Something nobody's mentioned yet - if your bonus pushes your annual income over certain thresholds, you might actually lose some tax credits or deductions. That happened to me last year - my bonus pushed me over an income limit that reduced my student loan interest deduction. So in some cases you might actually pay a bit more in overall taxes because of a bonus, not just higher withholding.

This is such a common frustration! I went through the exact same thing with my year-end bonus last month. The key thing to remember is that the high withholding you're seeing (that 40%) is just your employer being overly cautious - it's not the actual tax rate you'll pay on the bonus. Most employers use the "aggregate method" which treats your bonus like it's your regular weekly/monthly pay. So if you got a $10,000 bonus, they withhold as if you make that much every pay period all year long, which temporarily bumps you into a much higher tax bracket for withholding purposes. When you file your taxes, that bonus just gets added to your regular income and taxed at your normal marginal rates. So if you're truly in the 24% bracket, that's what you'll actually pay on the bonus income. The extra withholding becomes a nice refund! I know it stings to see so much taken out upfront, but think of it as forced savings that you'll get back with interest (well, without interest, but you get the idea). At least you won't owe anything come April!

Your roommate needs to file a 1040-X (amended return) immediately and pay back the extra refund he received from falsely claiming the dependent. He's committed tax fraud, plain and simple. The IRS matches Social Security numbers on tax returns, so they will eventually notice that this kid was claimed by someone with no relation and no history of claiming them before. They may also investigate whether the parent was involved in selling the dependent claim. Both your roommate and the neighbor could face serious consequences. In addition to penalties and interest, tax fraud can be prosecuted criminally with up to 3 years imprisonment for each false statement. The $400 payment creates evidence of willful intent to defraud, which makes it much worse.

One thing nobody's mentioned yet - your roommate should NOT contact the neighbor about this! He needs to fix his return independent of whatever the neighbor does. Reaching out could be seen as conspiring to get stories straight, which makes everything worse. Also, your roommate should NOT spend that refund money! The IRS will want it back plus interest, and possibly penalties. He should set aside the entire amount related to the false dependent claim so he can return it when he files the amended return. The Earned Income Credit alone for falsely claiming a child can be thousands of dollars. The IRS specifically targets EIC claims for audits because it's so frequently abused.

Quick tip about the VIN issue - I'm a car salesperson and see this problem ALL THE TIME with hybrid tax credits. There's often a disconnect between how the manufacturer reports VINs to the IRS and how dealers record them. Sometimes it's as simple as a space or dash in the wrong place. Get your Manufacturer's Statement of Origin (MSO) from the dealer - this is the birth certificate of your car and has the VIN exactly as the manufacturer recorded it. Compare this to what you submitted. I've seen cases where someone put a letter O instead of a zero or vice versa. Also, check if your specific hybrid model has the required battery capacity for the credit you're claiming. The requirements changed in 2023 and some vehicles that qualified before no longer do.

Just wanted to add one more resource that helped me with my hybrid credit appeal - the IRS has Publication 535 which specifically covers business deductions, but more importantly for your situation, they have a lesser-known document called "Appeals Mediation Guidelines" that you can request when filing Form 12203. When I was dealing with my denied electric vehicle credit (similar situation), I discovered that you can specifically request "fast-track mediation" on your Form 12203 if the disputed amount is under $25,000. This process is designed to resolve cases within 40-60 days instead of the typical 6+ months for regular appeals. The key thing I learned is to be very specific about WHY you believe the IRS determination was incorrect. Don't just say "I qualify for the credit" - explain exactly what documentation proves your vehicle qualifies, when you purchased it, and why their VIN verification system may have failed to match your car properly. Also, since you mentioned the dealership couldn't help initially, try contacting your car manufacturer's customer service directly. They often have a tax credit verification department that can provide official documentation showing your specific VIN qualifies for the credit during your purchase period.

Any good resources to learn about partnership tax? I've been using Becker but their partnership stuff isn't very thorough. Have an interview next month and need to study up.

As someone who struggled with partnership tax concepts during my own CPA studies, I'd recommend starting with the fundamentals and building up. Here's what helped me: First, master the basic flow: Partnership income/losses flow through to partners based on their ownership percentages, but partners are taxed on their allocated share whether or not they receive distributions. This is key to understanding everything else. For guaranteed payments vs distributions, think of it this way: Guaranteed payments are like paying an employee (deductible expense, subject to SE tax), while distributions are like paying dividends to shareholders (not deductible, generally no SE tax). The Section 754 election is all about fairness when someone buys into an existing partnership. Without it, new partners can get stuck paying tax on appreciation that happened before they joined. Practice with real numbers - work through examples where you calculate the tax impact on both the partnership and individual partners. This will make the concepts stick much better than just reading about them. Good luck with your interview! The fact that you're preparing this thoroughly shows you're taking it seriously, which will definitely come across to the interviewers.

pro tip: if id.me fails try early morning or late night. servers less busy

If you're still having trouble with ID.me verification, try calling the IRS transcript line at 800-908-9946 instead. Yes it takes 5-10 business days by mail but at least you'll have a definite timeline. I was in a similar crunch for my mortgage and ended up going this route when the online kept failing. Make sure you have your SSN, DOB, and prior year AGI ready when you call. They can also sometimes expedite if you explain it's for a mortgage closing.