withheld. The tool is showing I'll get a refund of about $1,200 if I don't make any changes. While that might sound nice, I'd rather have that money in my paycheck throughout the year instead of giving the government an interest-free loan. Going to adjust my W-4 to claim one additional allowance and see how that affects things. Really appreciate everyone sharing their mistakes and successes - it made the whole process way less intimidating!

This is exactly what I needed! I've been avoiding the Tax Withholding Estimator because I wasn't sure about the gross vs. net pay question, but this thread cleared everything up perfectly. Just want to confirm what I'm understanding: I should use my gross pay (the full amount before ANY deductions) for both the "amount per pay period" AND the "year-to-date wages" fields, correct? My paystub shows $4,200 gross per pay period and $29,400 YTD gross - those are the numbers I should enter? Also, I have a 401k contribution that gets deducted pre-tax. From what I'm reading here, I should still use the full gross amount and then separately account for the 401k in the deductions section of the estimator, right? I don't want to mess this up like some of you did and end up with a surprise tax bill! Thanks everyone for sharing your experiences - this community is incredibly helpful for navigating these confusing IRS tools.

The terminology confusion is totally understandable! I had the same reaction when I first encountered this. Think of it this way: the "unrecaptured" part refers to depreciation that didn't get fully recaptured at ordinary income rates under the original section 1250 rules. For residential rental property, section 1250 was supposed to recapture excess depreciation (the amount over straight-line) as ordinary income, but since residential rentals use straight-line depreciation anyway, there was no "excess" to recapture. So all that depreciation remained "unrecaptured" under section 1250. Then in 1997, Congress decided this unrecaptured depreciation shouldn't get the sweet long-term capital gains treatment - it should be taxed at 25% instead. So you're paying 25% on depreciation that was never recaptured under the original section 1250 rules, hence "unrecaptured section 1250 gain." It's definitely confusing naming, but it makes more sense when you understand it's referencing what didn't happen under the old rules, not what's happening now!

This is such a great thread - I've been wrestling with the same terminology confusion! I'm a real estate agent and my clients always ask me about this when they're selling rental properties. What really helped me understand it was thinking about the timeline: back when section 1250 was written, it was designed to recapture "excess" depreciation (accelerated vs straight-line) as ordinary income. But since residential rentals already use straight-line depreciation, there was no "excess" to recapture - so all that depreciation remained "unrecaptured" under those original rules. Fast forward to 1997 when Congress said "wait, we don't want all this depreciation getting capital gains treatment" - so they created this middle-ground 25% rate specifically for depreciation that was "unrecaptured" under the old section 1250 framework. So yes, it IS being recaptured now through taxation, but it's called "unrecaptured" because it references what didn't happen under the original section 1250 provision. The name stuck even though the treatment evolved. It's like calling something by its historical context rather than its current function - definitely confusing but makes sense once you know the backstory!

Has anyone here ever had these codes and then had their refund actually reduced? I'm seeing 570/971 on mine too but also code 420 which apparently means "examination of tax return" which sounds even more ominous!

I've dealt with these exact codes before and understand the anxiety! Code 570 with 971 is actually pretty common and usually resolves without major issues. The key thing to remember is that 570 doesn't mean something is wrong - it just means they're taking a closer look at something on your return. In my case last year, I had these codes appear about 10 days after my return was accepted. The 971 notice arrived about 2 weeks later asking me to verify my filing status and dependent information. I sent the requested documents and my refund was released about 3 weeks after that with code 571 showing the hold was lifted. The waiting is definitely nerve-wracking, but try not to panic. Most of these reviews are routine compliance checks rather than indicators of problems. Keep checking your transcript every few days - you'll likely see additional codes appear that will give you more information about what's happening.

As someone who's been through an actual audit, I can offer some perspective on this. I got audited two years ago (random selection, not because of any mistakes) and had TurboTax MAX. The representation was genuinely helpful - I never had to speak to the IRS directly, which was a huge relief since I was pretty anxious about the whole thing. The tax pro handled all the back-and-forth communication and knew exactly what documents to submit and how to present them. That said, my audit was relatively straightforward and only lasted about 6 weeks. The peace of mind was worth it for me, but looking back, I probably could have handled it myself with just guidance rather than full representation. For a first-time filer with a simple return, you're statistically very unlikely to get audited. But if you do decide to get audit defense, consider your personality - if you're someone who would be really stressed about communicating with the IRS directly, TurboTax's representation might be worth the extra cost. If you're comfortable handling it yourself with guidance, FreeTaxUSA's option should be sufficient.

As a tax professional who's helped clients through numerous audits, I'd recommend focusing less on which company's audit defense is "better" and more on understanding your actual risk level first. For a first-time filer with just a W-2 and standard deduction, your audit risk is extremely low (under 0.5%). The IRS typically focuses their limited audit resources on returns with higher income levels, complex deductions, or specific red flags like large charitable donations relative to income. That said, if you decide audit defense is worth it for peace of mind, here's what I tell my clients: FreeTaxUSA's Audit Assist is great value if you're comfortable being coached through the process. TurboTax MAX is worth the premium if you want someone else to handle all IRS communication completely. One thing many people don't realize is that most "audits" are actually correspondence audits - just letters asking you to mail in documentation to support specific items on your return. These are usually straightforward to handle even without professional help. My honest advice for your situation: save the money on audit defense and instead put that cash toward building an emergency fund. With a simple return, you're very unlikely to need it, and if you do get audited, you can always hire help at that point.