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Whats the current interest rate the IRS charges on payment plans? I remember when I did mine a couple years ago it was like 3% plus some quarterly rate thing. With interest rates higher now I'm wondering if its better to just pay it off if you can vs setting up a plan.
The current IRS interest rate is 8% as of January 2025. It's the federal short-term rate plus 3%, and they adjust it quarterly. Plus there's the failure-to-pay penalty of 0.5% per month (up to 25%) on the unpaid balance, though that's reduced to 0.25% per month if you're on an installment plan. So yeah, it's definitely more expensive than it was a couple years ago. Might be worth looking at other options if you have them - like a low interest personal loan or even carefully using savings if you have enough emergency fund left.
Congratulations on your new baby! Your situation is totally manageable. Since you completed your OIC in 2021, you're well within the 5-year compliance period, but that doesn't prevent you from setting up payment plans for new tax debts. The key thing is to act promptly - file your 2023 return on time (or request an extension) and set up the payment plan before the payment deadline. This actually helps demonstrate compliance with your OIC terms rather than hurting it. Given that you're on short-term disability with a newborn, I'd strongly recommend being conservative with your monthly payment amount. With a $9,500 balance, you could set up a plan for as low as $130-140/month and still pay it off within the IRS's 72-month maximum timeframe. You can always increase payments later when you're back to full income. The online payment agreement tool is probably your best bet for quick setup. Just keep in mind the current interest rate is around 8% annually, so if you have low-interest alternatives available, it might be worth comparing the total cost.
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For the nanny income specifically, since it was family (her cousin), do you think there was an understanding this was "under the table"? Because that complicates things. If you suddenly report this income, you could potentially create problems for the family that employed her if they didn't handle their end of the household employment taxes. Not saying don't report it, but just something to consider. Maybe have a conversation with the cousin first?
Yeah, it was definitely an informal arrangement. I hadn't thought about how reporting it might affect them. I'll reach out to her cousin and see if we can figure this out together. I just want to get caught up without creating problems for anyone else. Do you think there's a statute of limitations on the household employment taxes they might owe? This was back in 2018 so it's been a while now.
For the IRS, the statute of limitations is generally 3 years, but it extends to 6 years if there's a substantial underreporting of income (25% or more). Since this involves employment taxes, the cousin's family could potentially face penalties for not filing Schedule H and paying household employment taxes. If I were in your shoes, I'd definitely have that conversation with them first. One potential approach is to just report the income as "miscellaneous income" on Schedule 1 rather than specifically as nanny or household employee income. This reports your wife's income without explicitly triggering household employment tax implications. While technically not the perfect solution, it might be a practical compromise for an informal family arrangement from years ago. Remember though, I'm just sharing what I've learned from my own experience - each situation is unique and has its own considerations.
For your wife's nanny income, wouldn't she need to pay self-employment tax too? That's an extra 15.3% on top of regular income tax, right? That seems like it would be a big hit on back taxes you're already struggling with.
Oh that's a huge relief! I've been reporting babysitting money as self-employment income and paying that extra tax for years. So if I'm caring for kids in their home and following their schedule, I'm actually a household employee and not self-employed? How would I fix my past returns then?
Yes, you're likely correct about being a household employee! The key test is whether you're working in their home, following their schedule, and they control how you do your work. If so, you're their employee, not self-employed. To fix past returns, you'd need to file amended returns (Form 1040X) for any years within the statute of limitations (generally 3 years). You'd remove the self-employment income from Schedule C and instead report it as "other income" on Schedule 1. This should eliminate the self-employment tax you've been paying. However, keep in mind that your employers technically should have been paying their share of Social Security and Medicare taxes too. When you amend, you might want to consider whether this could create issues for them, similar to what @Makayla Shoemaker is dealing with regarding her cousin s'family. You might want to consult with a tax professional to make sure you handle the amendments correctly and understand all the implications before filing.
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Have you considered reaching out to the Volunteer Income Tax Assistance (VITA) program? They offer free tax preparation services for people with disabilities, and many locations now provide remote options due to COVID adaptations they've maintained. While they don't offer advances directly, they might be able to expedite your filing to get your refund faster. Do you qualify for any special credits related to your disability that might increase your refund amount? What's your timeline for needing the funds?
I'm really sorry to hear about your Credit Karma situation - that's incredibly frustrating, especially when you're dealing with disability challenges and counting on that advance! 😔 Based on what others have shared, here are a few solid options to consider: **Quick alternatives with advances:** • H&R Block online - seems to have good disability accommodations and 24-48 hour processing • TaxSlayer - another user just got approved for $1,250 in 37 hours • Jackson Hewitt online - also offers refund advances **Things to watch out for:** • Fees can range $25-100, so compare the total cost • Some advances are smaller than advertised • New platforms have learning curves **Alternative approach:** Some folks found that filing with faster services like FreeTaxUSA or TaxAct without an advance actually got their refund in 8-12 days, which wasn't much slower than advances anyway and saved on fees. Given your disability needs, I'd probably start by checking H&R Block's online platform since multiple people mentioned their good accessibility features. Whatever you choose, make sure to read all the fee disclosures carefully before committing. Hang in there - there are definitely workable solutions for your situation! 💪
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Has anyone successfully gotten their broker to reverse the backup withholding? I'm in a similar situation (wrong middle initial) and just noticed nearly $3500 was withheld from a stock sale last month. My broker is saying they can't do anything about it now that the money has been sent to the IRS.
Unfortunately, once the withholding has been sent to the IRS, brokers generally can't reverse it. Your best option is to correct your information with the broker (provide an updated W-9) to prevent future withholding, and then claim the credit when you file your tax return. Make sure you keep all your transaction records and the 1099 you'll receive.
I went through a very similar situation a few years ago when my brokerage had an outdated SSN on file (long story involving a name change). The backup withholding hit me on a large mutual fund redemption and I was panicked about whether the IRS actually received the money. Here's what I learned: The IRS systems are notoriously slow to update, so don't expect to see backup withholding reflected in your online account immediately. Your brokerage is required to send the withheld funds to the IRS within a specific timeframe, and they have strong incentives to comply since they face penalties if they don't. For verification, I found the most reliable approach was to keep detailed records of the withholding from your brokerage statements and wait for your 1099 forms. The 1099-B (for stock sales) will show both your proceeds and the backup withholding amount. This is your official documentation that the IRS will accept. Regarding quarterly payments - you're absolutely right that you can adjust them. The IRS cares about your total tax payments for the year, not the timing or method. If your backup withholding exceeds your projected liability, you can reduce or skip estimated payments accordingly. Just make sure to run the numbers carefully to avoid underpayment penalties.
Omar Fawaz
I file taxes for my husband's s-corp and we have a sept 30 fiscal year. I was told to use tax software from the CALENDAR year when the fiscal year ENDS. So for a july 1 2021 - june 30 2022 fiscal year, we used 2022 tax software even though we filed in september 2022. This has always confused me but our accountant says its right. just be careful cause the forms change yearly!!
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Chloe Anderson
•You're definitely using the correct approach! I made the mistake of using 2021 software for our March 2022 fiscal year end filing, and it caused all kinds of problems. The software was missing updated forms and couldn't e-file properly. Always use the tax software from the year your fiscal year ends in, even if most of your business year was in the previous calendar year.
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Omar Fawaz
•Thanks! That's really reassuring to hear. Our accountant explained it but I still get nervous every time we file. The software thing was confusing at first because you're buying "2022 software" to file a return in 2022, but the IRS considers it a 2022 return anyway, so it all matches up.
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Collins Angel
Just wanted to add one more important detail that might help other newcomers like myself - make sure you're aware of the estimated tax payment deadlines for fiscal year S-Corps too! For a June 30 fiscal year end, your quarterly estimated payments are due on September 15, December 15, March 15, and June 15. This was another area where I initially got confused because I was thinking in calendar year terms. Also, if you're new to handling S-Corp taxes, I'd strongly recommend getting professional help at least for the first year or two. The interplay between the corporate return (1120-S) and the individual K-1 reporting can get complex, especially with fiscal years. Better to invest in proper guidance upfront than deal with penalties or corrections later!
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