Does anyone know if you can claim the American Opportunity Tax Credit for previous years when filing late? I think that might help reduce what OP owes since it's worth up to $2,500 per year if you qualify.

I work at a tax preparation office and want to add a few important points that might help you feel less overwhelmed about this situation. First, the IRS has programs specifically for situations like yours. You may qualify for an "Offer in Compromise" if your financial situation makes it difficult to pay the full amount owed. As a college student with limited income and assets, this could significantly reduce what you owe. Also, don't forget about the Lifetime Learning Credit in addition to the American Opportunity Tax Credit mentioned earlier. If you've exhausted your 4 years of AOTC eligibility or don't qualify for it in certain years, the LLC can provide up to $2,000 per year in tax credits for qualified education expenses. One strategy that might help: since you mentioned having only $4,000 available, you could file all your returns first to see exactly what you owe after credits and deductions. The actual amount might be much lower than you think, especially with education credits. Then you can set up an installment agreement with the IRS for as little as $25-50 per month while you're still in school. The key is to file those returns as soon as possible to stop the failure-to-file penalties from continuing to accrue. The IRS is generally very understanding with students who made honest mistakes about scholarship taxation rules.

Does your daughter qualify as your dependent? The tuition and fees deduction expired after 2020, but if she qualifies as your dependent, you might be eligible for the Lifetime Learning Credit which covers graduate education.

Based on what you've shared, since your daughter earned $42K this year, she likely doesn't qualify as your dependent due to the income limit (around $4,400 for 2022). This means you can't claim education credits on your return. However, there's good news! Even though you paid the tuition directly, your daughter can still claim the Lifetime Learning Credit on her own tax return. The IRS treats your payment as a gift to her, and then she's considered to have paid the tuition herself for tax purposes. The Lifetime Learning Credit is specifically available for graduate students and is worth 20% of qualified education expenses up to $10,000 (so a maximum credit of $2,000). Since you paid $15,000 for her fall semester, she could potentially claim the full $2,000 credit on her return. Make sure she gets a Form 1098-T from the university showing the tuition payments. She'll need this to claim the credit. This arrangement often works out better tax-wise anyway since students are typically in lower tax brackets than their parents. You might want to coordinate with her to make sure she knows about this opportunity - many graduate students don't realize they can claim education credits even when their parents paid the tuition!

I think everyone's overcomplicating this. The purpose of tracking non-deductible expenses is pretty straightforward - it's to properly track each partner's tax basis. The IRS wants to make sure partners don't claim more losses than they have basis for. The mortgage principal thing makes sense when you think about it: principal payments aren't expenses at all. They're converting one asset (cash) to reduce a liability (loan balance). That's why they don't flow through to capital accounts the same way as true expenses. The 50% non-deductible meals absolutely should be included though. Those are true expenses that just happen to be limited for tax purposes.

I've been dealing with similar issues in my partnership and wanted to share what I learned from our CPA. The key insight that helped me was understanding that non-deductible expenses serve two purposes: they reduce each partner's outside basis AND they reduce their capital accounts for book purposes. This is why mortgage principal payments don't belong in this category - they don't reduce anyone's economic investment in the partnership since the partnership is getting value (reducing debt) in exchange for the cash payment. One thing I haven't seen mentioned is that you also need to be careful about timing. Non-deductible expenses should be allocated in the same tax year they're incurred, even if the partnership is on a different accounting method for other purposes. Also, make sure your operating agreement is clear about how these allocations work. We had to amend ours because it wasn't specific enough about whether non-deductible expenses follow the same allocation as regular expenses or if they have their own rules.

Has anyone here specifically done both a full-time W-2 job and Uber Eats? I'm in a similar situation and wondering if there's any specific tax software that makes this combination easier to file? My full-time job is simple but I'm worried about messing up the Uber part.

One thing I'd add that hasn't been mentioned is to consider setting up a separate bank account just for your Uber Eats earnings and expenses. This makes tracking everything so much easier come tax time! I opened a free business checking account and have all my delivery income deposited there, plus I pay for gas, car maintenance, and other delivery-related expenses from that account. At the end of the year, it's super easy to see exactly what I earned and what I spent. Also, don't forget you can deduct things like insulated delivery bags, phone mounts for your car, and even hand sanitizer if you bought it specifically for delivery work. These smaller expenses add up and can reduce your taxable income. Just keep all your receipts! With your current income level and the amount you're planning to work, you'll likely be in the 12% tax bracket for most of that Uber income, plus the 15.3% self-employment tax. So budgeting around 25-30% of your gross Uber earnings for taxes is smart advice.

I'd strongly recommend following Jamal's systematic approach, but with one addition - if you do need to call, try using the IRS2Go mobile app first to check your account status and see if the information you need is available there. Sometimes what looks like a complex verification request can actually be resolved by simply viewing your account transcript online. Also, make sure to note the "respond by" date on your notice - most verification letters give you 30 days, but some are shorter. If you're running close to the deadline and can't get through by phone, responding by mail with tracking is always safer than missing the deadline entirely. The IRS is generally more forgiving of proper responses sent via the "wrong" method than they are of no response at all.

One thing I haven't seen mentioned yet is timing - if you received this letter yesterday, you're actually in a good position time-wise. Most IRS verification letters give you 30 days to respond, so you have room to breathe and choose the right approach. I'd recommend starting with the simplest step: look up your specific notice number on IRS.gov/notices to see exactly what response options are available for your particular situation. This will tell you definitively whether online submission is possible for your notice type. If online isn't an option and you're worried about phone wait times, remember that mailing your response (with tracking) is still perfectly valid and often less stressful than dealing with phone systems during tax season. The key is responding completely and on time - the IRS cares much more about getting the right information by the deadline than they do about which method you use to send it.