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I'm curious about this whole issue myself cuz I just started a commission job too. Anyone here know if tax withholding for commissions is different between states? Or is it all federal rules? Like if I move from NY to Texas mid-year, would it affect how my commission is taxed?
The federal withholding rules for commissions are the same nationwide - they follow the IRS guidelines regardless of which state you're in. However, state withholding varies dramatically. Moving from NY to Texas mid-year would have a significant impact because New York has state income tax while Texas doesn't. After you move to Texas, you'd no longer have state withholding taken out, but you'd still need to file a part-year resident tax return for New York for the portion of the year you lived there. This kind of mid-year move gets complicated tax-wise, so it might be worth consulting with a tax professional who can help you with the part-year resident filing requirements.
One thing I'd add as someone who went through this exact situation - keep detailed records of your paystubs throughout the year! I wish I had done this better my first year in commission sales. When tax time comes, having all your pay stubs organized makes it much easier to verify that your W-2 is accurate and that all the withholding amounts are correct. Sometimes payroll systems can have glitches, especially with variable commission structures. Also, consider setting aside a small percentage of those big commission checks in a separate savings account. Even though you'll likely get a nice refund, it's good to have a buffer in case there are any surprises or if you want to make estimated payments next year to avoid the overwithholding cycle altogether. The peace of mind of knowing you have some tax money set aside is worth it, especially when your income swings are as dramatic as yours. Congrats on the $107k YTD - sounds like you're killing it in sales!
This is great advice! I'm pretty new to all this commission-based income stuff and hadn't even thought about keeping detailed records of my paystubs. Quick question - when you say "set aside a percentage," what percentage would you recommend? I've been putting about 15% of each big check into savings just to be safe, but I'm wondering if that's too much or too little. Also, have you found any good apps or tools for tracking all this? I'm terrible at staying organized with paperwork but I know I need to get better at it. Thanks for the congrats too - it's been a wild ride learning this sales game but I'm starting to get the hang of it!
Don't forget about the "Deluxe" trap that both companies use. The basic version advertised at a low price usually won't cover homeowner deductions or self-employment income. You'll need at least the Deluxe version for mortgage interest and the Self-Employed version for your freelance work. If you really want to save money, the IRS has a Free File program where you can use name-brand tax software for free if your AGI is under about $73k. Worth checking that out before paying for either one.
This!! I got tricked into upgrading last year. Started with the "free" version and ended up paying $120 by the end with all the required upgrades for my situation.
Based on your situation with W-2 income, freelance work, and new homeownership, I'd lean toward H&R Block for 2025. Here's why: 1. **Cost**: H&R Block's Deluxe version (which you'll need for mortgage interest) is typically $20-30 cheaper than TurboTax's equivalent. 2. **Homeowner focus**: Their mortgage interest and property tax sections are really well-designed for first-time homeowners. They walk you through points deductions, PMI, and other homeowner benefits you might not know about. 3. **Freelance handling**: For $5,800 in freelance income, both platforms handle Schedule C fine, but H&R Block won't pressure you to upgrade to their most expensive tier like TurboTax often does. Just be aware that you'll definitely need their Deluxe version (not Basic) to handle both the mortgage interest and self-employment income. Don't let them upsell you beyond Deluxe unless you have more complex investments. One tip: Both companies run early-bird discounts in January, so if you can wait a few weeks into tax season, you might save another 15-20% off the regular price.
Does anyone know if using TurboTax or H&R Block can handle this kind of situation properly? I'm in a similar boat with Illinois and Wisconsin withholding.
H&R Block's premium version handled my two-state situation last year pretty well. There's a section specifically for part-year residents where you enter the dates you lived in each state. I had to pay for the premium version though - the free one doesn't support multiple states.
I went through almost the exact same situation when I moved from California to Texas a couple years ago! The good news is you're definitely going to get that money back - it's just a matter of filing correctly. Since you mentioned you moved in April, you'll need to file as a part-year resident for both states. For Pennsylvania, you'll only report income earned from January through March (or whenever exactly you moved). For Ohio, you'll report income from your move date through December 31st. One thing that really helped me was keeping a detailed record of my exact move date with supporting documentation like utility connection dates, lease agreements, and even receipts from the moving company. Both states may ask for proof of when you established residency. Also, don't stress too much about the HR mistake - this happens more often than you'd think, especially with larger companies that have employees across multiple states. The important thing is getting it fixed going forward and filing your returns correctly to get that overpayment back. You should definitely get a nice refund from Pennsylvania since you weren't actually liable for those taxes after moving!
This is really reassuring to hear from someone who's been through the same thing! I'm definitely keeping all my moving documentation together now - I have my lease start date, utility setup confirmations, and even my change of address form from the post office. Quick question - did you have to mail in physical copies of all that documentation with your tax returns, or did you just keep them in case you got audited? I'm trying to figure out if I should make copies of everything or just have the originals ready to go. Also, do you remember roughly how long it took to get your California refund? I'm hoping Pennsylvania processes theirs quickly since it's pretty straightforward that I shouldn't have been paying them after April.
Just a heads up - if you do decide to report this income next year instead of this year, be aware that the company might issue a 1099 for the current year even though you earned the money in 2022. If that happens, you'll need to explain the situation if the IRS questions the discrepancy. Generally, it's best to report income in the year you receive it if you're a cash-basis taxpayer (which most individuals are).
That's a good point I hadn't considered. So there's a chance the company will issue a 1099 for tax year 2023 or whenever I actually get paid, even though the work was done in 2022?
Exactly. Companies issue 1099s for the calendar year in which they made the payment, not when the work was performed. So if you get paid in 2023, you'll get a 1099 for tax year 2023, even though you did the work in 2022. This actually works in your favor in terms of timing, since you want to handle this separately from your parents' filing. Just be aware that from the IRS perspective, you report the income in the year you receive it (assuming you're a cash-basis taxpayer, which almost all individuals are).
As someone who's dealt with similar timing issues on contractor income, I'd recommend keeping detailed records of when you actually performed the work versus when you receive payment. The IRS generally follows the cash method for individuals, so you'll report the income when you actually receive it, not when you earned it. One thing to consider - since you're making $95k at your regular job, this additional $850 will be taxed at your marginal rate (likely 22% federal) plus the 15.3% self-employment tax, so set aside roughly $300-350 to cover the tax liability when you do receive the payment. Also, don't forget that you'll need to make quarterly estimated tax payments if this pushes your total tax liability over $1,000 for the year you receive it. The IRS gets grumpy about underpayment penalties, even on relatively small amounts.
Tom Maxon
To all those having trouble reaching a human at IRS. I just ran across this video that gave me a shortcut to reach a human. Hope it helps! https://youtu.be/_kiP6q8DX5c
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Aiden Chen
Hey Montana! I totally get your confusion - transcript codes can be really overwhelming. The multiple 290 codes you're seeing are actually pretty normal and usually just indicate routine adjustments the makes while your return. Since switched from PATH to regular processing, that's actually a good sign that things are moving forward. The lack of a tax code right now just means they're still working through verification. I wouldn't stress too much about the rumors - if there were serious issues, you'd typically get official correspondence from the directly. Keep checking every few days, and if you don't see movement in another week or two, then maybe consider calling the for clarification.
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Fatima Al-Mansour
β’Thanks for the reassurance Aiden! That makes me feel a lot better about the situation. I've been checking obsessively and it's good to know that the switch from PATH to is actually progress. Do you know roughly how long the verification process usually takes once it moves to that stage?
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