Thank you all for this incredibly helpful discussion! As the original poster, I really appreciate everyone taking the time to explain the Zelle situation so thoroughly. It's crystal clear now that even though Zelle doesn't issue 1099-K forms, I absolutely need to report that $8,500 from my graphic design work. I was honestly hoping there might be some wiggle room, but after reading about Yuki's cousin's audit experience, I'm definitely not taking any chances. I think I'll check out that taxr.ai tool Giovanni mentioned to help organize my records, and maybe use Claimyr if I need to speak with an IRS agent directly about anything else. Better to be over-prepared than face penalties and interest later. You've all saved me from making a potentially very expensive mistake. Time to get my Schedule C properly filled out!

As a tax professional, I want to emphasize something that's been touched on but bears repeating: the burden of proof is always on the taxpayer. While Zelle doesn't issue 1099-K forms, you should be keeping meticulous records of all your business transactions regardless of the payment method. I recommend creating a simple spreadsheet to track each Zelle payment you receive for your graphic design work - date, amount, client name, and description of services. Take screenshots of the Zelle transactions as backup documentation. If you're ever audited, having organized records will make the process much smoother and demonstrate good faith compliance. Also, don't forget that as a self-employed individual earning over $400, you'll likely need to pay self-employment taxes on that $8,500 in addition to regular income tax. Make sure to set aside approximately 25-30% of your freelance income throughout the year for taxes to avoid any surprises come filing time.

lmaooo irs really said log off and touch grass 💅

Been there! The lockout is super annoying but it's usually because the system is being extra sensitive. Make sure you're using the EXACT refund amount from line 35a of your 1040 (not what you think you'll get). Also try using a different browser or clearing your cache - sometimes that helps with the login issues.

Anyone know if you can e-file when claiming a Section 1341 credit? Last year I had a similar situation and TurboTax kept giving me an error when I tried to e-file with the claim of right credit.

I went through something very similar with duplicate EE bonds last year! One thing to watch out for - make sure you have all the documentation from Treasury showing the erroneous issuance before you file. The IRS may want to see proof that the second bond was issued in error and that you're required to repay the interest. Also, since you're dealing with $4,100, you'll definitely want to calculate both the deduction and credit methods when you file your 2025 return. In my case, the credit ended up saving me about $200 more than the deduction would have, but it depends on your tax brackets in both years. Keep all your correspondence with Treasury - you'll need it to support your Section 1341 claim. The IRS is pretty strict about having proper documentation for claim of right situations.

Just want to add another perspective - if you're not comfortable with how CashApp Tax is handling your retirement distributions, it might be worth paying for a more robust program just for this year. I've used both TurboTax and H&R Block, and they walk you through retirement distributions much more thoroughly with specific questions that help ensure accuracy. Even if it costs a bit more, getting it right is worth it. Retirement distribution mistakes can be expensive if the IRS thinks you took taxable distributions that you didn't report properly.

Mason, I went through something very similar last year with multiple Roth IRA distributions and CashApp Tax. Here's what I learned that might help: The blank Box 2a on your first two 1099-Rs is actually good news - it means those distributions are likely just your original contributions coming back to you tax-free. Since you mentioned opening these accounts "a few years back," you're probably well within your contribution amounts. For the third one with $390 in Box 2a, that's showing taxable earnings. The code T confirms it's an early distribution that might be subject to penalties. One thing to watch out for with CashApp Tax - when it asks for your "basis" in the Roth IRA, that's the total of all contributions you've made over the years (not including any growth). You'll need this number to complete Form 8606 correctly. If you're feeling overwhelmed, don't be afraid to switch to a more comprehensive tax program for this year. Sometimes the peace of mind is worth the extra cost, especially when dealing with retirement accounts where mistakes can be expensive. Keep all your 1099-R forms and any records showing when you made contributions to these accounts - you'll need them if the IRS ever has questions.

Heads up from someone who did this wrong! My wife and I started an S-Corp for our graphic design biz in 2018 and only paid ourselves tiny salaries ($15k each) while taking hefty distributions the first two years. Got audited in 2021 and the IRS reclassified most of our distributions as salary. Had to pay back employment taxes plus penalties. Ouch! Now we use the 60/40 rule - roughly 60% salary to 40% distributions, and document everything like crazy. Our accountant says there's no magic formula but reasonable should mean reasonable for your industry and workload.

As a newer S-Corp owner myself, I've found that documentation is absolutely key. We started conservative with salaries too, but what helped us was creating a simple spreadsheet tracking our monthly revenue, expenses, and profit margins. Every time we adjust our salaries, we document the business justification. One thing that's been helpful is looking at job postings for similar roles in our area to establish benchmarks. For tattoo shops specifically, you might look at what experienced tattoo artists or shop managers earn locally. Since you're doing both artistic work AND business management, your reasonable compensation should reflect both roles. The 30-40% of profits rule mentioned earlier is solid, but don't stress too much about hitting exact ratios every month when you're still growing. The IRS understands that new businesses have variable income. Just make sure whatever you're paying yourselves is defensible based on what you'd pay someone else to do your jobs, and keep good records of how you determined those amounts.