Has anyone dealt with this for state returns specifically? My federal return was accepted but my state (California) was rejected, and I owe on both. Should I still pay the state amount even though the return was rejected?

Just want to add some additional peace of mind for anyone in this situation - the IRS has actually improved their e-file rejection process over the past few years. Most rejections happen within 24-48 hours of submission, so you'll know pretty quickly if there's an issue. If your return does get rejected, don't forget to check your email AND your tax software account for the rejection notice. Sometimes people miss the notification and think their return is still processing when it was actually rejected days ago. Also, keep records of your payment confirmation numbers when you pay online, even if your return is rejected. This will help you track that the payment was made on time if you ever need to dispute penalties later. The IRS and state systems are pretty good about matching payments to returns once the corrected filing is accepted.

I'm going through this exact same thing right now! Just started my first "real" job with benefits and was completely shocked when I saw my take-home pay. Like you, I was expecting way more money in my pocket and couldn't figure out what all those weird abbreviations meant. What helped me was looking at it this way: MED/EE and OASDI/EE are basically your contributions to programs that will benefit you later (Medicare when you're older and Social Security for retirement/disability). Your employer is also contributing the same amounts that don't show up on your paystub, so you're actually getting more value than what you see deducted. The 27% does seem high, but check if that includes other stuff like health insurance, 401k contributions, or other benefits. When I looked closer at mine, I realized a bunch of that "tax" percentage was actually going to things like dental insurance I forgot I signed up for during orientation. One thing I wish someone had told me earlier - you can submit a new W-4 form anytime to adjust your federal withholding if it turns out they're taking too much. Better to get that money in your paycheck each month than wait for a big refund next April! Welcome to the real world - apparently we all go through this paycheck shock! At least we're in Texas so we don't have to deal with state income tax on top of everything else.

I totally get the confusion - those paycheck abbreviations are like a secret code nobody teaches you! I just went through this same thing a few months ago and felt completely lost looking at all those deductions. Here's what helped me understand it: think of your paycheck as having three main buckets. First, there's federal income tax (the Fed Withholding part) which varies based on how you filled out your W-4. Second, there's FICA taxes - that's your MED/EE (Medicare) and OASDI/EE (Social Security) which are fixed percentages that everyone pays. Third, there might be other stuff like health insurance, 401k, etc. The 27% total does sound high, but it might include non-tax deductions too. I'd definitely recommend double-checking if you have automatic 401k contributions or insurance premiums being deducted - those aren't taxes but they still shrink your take-home pay. Since you're in Texas, you're already saving money by not having state income tax! And remember, you can always adjust your W-4 if too much federal tax is being withheld. The IRS withholding calculator mentioned in other comments is really helpful for figuring out the right amount. Don't feel bad about being shocked - literally everyone goes through this reality check with their first real paycheck. You'll get used to budgeting around your actual take-home amount pretty quickly!

This has been an incredibly informative thread! I'm dealing with a similar bonus repayment situation and wanted to add one more consideration that I learned about recently. If you're making repayments over multiple years like the original poster, be aware that the tax benefit you receive might vary significantly between years depending on your other itemized deductions. Since the IRC 1341 repayment is claimed as an itemized deduction (when using the deduction method), you need to exceed the standard deduction threshold to get any benefit. For 2024, the standard deduction is $14,600 for single filers. So if your only itemized deduction is the $33,750 bonus repayment, you'll get the full benefit. But in years where you have fewer itemized deductions, you might hit situations where the credit method becomes more attractive even if the raw numbers suggest otherwise. I'd also recommend keeping a spreadsheet tracking all your repayment-related expenses (certified mail costs for sending payments, any bank fees for wire transfers, etc.) as these might be deductible as well, though they're usually small amounts. The documentation advice from everyone here is spot-on. I created a dedicated folder with copies of everything - original W-2 showing the bonus, employment contract sections about repayment obligations, payment confirmations, employer letters, etc. Better to have too much documentation than not enough if the IRS ever has questions.

This thread has been incredibly helpful! I'm actually a tax professional who specializes in employment-related tax issues, and I wanted to add a few technical clarifications that might help you and others in similar situations. First, regarding the timing of deductions - you're absolutely correct that you can claim the IRC 1341 deduction in each year you make the repayment. Don't wait until you've repaid the full amount. Each payment is treated as a separate deductible event. One important detail that hasn't been mentioned: make sure your repayment is actually reducing the pre-tax bonus amount, not just paying back the net amount you received. Since you mentioned the full $67,500 pre-tax amount, it sounds like you're on the right track, but I've seen cases where people only repaid the after-tax amount they received, which creates complications. Also, when comparing the deduction vs. credit methods, remember that the credit calculation is based on the tax you actually paid on that income in the original year, not just the marginal tax rate. This includes considering how the bonus income affected other aspects of your return (like phase-outs of deductions or credits). Your documentation plan is excellent. I'd also suggest requesting a letter from your employer that specifically states this is a "repayment of previously taxed compensation under claim of right" - this language helps establish the IRC 1341 context clearly. One last tip: if your 2024/2025 AGI ends up being significantly lower than 2023, definitely run the credit calculation. The tax savings can be substantial in those cases.

As someone who's been through this exact confusion, I want to emphasize something that really helped me understand Line 16 better. The key is thinking of it as your "total tax liability" before any credits or payments are applied. For your situation with both W-2 and freelance income, here's a simple way to think about it: Line 16 = Regular Income Tax + Self-Employment Tax + Any Other Special Taxes The regular income tax comes from your total taxable income (which includes both your W-2 wages AND your freelance profit from Schedule C). You look this up in the tax tables or calculate it with the worksheet. The self-employment tax is calculated separately on Schedule SE based on your freelance earnings - this covers your Social Security and Medicare taxes that weren't withheld from your freelance income. One thing that confused me initially was thinking these were separate buckets, but they all get added together on Line 16. Then later, on Lines 17-20, you subtract any tax credits you qualify for. Finally, you compare that net amount to what you've already paid through withholding and estimated payments to see if you owe more or get a refund. Take it step by step and don't rush - it's better to be accurate than fast!

Just wanted to jump in here as someone who made every possible mistake with Line 16 when I first started filing my own taxes! The confusion is totally understandable, especially with mixed income sources. One thing that really helped me was creating a simple checklist for Line 16: ✓ Calculate regular income tax from Line 15 using tax tables/worksheet ✓ Add self-employment tax from Schedule SE (if you have freelance income) ✓ Add any other taxes (like early withdrawal penalties) ✓ Double-check all your math The biggest "aha moment" for me was realizing that Line 16 is essentially answering the question: "How much do I owe the government in total before considering what I've already paid or any credits I qualify for?" Since you mentioned this is your first time doing taxes without software, I'd also suggest keeping good notes as you work through each step. Write down where each number comes from - it'll save you so much time if you need to double-check anything or if you get a letter from the IRS asking for clarification. You're asking the right questions and being careful about getting it right, which puts you way ahead of where I was my first time! Don't be too hard on yourself - the tax code is genuinely complicated, and you're doing great by taking the time to understand it properly.

Just wanted to add something that might help with future planning - since you mentioned you're 27 and have time to rebuild. Consider setting up automatic contributions to your new Roth IRA to take advantage of dollar-cost averaging as you recover from this setback. Also, if you find yourself in another financial emergency, look into other options before touching retirement accounts again. Some alternatives include: personal loans (which might have lower effective costs than the 10% penalty plus taxes), borrowing from a 401k if your new employer's plan allows it (you pay interest to yourself), or even a 0% APR credit card for temporary relief. The compound interest loss you mentioned is real - that $12,000 could have grown to around $150,000+ by retirement age. But you're young enough that consistent contributions going forward can still put you in great shape for retirement. Don't let this one mistake derail your long-term financial planning!

One thing I haven't seen mentioned yet is the timing of when you'll actually receive your 1099-R form. Since your withdrawal happened in February, you should definitely receive the form by January 31st of next year, but keep in mind that some financial institutions are slower than others with their reporting. I'd recommend checking with your 401k provider in early January to make sure they have your current address, especially since you mentioned you were switching jobs around the time of the withdrawal. The last thing you want is for the 1099-R to get lost in the mail and delay your tax filing. Also, just to echo what others have said about the tax impact - with a $12,000 withdrawal plus your $20,000 Roth conversion, you're looking at $32,000 in additional taxable income for the year. Depending on your regular salary, this could potentially bump you into a higher tax bracket, so you might want to consider making estimated tax payments if you haven't already to avoid any underpayment penalties when you file. It sounds like you learned from this experience, which is the most important thing. We all make financial decisions we later regret, but you handled a tough situation and now you know what to avoid in the future.