I've been dealing with IRS issues for years and wanted to share some additional tips that might help. First, definitely keep detailed records of all your installment agreement payments - bank statements, canceled checks, money order receipts, whatever you used to pay. This documentation will be crucial if the IRS questions the overpayment. Also, be aware that if you filed joint returns, the refund will typically be issued to both spouses even if only one person's name was on the installment agreement. Make sure your current address is updated with the IRS before requesting the refund, as they'll mail the check to your address of record. One more thing - if you're expecting a large refund like this, consider having it direct deposited instead of receiving a paper check. You can request this when you contact them, and it's much faster and more secure. Just have your bank routing and account numbers ready when you call or include them in any written correspondence. Good luck getting your money back! The IRS definitely owes it to you.

I just wanted to add my experience with a CP-89 negative balance situation. Like others have mentioned, it definitely means the IRS owes you money. In my case, I had overpaid on a 2013 installment agreement and received a similar notice. One thing I learned that might help - if you're having trouble getting through to the IRS by phone, you can also visit a local Taxpayer Assistance Center (TAC) if there's one near you. You'll need to make an appointment through the IRS website, but I found the in-person service much more helpful than trying to navigate their phone system. The representative was able to pull up my entire payment history on the spot and confirm the overpayment. They processed my refund request right there, and I received my check about 3 weeks later. Just make sure to bring your CP-89 notice, a copy of your ID, and any payment records you have from the installment agreement. You can find TAC locations and schedule appointments at irs.gov/help/contact-your-local-irs-office. It's definitely worth considering if the phone route isn't working out for you!

Just FYI, tax software makes this WAY easier to figure out. You don't need to understand all the details about gross vs net income yourself. Programs like TurboTax, FreeTaxUSA, or even the IRS Free File options will walk you through entering your different income sources and expenses. I use HR Block and it automatically figures out my taxable income after I enter all my 1099 income and business expenses. The interview style questions make sure I don't miss any deductions too.

I'm a tax professional and wanted to add some clarity here. You're absolutely correct that taxes are based on your net income after legitimate business expenses, not gross income. However, I'd caution against relying solely on third-party tools or services without understanding the fundamentals yourself. For your specific situation with $42,000 in design income and $8,500 in business expenses, you'll report both amounts on Schedule C. Your net profit of $33,500 will be subject to both regular income tax AND self-employment tax (15.3%). This is important because many people forget about the self-employment tax component. A few key points: 1) Make sure all $8,500 in expenses are truly business-related and properly documented, 2) Consider whether any purchases should be depreciated over multiple years rather than deducted in full this year, 3) Track your home office expenses and vehicle mileage if applicable, and 4) Remember that your standard deduction will further reduce your taxable income after calculating your adjusted gross income. The quarterly payment advice mentioned earlier is spot-on - with $33,500 in net self-employment income, you should definitely be making estimated payments to avoid penalties. I'd recommend consulting with a local CPA for your first year with significant self-employment income to make sure you're set up correctly going forward.

I'm dealing with a very similar situation after losing my corporate job last year. One thing that's helped me is tracking absolutely everything related to my home office since I work while the kids are around. You can deduct a portion of your home expenses (utilities, internet, rent/mortgage interest) based on the percentage of your home used exclusively for business. If you're working from a dedicated space while managing childcare logistics, this adds up quickly. Also, don't forget about equipment purchases - if you bought a computer, desk, office chair, or even a better webcam for client calls, those are fully deductible business expenses in the year of purchase (or you can depreciate them). The key is documenting everything. I keep a simple spreadsheet of all business-related expenses and take photos of receipts. It won't solve the childcare cost problem entirely, but every legitimate deduction helps free up money for those expenses. Have you looked into your state's rules for independent contractors? Some states have additional deductions or credits that might apply to your situation.

I'm in a very similar boat - lost my tech job and now juggling IC work with two kids. One thing that's been helpful is looking into quarterly estimated tax payments strategically. Since our income is more unpredictable now, you can actually adjust your quarterly payments based on your actual earnings rather than paying the same amount each quarter. This has freed up cash flow during slower months that I can put toward childcare when I have bigger projects coming up. The IRS allows you to pay based on your actual income for each quarter using the "annualized income installment method" - it's more paperwork but can really help with cash flow management. Also, if you're considering the LLC route, remember that you'll still pay the same self-employment taxes, but an LLC can make it easier to separate business and personal expenses for record-keeping. Just make sure the business expenses are legitimate - the IRS scrutinizes IC deductions pretty closely, especially anything that could be considered personal (like childcare). Have you looked into any local programs for displaced tech workers? Some areas have grants or subsidized childcare specifically for people transitioning between employment types.

I went through this exact same situation last year with our babysitter! You're definitely on the right track. Just to add a few things I learned the hard way: Make sure you're using the correct ITIN format (9XX-XX-XXXX) on the W-2 - some people accidentally transpose digits or format it like an SSN. Also, keep detailed records of everything because if there are any processing issues, you'll want documentation. One thing that caught me off guard was that some banks won't accept direct deposit tax refunds to accounts linked to ITINs, so your nanny might need to file a paper return and wait for a paper check. Not your responsibility, but just something to give her a heads up about. Also, double-check your state's requirements early. I waited until the last minute and discovered my state needed an additional form that took 2 weeks to process. The January 31st deadline comes up fast!

I just went through this process a few months ago and wanted to share some additional tips that might help! First, when you're filling out the paper W-2, use black ink only - I learned this the hard way when the SSA rejected my first submission because I used blue ink. Also, make sure you're ordering the official red-ink W-2 forms from the IRS or a legitimate vendor, as photocopies won't be accepted. One thing I wish I'd known earlier is that you should keep extra copies of everything. I ended up needing to provide documentation to both the state unemployment office and my CPA months later, and having organized records saved me a lot of headaches. Also, since you mentioned you've been withholding FICA taxes, make sure you're calculating the employer portion correctly on your Schedule H. The ITIN doesn't change the tax calculations, but it's easy to make mistakes when you're doing everything manually instead of through payroll software. Finally, consider setting up a simple spreadsheet to track quarterly payments going forward - it makes next year's filing much easier! Good luck with everything!

Don't forget to think about state taxes too! My boyfriend and I have a similar situation, and while the federal filing was pretty straightforward once we figured out who should claim our daughter, the state rules were different. Some states have their own versions of credits and different rules for unmarried parents.

Great question! I was in a very similar situation a few years ago. One thing that really helped us was creating a detailed spreadsheet of all our household expenses to figure out who was actually contributing more than half for the Head of Household determination. We tracked everything - rent, utilities, groceries, childcare, even things like our son's clothes and medical expenses. It turned out that even though my partner made less money, she was actually covering more of the day-to-day expenses while I was paying the bigger bills like rent. We also discovered that the Child and Dependent Care Credit could be pretty valuable - you can claim up to $3,000 in childcare expenses for one child, and the credit percentage depends on your income level. One mistake we made initially was not coordinating our W4 withholdings properly. Make sure whoever is claiming your son adjusts their W4 to account for the additional credits they'll receive, otherwise you might end up with a huge refund (which is essentially an interest-free loan to the government). The IRS withholding calculator on their website is actually pretty helpful for this once you know who's claiming what.