Great question! This confusion about Box 12 codes trips up so many people every year. Just to reinforce what others have said with a slightly different angle: Think of your W-2 as telling a complete story about your year. Box 1 (wages) is already the "final answer" after all deductions and contributions have been applied. The Box 12 codes are just showing you the details of how that final number was calculated. So Code AA (Roth 401k) = "Hey, this amount was included in your taxable wages because you chose to pay taxes now instead of later" And Code DD (health insurance) = "Here's what your employer spent on your health coverage - just FYI, no tax implications" For troubleshooting your refund calculation differences, try this: ignore all the Box 12 codes completely and just use Box 1 for your wages. If your calculations still don't match between paper and software, the issue is probably somewhere else entirely (maybe different treatment of standard deduction, tax tables, or other income sources). The fact that TaxAct and your paper calculations differ suggests you might be double-counting or missing something unrelated to these retirement codes.

Adding to all the great advice here - I just wanted to share my experience as someone who made this exact mistake a few years ago. I was manually subtracting my Code AA amount from Box 1 wages because I thought "retirement contributions should reduce taxable income," not realizing that Roth contributions work the opposite way. The IRS sent me a lovely letter explaining that I had under-reported my income and owed additional taxes plus penalties. That's when I learned that Code AA contributions are already properly included in Box 1 wages - no adjustments needed! For anyone still feeling uncertain about these codes, here's a simple rule of thumb: if you're not a tax professional and the IRS instructions don't specifically tell you to enter a Box 12 code somewhere on your return, then you probably don't need to do anything with it. The codes are mostly there for informational purposes and to help employers/the IRS track certain types of benefits. Your Box 1 wages are already the "tax-ready" number after all the proper adjustments have been made by your employer's payroll system.

I've been through this exact situation with my spouse and the PTC allocation nightmare. What really helped us was understanding that the dramatic swings you're seeing are due to "cliff effects" in the credit calculation. At your income level ($43,200), you're right around where small changes in allocation percentages can trigger big differences in how the credit formula works. The 1% allocation is giving you most of the credit benefit while taking almost none of the advance payment responsibility - but this creates an unfair burden on your stepdad. Here's what I'd recommend: First, sit down with your stepdad and run scenarios in both of your tax software to see the combined impact. The goal should be finding an allocation that's fair to both of you, not just maximizing one person's refund. Second, consider who actually used the coverage and who paid the premiums. If your stepdad paid all the non-subsidized portions and you were just added to his plan, maybe something like 10-20% allocation to you would be more reasonable than either 1% or 50%. Third, keep documentation of how you decided on the allocation - receipts, notes about who paid what, etc. The IRS allows flexibility but expects the allocation to make sense for your actual situation. Don't just pick 1% because it gives you the biggest refund - that could create problems for your stepdad and might not hold up if questioned. Work together to find something fair for both of you.

The Premium Tax Credit allocation can definitely be overwhelming, but you're asking all the right questions! The wild swings you're seeing in your refund amounts are actually normal - they happen because the PTC calculation involves complex income thresholds and subsidy formulas. What's happening is this: at 1% allocation, you're taking responsibility for only about $135 of the $13,500 in advance payments ($13,500 x 0.01), but you're still getting credit calculated based on your income of $43,200. At 8%, you're responsible for about $1,080 in advance payments, which might exceed what you qualify for. Here's my advice: Don't choose your allocation percentage based solely on which gives you the biggest refund. The IRS expects the allocation to reasonably reflect who was actually covered and who benefited from the insurance. Since this was your stepdad's plan and he likely paid the non-subsidized premiums, a smaller allocation to you (maybe 10-25%) would probably be more appropriate than 50/50. Most importantly, coordinate with your stepdad before filing! Run the numbers in both of your tax software to see the combined impact. That $8,900 refund you get at 1% allocation might create an equally large tax bill for him. Keep documentation of your decision-making process and consider factors like who paid premiums, who used the coverage, and what feels fair given your respective situations. The goal should be an allocation that makes sense for your family, not just tax optimization.

Important side note: If the life insurance policy was transferred to you for valuable consideration (meaning you bought it from someone else), then the tax-free treatment might not fully apply. This is called the "transfer for value rule." Doesn't sound like that's your situation since you were just named as a beneficiary, but thought I'd mention it for completeness. Also, if the insurance company held the money for a while before paying you and you received interest on top of the death benefit, that interest portion IS taxable, even though the death benefit itself isn't.

Just wanted to add another perspective here - I work at a financial planning firm and we see this confusion with 1099-R forms from life insurance payouts pretty frequently. The issue is that the IRS uses the same form (1099-R) for both retirement plan distributions AND life insurance death benefits, which creates a lot of confusion. Here's a quick checklist for anyone dealing with this: 1. Box 2a should show $0.00 or be blank for a non-taxable death benefit 2. Box 7 will have a distribution code - for life insurance it's often code 4 or 7 3. In TurboTax, when entering the 1099-R, you MUST specify it's a "death benefit from life insurance" not just a regular distribution Dylan, sounds like you got it sorted out based on your follow-up comment, but for others reading this thread - don't panic when you see that big number initially show up as taxable income in TurboTax. The software is just being cautious until you provide all the details about what type of distribution it is. And yes, you absolutely should still report it on your return even though it's not taxable - the IRS computer systems will be looking for it since they got a copy of your 1099-R.

I just went through this same headache with my CP30 notice a few weeks ago! After trying the IRS website for hours, I ended up calling the practitioner priority line (I'm an enrolled agent) and the IRS rep confirmed the process that others have mentioned here. The key is going to irs.gov/payments, selecting "Pay Your Tax Bill," then "Direct Pay from Your Bank Account" to avoid fees. When you get to the payment details, select "Balance Due" and "Individual" as taxpayer type. Make sure the tax year matches your CP30 notice. For the "Apply Payment To" section, select "Estimated Tax" since CP30s are specifically for missed quarterly payments. Most importantly, put your full CP30 notice number in the comments field - this is crucial for proper application. One thing I learned that might help others: if you're paying close to the deadline, the IRS considers the payment submitted on the date you complete the transaction online, not when it processes from your bank account. So even if it takes 2-3 days to clear, you're covered as long as you submit before the due date on your notice. Keep your confirmation number safe! The IRS rep told me that's your proof of timely payment if there are any issues later.

I've been dealing with IRS notices for years and wanted to share a few additional tips that might help. First, if you're having trouble finding your CP30 notice number that others mentioned, it's typically in the upper right corner and will say something like "Notice CP30" followed by a date code. One thing I always do is take a screenshot or photo of the confirmation page after submitting payment - don't just rely on the confirmation number. The visual proof can be helpful if there are any disputes later. Also, if you're worried about timing and your due date is really tight, consider making the payment and then calling the IRS a few days later to confirm it was applied correctly. Yes, the hold times are brutal, but it's worth the peace of mind to verify everything went through properly, especially if you're close to additional penalty deadlines. The Direct Pay option really is the way to go - no fees and it's considered submitted immediately even though it takes a few days to process from your bank account.

Has anyone tried just asking your employer for a simple letter stating how much you earned? I did this once when my employer "forgot" to send a 1099. I still reported the income correctly, attached the letter as documentation, and never had any issues. Sometimes a simple solution works best!

This is exactly why I keep meticulous records of all my side work - bank deposits, payment app screenshots, even text messages about payment amounts. Your employer is definitely breaking the law by not issuing a 1099 for $2,700, but that doesn't get you off the hook for reporting it. I'd suggest gathering whatever documentation you do have (bank statements showing deposits, any written communication about payments, etc.) and reporting the income on Schedule C. The IRS actually prefers when taxpayers are proactive about reporting income, even without official forms. You might also want to file Form SS-8 to get an official determination of whether you were actually an employee (in which case they should have been withholding taxes) or truly an independent contractor. Don't let your anxiety paralyze you - unreported income is way riskier than reporting income without perfect documentation. The IRS has gotten much better at tracking electronic payments in recent years, so there's a good chance they already know about this income anyway.