Check if you qualify as a statutory employee - could be middle ground solution. Some workers can be treated as 1099 contractors but don't have to pay full self employment tax. Worth looking into.

I went through almost the exact same situation a couple years ago with a temp agency that should have classified me as W-2 but sent a 1099-NEC instead. Here's what I learned: The key test is who had control over your work. Since your boss told you when to work, likely provided tools/equipment, and you worked exclusively for them during that period, you were definitely misclassified as an independent contractor. I'd recommend starting with a conversation with your former employer before filing any IRS forms. Explain that you believe you were misclassified and ask if they'd be willing to issue a corrected W-2. Many small business owners genuinely don't understand the classification rules and might fix it voluntarily to avoid potential IRS scrutiny. If they refuse, then go the Form SS-8 and Form 8919 route that others mentioned. The SS-8 gets you an official determination, and the 8919 lets you pay only the employee portion of Social Security/Medicare taxes instead of the full self-employment tax. One month of work probably isn't a huge tax difference, but it's the principle that matters. Don't let employers shift their tax burden onto workers - that's exactly why these classification rules exist.

One thing nobody mentioned yet - if you made only $2400, look into the Qualified Business Income deduction (Form 8995). It might let you deduct up to 20% of your business income! Definitely worth checking out for small sole proprietors. Also, if you worked from home for your business, don't forget about the home office deduction. You can either do the simplified method ($5 per square foot up to 300 sq ft) or actual expenses method. Just make sure the space is used regularly and exclusively for business.

Great question about the QBI deduction! The phase-out thresholds are pretty high - for 2024, the QBI deduction starts phasing out at $191,950 for single filers and $383,900 for married filing jointly. So with your $2,400 in business income, you're well below that threshold and should be able to claim the full 20% deduction. Just make sure your business qualifies - most sole proprietorships do, but there are some exclusions for certain service businesses at higher income levels (which again, you don't need to worry about at your income level). Form 8995 is pretty straightforward for simple cases like yours. This deduction alone could save you around $480 in taxable income, which is a nice chunk of change when you're just starting out!

My sister works for the IRS (not in collections) and she always says most OICs fail because people don't give COMPLETE financial information. They leave stuff out thinking the IRS wont notice. But they have ways to verify your bank accounts, property, etc. If they catch you hiding things, your offer will be rejected immediately. Also make sure you keep filing and paying current taxes while your OIC is pending! That's another common reason they get rejected.

I went through the OIC process about 3 years ago with $89k in tax debt and successfully settled for $15k. The key things that helped me were: 1. Being completely transparent about my financial situation - I included EVERYTHING, even small bank accounts with minimal balances 2. Working with the Taxpayer Advocate Service (free!) when I got stuck on paperwork 3. Including detailed documentation of my expenses and why I couldn't pay the full amount 4. Being patient - the whole process took 11 months but was worth it One thing I wish I'd known earlier: if you qualify for the low-income certification, you don't have to pay the application fee or the initial payment with your offer. This saved me $205 plus the 20% down payment I would have had to include. Also, during the review process, make sure you respond to ANY requests for additional information immediately. They give you specific deadlines and missing them will kill your application. Given your situation with no assets and limited income, you actually have a decent shot at getting approved. The IRS knows they can't get blood from a stone. Just make sure your offer reflects what you can realistically pay based on their calculation methods.

These codes got me stressing so hard I started dreaming in numbers 🤣 The IRS needs to make this stuff easier to understand for regular folks istg

Been dealing with these codes for months and finally figured it out! Code 290 = they're adding tax/adjustments to your account (bad news usually), Code 291 = they're reducing/removing previous assessments (good news!). If you see both, it means they made an adjustment then partially or fully reversed it. The key is looking at the dates and amounts to see the timeline. Pro tip: the cycle dates next to these codes tell you when each action happened, so you can follow the story of what the IRS did to your return 📊

This is a great point about framing the negotiation properly. I'd add that your friend should also consider the timing element here - if the business continues operating with losses, that sweat equity partner will keep receiving negative K-1s that could complicate their personal tax situation. Another angle to consider: since this partner never contributed cash, they likely don't have sufficient "basis" to deduct all the losses that have been allocated to them anyway. This means they may have suspended losses on their personal return that they can't currently use. A clean exit might actually be more valuable to them than continuing to accumulate unusable tax losses. Your friend might want to get a tax professional to calculate what the partner's actual tax basis is versus their capital account balance. These are often very different numbers, and the basis calculation might show that the partner's economic position isn't as strong as the capital account balance suggests. The key is documenting everything properly so the buyout is structured in a way that's defensible to the IRS and fair to all parties involved.

I've dealt with this exact situation multiple times, and the suspended loss angle is absolutely critical leverage that most people miss. In one case, we had a sweat equity partner with a $85k negative capital account who was demanding full payment. When we calculated their actual tax basis (which was essentially zero since they never contributed cash), we discovered they had over $70k in suspended losses sitting on their personal return that they couldn't use. We presented this analysis showing that continued partnership ownership would likely generate more unusable losses, while a buyout - even at a significantly reduced amount - would allow them to trigger some of those suspended losses as a capital loss on the sale of their partnership interest. The partner ended up accepting a $15k settlement because they realized the alternative was continuing to receive K-1s with losses they couldn't deduct, plus the complexity of tracking suspended losses for potentially years. The key is getting a tax professional to run the numbers on both the capital account AND the tax basis/suspended loss calculation. Often the partner's actual economic position is much weaker than the capital account suggests, especially when they never contributed actual capital but have been allocated years of losses. This analysis completely changes the negotiation dynamic and often leads to much more reasonable settlement amounts.