When I was audited in 2022, I took a different approach than waiting to see if they'd hold my refund. I estimated what I might owe from the audit (added about 20% for safety) and adjusted my W-4 to have less withheld from my paychecks. This way, I wasn't giving the IRS an interest-free loan they might keep anyway. Then I set aside that money in a high-yield savings account. When the audit concluded, I had the funds ready plus had earned interest on it. Even if your audit results in zero additional tax, this approach gives you more control over your money.

I'm going through something similar right now and wanted to share what I've learned from my tax attorney. The IRS has something called an "offset" process where they can indeed hold your current year refund if there's an ongoing audit that might result in additional taxes owed. However, there are a few key factors that influence this decision: 1. **Timing matters**: If your audit is in the early stages (just requesting documents), they're less likely to hold your refund compared to audits nearing completion where deficiencies are already identified. 2. **Amount at stake**: Larger potential tax liabilities increase the likelihood of a refund hold. 3. **Your compliance history**: If you have a clean record and respond promptly to audit requests, they may be more lenient. My attorney suggested contacting the examining agent directly (their info should be on your audit notice) to ask specifically about refund processing. Also, consider filing Form 911 (Request for Taxpayer Advocate Service Assistance) if the refund hold creates financial hardship - the TAS can sometimes expedite resolution. One last tip: keep making your quarterly estimates as normal unless your audit reveals you've been significantly underpaying. Better to stay current on the current year while sorting out the past!

A practical tip from someone who sells vintage clothing: Start using inventory management software NOW before you get deeper into selling. I use a simple spreadsheet with columns for: 1. Item description 2. Date acquired 3. Original cost 4. Estimated current value 5. Storage location 6. Condition notes This makes it much easier to track your COGS and will save you massive headaches at tax time. Also, take photos of everything for insurance purposes - 3000 pairs of collectible sneakers represents a significant asset!

Great advice in this thread! I went through something similar when I transitioned from collecting vintage watches to selling them as a business. One additional consideration that hasn't been mentioned yet: make sure you're prepared for the self-employment tax implications of Schedule C income. Unlike capital gains treatment, business income from Schedule C is subject to self-employment tax (15.3%) on top of regular income tax. This can be a significant additional cost, especially if you're planning to sell $2000+ worth annually. However, the benefit is that you can deduct business expenses like storage costs, packaging materials, listing fees, even a portion of your home if you use it for storage/processing. Keep detailed records of all these expenses - they can really add up and offset some of that self-employment tax burden. Also, consider making quarterly estimated tax payments if you expect to owe more than $1000 in taxes from your sales to avoid underpayment penalties.

I wonder if this is related to the increased security measures the IRS implemented this year? Have you checked if there are any identity verification requirements you might have missed? The whole system seems more complicated this year, and I'm concerned that the disconnect between tax preparers, the IRS, and banks is creating these delays. Did TurboTax mention anything about verification codes or additional steps?

I had this exact issue with Chime last year! Here's what I learned: Chime processes tax refunds differently than regular direct deposits because they go through a different ACH network pathway. Even though your DoorDash and UberEats payments hit instantly, tax refunds often take 1-2 business days even after the IRS sends them. The good news is that if TurboTax confirmed they sent it this morning, you'll likely see it by tomorrow evening at the latest. In the meantime, you can check the IRS "Where's My Refund" tool to see if it shows as "sent" on their end too - that'll give you extra peace of mind. I know the waiting is stressful when you have bills due, but hang in there!

Just want to add one thing I learned the hard way - if you don't report this income and the family DOES decide to claim you as a childcare expense on their taxes (which they might do despite what they told you), it creates a mismatch that can trigger IRS questions. This happened to me a few years ago. The family told me they weren't reporting, then claimed childcare expenses, and I got a notice from the IRS asking about the unreported income. Not a full audit, but definitely a headache to resolve.

Based on everyone's advice here, it sounds like you definitely need to report this income. I'm in a similar boat - made about $2400 babysitting for three different families this year and was getting mixed messages about whether it counted as "real" income. What helped me was tracking down the actual IRS publication (Pub 926) about household employees. It's pretty clear that if you're providing childcare services regularly, you're either a household employee (if they control your work) or self-employed (if you control how you do the work). Either way, it's taxable income over $400. The "gift" explanation from the mom is unfortunately just wrong, even if she genuinely believes it. The IRS looks at the substance of the transaction - you provided services, you got paid. That's income, not a gift. One thing I'd add to the great advice about expenses - if you used your phone for coordinating with the family or took any training courses related to childcare, those can be business expenses too. Every legitimate deduction helps offset that self-employment tax!

Has anyone actually had the IRS question a business meal deduction because the vendor wasn't a formal business? I've been in business 5 years and have never had this come up in my annual tax filings.

I've been dealing with similar situations in my consulting business and wanted to share what I've learned through experience. The key thing everyone's touched on is absolutely correct - the IRS focuses on YOUR documentation and business purpose, not the vendor's business structure. What I'd add is to make sure you're documenting the business discussion immediately after the meal while it's fresh. I keep a simple note in my phone with: date, attendees, main topics discussed, and how it relates to business operations. This has been invaluable during my record-keeping. For your specific situation with the $67 Venmo payment, I'd definitely categorize it as "Business Meals" rather than trying to hide it elsewhere. The Venmo transaction plus your notes about brainstorming content ideas and quarterly planning clearly establish legitimate business purpose. Being honest and accurate with categorization actually protects you better than trying to obscure legitimate expenses. One last tip - consider having your friend provide you with a simple handwritten receipt that includes their name, date, items provided, and amount. It doesn't need to be formal business letterhead, but having something beyond just the Venmo confirmation can strengthen your documentation if questions ever arise.