I've dealt with a few of these LTR 324c notices over the years through my tax practice, and I want to reassure you that this is one of the most routine IRS correspondences you can receive. It's definitely not an audit or indication of wrongdoing. The advice everyone has given here is excellent - your PayPal records and client emails will absolutely satisfy their documentation requirements. One small addition I'd make: when you create your response packet, consider adding a brief statement about your record-keeping practices. Something simple like "All income from freelance work was tracked using PayPal and reported accurately on my return" shows the IRS that you maintain organized records. Also, since you mentioned filing through TurboTax, you might want to include a copy of the relevant tax form pages showing where you reported this income (likely Schedule C or Schedule C-EZ). This helps the reviewer quickly see exactly what they're verifying against your supporting documentation. The timeline everyone mentioned (6-8 weeks) is pretty standard in my experience. Once you mail your response with certified mail, try to put it out of your mind. The IRS correspondence system moves slowly but surely, and you've clearly got everything they need to verify your reported income. You're handling this exactly the right way by gathering proper documentation and responding promptly. Your $6,700 refund should come through without any adjustments once they match up your records!

I completely understand that sinking feeling when you first open an IRS letter! I went through the exact same thing with a LTR 324c about 9 months ago for freelance income that wasn't matching their system. Everyone here has given you fantastic advice - your PayPal records and client emails are exactly what the IRS needs to verify your $6,700 in side gig income. I just wanted to add a couple things that helped me feel more confident during the process: When you're putting together your response packet, consider organizing it like you're telling a story. Start with your cover letter explaining the situation, then your summary sheet showing all payments totaling $6,700, followed by the actual documentation in chronological order. I found this narrative approach made everything feel more cohesive. Also, don't be afraid to be slightly over-thorough rather than under-thorough. I included everything I could think of - PayPal exports, bank deposit records, client emails, even screenshots of my original tax filing showing where I reported the income. Better to give them more information than they need than to have them come back asking for additional documentation. One last thing - I set a phone reminder for about 6 weeks after mailing my response to check the "Where's My Refund" tool. Having that date in my calendar helped me not obsess over checking it every day! You've got all the right documentation and a clear path forward. This will be resolved soon and you'll have your car repair money. Hang in there!

Has anyone actually calculated what the tax impact would be if you just filed with the W2 as-is? Like if they don't correct it in time and you have to file by the deadline? I'm in a similar situation but with healthcare FSA mixed with dependent care.

I went through this exact same issue two years ago! My employer also combined my dependent care FSA ($5k) with my transit benefits ($300) in Box 10, making it look like I exceeded the dependent care limit. Here's what I learned: definitely get the corrected W2 before filing. The IRS computers will automatically flag any Box 10 amount over $5k for dependent care, which could trigger correspondence or an audit later. Even though it's "just" $300, it's not worth the headache. When you contact HR again, be specific about what needs to be corrected. Ask them to issue a W-2c that shows only your actual dependent care FSA contribution ($5k) in Box 10, and make sure your transit benefit is properly reflected as a reduction in your Box 1 wages instead. Most payroll departments can turn around a W-2c in 1-2 weeks once they understand what needs to be fixed. Don't feel bad about pushing for this - it's their error and you have every right to accurate tax documents!

One thing nobody's mentioned - watch out for when you sell the house! If you've been claiming depreciation on the business portion of your home (which you should with the regular method), you'll have to recapture that depreciation when you sell. Also, the business portion won't be eligible for the capital gains exclusion ($500k for married filing jointly). That's something to consider when deciding between the regular and simplified methods. The simplified method doesn't claim depreciation, so you avoid these complications when selling.

Great question! I actually went through this exact scenario when I bought my home in 2023. Your understanding is correct - you'll split the mortgage interest proportionally between business and personal use. Since your spouse will use 15% of the home exclusively for business, that 15% of the mortgage interest becomes a business deduction on Schedule C. The remaining 85% can potentially be claimed as an itemized deduction on Schedule A, but remember it's subject to the $750k mortgage debt limit. One important consideration for California: our high property values mean you might hit that $750k cap quickly. With a $1.2M mortgage, only the interest on the first $750k of debt qualifies for the personal mortgage interest deduction. So you'd calculate 15% of total mortgage interest for the business deduction, then take 85% of the interest on just the first $750k for Schedule A (assuming you itemize). Also, don't forget about California's more restrictive mortgage interest deduction limits for state taxes - we cap it at interest on $1M of acquisition debt for state purposes, which is different from the federal $750k limit. Make sure you have solid documentation showing the exclusive business use of that 15% of your home. The IRS scrutinizes home office deductions closely, especially on higher-value properties.

Just wanted to add another perspective on documentation - I went through a similar situation last year and found that maintaining a simple spreadsheet with dates worked really well for tracking custody. I included columns for pickup/dropoff times, who had the kids each night, and any deviations from our normal schedule. What really helped during my IRS review was that I also kept copies of things like: - School pickup/dropoff records (many schools track this) - Medical appointment records showing which parent took kids - Activity registrations and who transported them - Even grocery receipts showing kid-related purchases on specific dates The key thing I learned is that the IRS wants to see a pattern of actual physical custody, not just what's written in your divorce agreement. Since you mentioned having the kids "slightly more than 50%" of nights, make sure you can prove that specific percentage with real dates and documentation. Also, don't forget that overnights count more than just daytime hours - the IRS specifically looks at where the child slept, not just spent time during the day. So even if your ex picks up the kids after school but they sleep at your house, that night counts toward your custody percentage.

Great question about Head of Household status with split custody! I went through this exact situation after my divorce two years ago. The key thing to understand is that Head of Household eligibility and dependency exemptions are actually two separate tests under IRS rules. For HoH status, what matters is physical custody - where your children actually sleep for more than half the nights in the year. The fact that you're splitting the dependency exemptions (one child each) doesn't disqualify you from HoH as long as at least one qualifying child lives with you more than 50% of the time. Since you mentioned having the kids "slightly more than 50% of the nights," you should qualify for Head of Household status. Just make sure to document this carefully - count the actual overnights, not just what your separation agreement says. I kept a simple calendar marking which nights each child was at my house, and it really helped when I was preparing my taxes. One thing to double-check: make sure your divorce is finalized by December 31st of the tax year you're filing for, since you need to be "considered unmarried" to qualify for HoH status. It sounds like your February 2023 finalization should cover you for the 2023 tax year. The tax savings from HoH versus Single filing status can be significant, so it's definitely worth getting this right!

I went through this exact same situation with Goodwill last year and wanted to share what ultimately worked for me! After reading through all these helpful responses, I think the most important thing is to start with the basics - updating your address with their regional payroll office. What many people don't realize is that Goodwill operates through regional headquarters, and each region handles payroll differently. Your local store won't be able to help with W2 issues for former employees. When I called my regional office (found it by googling "Goodwill Industries [my city] regional headquarters"), they were incredibly helpful. Here's what made the difference for me: I had moved after leaving my job and never updated my address with them. They had been mailing my W2 to my old apartment! Once I provided my current address over the phone, they immediately emailed me a digital copy and mailed a physical one to my new address. One thing I'd add to all the great advice already given - if you're having trouble finding the right regional office number, try calling the main Goodwill customer service line and ask them to transfer you to payroll for former employee tax documents. They'll know exactly which department handles W2 requests. Also, don't forget that you can request a filing extension (Form 4868) if you need more time to sort this out. It gives you until October 15th to file, which takes a lot of pressure off while you're waiting for your W2 to arrive. The extension is automatic - you don't need to provide any justification. You'll get this sorted out! This is such a common situation and there are always solutions available.

I just wanted to jump in here as someone who went through this exact situation with Goodwill last tax season! Reading through all these responses brings back memories of how stressed I was, but I'm happy to report there's definitely a solution. The key thing that worked for me was calling their regional payroll office directly. Don't bother with your local store - they literally cannot access W2 information for former employees. I found my regional office by googling "Goodwill Industries of [my area] headquarters" and calling their main number. When I explained I was a former employee needing my W2, they transferred me to payroll immediately. Turns out they had been mailing it to my old address (I moved in November after leaving in September). They were able to email me a PDF copy that same day and sent a corrected one to my new address. Here's what I had ready when I called: - My full name and SSN - Exact employment dates - Current mailing address - Which store location I worked at The whole thing was resolved in about 15 minutes once I reached the right department. They deal with this all the time, especially after the holidays when lots of people have moved. Also, definitely keep your last paystub if you have it! It has all your year-to-date earnings and withholding info, which is exactly what appears on your W2. That's your backup plan if anything goes wrong. Don't stress too much - this is super common and totally fixable. You've got plenty of time to sort it out before filing season really gets busy!