This is actually more common than people think. Make sure your parents get a corrected 1098-T from your school showing the ACTUAL amounts paid for qualified expenses. The form should show no scholarships in Box 5. This will support their tax credit claims if they're audited.

From a practical standpoint, you need to gather all documentation first before having any conversations. Get copies of your actual 1098-T forms from the school, bank records showing the transfers from your parents, and any tuition payment receipts. This will help you understand exactly what's been reported to the IRS versus what your parents believe. The good news is that this situation, while stressful, is fixable without major penalties if handled correctly. Since your parents are actually paying more in qualified education expenses than they're currently claiming credits for, they're not in an overclaim situation that would trigger penalties. They may actually be entitled to larger education credits than they've been taking. The key is transparency and proper documentation going forward. When you do come clean (which you absolutely should), have all the paperwork ready to show exactly what was paid and when. This will make it much easier for them to file any necessary amended returns and claim the correct credits they're entitled to. The IRS generally views honest corrections favorably, especially when they result in proper reporting rather than tax avoidance.

I have a client who owes tax debt for 2022-2024 for $13000, and I am trying to prepare an OIC for them as Doubt of Collectability, as well as a low-income certification. Tax liability is SE due to being a freelance writer on Schedule C who is unmarried, has no car or any assets, and only made $10875.00 this year. Her grandfather helps her pay her half of the utilities and helps with other things she needs since she isn't paid regularly. This is my first one, and after entering all the income for the RCP, it only shows 336 future income. I was wondering what a reasonable offer should be. Since it is a Schedule C, I would send 6 months of bank statements, correct?

Based on your client's situation, an offer around $336-500 would be reasonable since your RCP calculation shows $336 in future income and minimal assets. For someone making $10,875 annually with no significant assets, this falls well within acceptable parameters for Doubt as to Collectibility. A few important points for your first OIC: 1. Yes, include 6 months of bank statements for Schedule C income - the IRS wants to see the irregular income pattern that's typical for freelancers. 2. Document the grandfather's assistance carefully. Since he's helping with utilities and necessities, make sure to show this isn't "income" to your client but genuine family support for basic living expenses. 3. The low-income certification is smart here - with income at $10,875, she likely qualifies and this waives the application fee and initial payment requirements. 4. Consider going slightly above your RCP calculation (maybe $400-450) to show good faith and account for any minor assets or income the IRS might value differently than you did. 5. Include a detailed hardship letter explaining how the irregular freelance income makes it impossible to maintain consistent payments, and how family assistance is necessary just for basic survival. The key is showing that even your minimal offer represents her true ability to pay given the circumstances. Good luck with your first OIC!

question - if I estimate now using FreeTaxUSA 2023 software and create an account, can I just log back in when I have my actual W-2 and 1099 forms and file from there? or would I need to start over?

Thanks for the heads up about the early release! I've been using FreeTaxUSA for the past few years and really appreciate being able to do tax planning before the rush. One tip I'd add - if you're estimating now, make sure to save different scenarios. I usually create versions with conservative estimates and then more optimistic projections to see the range of what I might owe or get back. Also worth noting that if you have any major life changes planned (marriage, new job, etc.), you can model those too to see how they'd impact your taxes. Really helps with financial planning for the year ahead.

Wait, I thought capital gains tax is like 15%? If u have a $20k gain that would be $3k in tax. R people saying u don't have to pay anything at all???

As someone who just went through this exact process, I can confirm what others have said about the Section 121 exclusion being a lifesaver! Just wanted to add a couple practical tips from my recent experience: 1) Make sure you can prove you actually LIVED in the home as your primary residence for 2 years, not just owned it. The IRS looks at things like voter registration, driver's license address, where you received mail, etc. 2) If you're cutting it close on the 2-year mark, count carefully. The IRS uses the exact date - so if you bought on March 15th, you need to wait until at least March 15th two years later to qualify for the full exclusion. 3) Keep your closing documents from when you purchased! You'll need them to calculate your basis properly when you file taxes next year. With only $20k in gains and being married, you're definitely well under the $500k exclusion limit. Sounds like you should owe zero capital gains tax if everything checks out. Good luck with your move!

Has anyone dealt with getting a severance paid out over multiple payments instead of one lump sum? My company is offering me either option, and I'm wondering if taking it over 3 months would result in less tax withholding upfront compared to a lump sum.

I went through something very similar when I got laid off six months ago. The 58% withholding rate you're seeing is unfortunately pretty normal for severance payments, especially if your company is being conservative with their calculations. Here's what likely happened: Your company treated the $8,500 severance as if you were going to receive that amount every pay period for the entire year. So if you normally get paid bi-weekly, they calculated withholding as if you'd be making $221,000 annually ($8,500 x 26 pay periods). That would put you in a much higher tax bracket, hence the aggressive withholding. The silver lining is that when you file your 2025 tax return, your actual tax will be based on your total income for the year - which will likely be much lower since you're now unemployed. You should get a substantial refund of that overwithholding. I'd recommend requesting a detailed breakdown of all the withholdings from HR so you can see exactly where every dollar went. Sometimes there are errors or unnecessary deductions that you can get corrected. Also consider talking to a tax professional about estimated quarterly payments for the rest of 2025 to avoid more overwithholding when you find your next job.