8 The W-4 doesn't use allowances anymore - they changed it in 2020. Now it's a completely different system with steps for different situations. I was confused too when I started my new job because I was used to the old form.

21 You're right, I completely forgot they changed the form! Shows how long I've been at my current job. I guess the basic concept is still similar though - you give your employer information about your tax situation, and they use IRS tables to calculate the withholding. Thanks for the correction. I should probably review my own withholding sometime soon since I haven't updated my W-4 since before the change.

2 The actual calculation is in IRS Publication 15-T if you really want to see the math. It's pretty complicated. More likely explanation is that you filled out your W-4 differently at the two jobs, or one employer is using an older version of your W-4. Ask HR for a copy of your current W-4 on file and see if it matches what you remember filling out.

What happens if you get caught? Are we talking fines or actual jail time? Asking for a friend...

Both are possible. For the business owner, willful failure to pay employment taxes can result in penalties up to 100% of the taxes owed, plus interest, plus potential criminal charges with jail time up to 5 years. The IRS tends to be particularly aggressive about employment tax cases because they view it as stealing both from the government and from the employee's future Social Security benefits. Your "friend" should also know the IRS has a whistleblower program that pays rewards to people who report tax evasion, and disgruntled employees often take advantage of this. I've seen businesses completely destroyed by the back taxes, penalties and legal fees even when they avoided criminal charges.

Here's the quick math: $20/hr x 40hrs x 52 weeks = $41,600 annual wages Proper employment costs beyond wages: - Employer FICA (7.65%): $3,182 - FUTA (0.6% on first $7,000): $42 - State unemployment (varies, but ~2.7% on first $7,000): $189 - Workers comp (varies by industry, ~2-5%): ~$1,248 - Payroll service/software: ~$1,000 - Potential benefits/PTO: varies wildly So maybe $45,000-$50,000 total annual cost for a properly paid $20/hr employee vs $41,600 cash. BUT the properly paid wages are fully tax deductible, while the under-the-table wages aren't deductible at all.

Is a Private Letter Ruling actually worth the cost though? I've heard they take forever to get (like 6-9 months) and by then your investment opportunity might be gone. Have you actually done one yourself for an IRA transaction?

You're absolutely right about the timeframe - they typically take 6-9 months, which makes them impractical for many time-sensitive investments. I haven't personally done one, but a business partner did for a significant real estate investment he was considering through his self-directed IRA. For smaller investments, the cost usually doesn't make sense. But if you're considering a large transaction with millions at stake, or a recurring investment strategy you plan to use multiple times, it can be worth the peace of mind. In my partner's case, the PLR actually saved him from making what would have been deemed a prohibited transaction, potentially saving him hundreds of thousands in taxes and penalties.

A Roth conversion ladder won't help after a prohibited transaction has already occurred. Once the prohibited transaction happens, the IRA is immediately considered distributed as of January 1 of that year. It's no longer an IRA that can be converted to a Roth. You could potentially use the distributed funds to contribute to a new Roth IRA (subject to income limits and annual contribution caps), but you'd still owe taxes and penalties on the full distribution from the disqualified IRA first.

That's good advice. Any idea how much they typically want as a down payment for those payment plans? He literally has almost nothing saved up right now.

Nevada can be pretty flexible with the initial payment compared to some other states. For tax debts under $10,000 (which fits your brother's situation), they sometimes accept as little as 10% down to start a payment plan. So potentially around $780 in his case, but they may go lower based on documented financial hardship. They'll look at his current income and essential expenses to determine what monthly payment he can afford. The most important thing is that he contacts them himself before they escalate to more serious collection actions. When people proactively reach out to set up payments, tax authorities are usually more willing to work with them on favorable terms.

Adding to this - he should update his address with both the state tax agency AND the postal service. I had a similar situation and found out the state had been sending notices for months but they were going to my old address despite my filing a change of address. Such a headache.

What counts as "maintaining the home" exactly? I pay all the rent and utilities, but my ex buys most of the groceries and clothes for our son. Can I still claim Head of Household?

Maintaining the home specifically refers to expenses like rent/mortgage, property taxes, utilities, repairs, and groceries. The IRS looks at the overall cost of running the household - not specifically child-related expenses like clothing or education. If you pay all the rent/mortgage and utilities, that's typically the largest portion of household expenses, so you're probably still providing more than half the cost of maintaining the home even if your ex buys groceries and clothes. Just add up all your household costs for the year and make sure your portion exceeds 50%. Keep those records handy in case the IRS ever has questions.

Yikes! How did the audit turn out? I'm worried bc my ex and I alternate years claiming our daughter but I'm not sure if she knows that means only one of us gets Head of Household.