As someone completely new to this conversation, I'm absolutely stunned by what I've learned here about tip reporting in the restaurant industry. I had no idea this was such a widespread systemic problem affecting so many workers. What really strikes me is how this creates what appears to be institutionalized tax evasion where restaurants get the financial benefits (avoiding employer FICA taxes) while servers bear all the long-term risks (audits, penalties, back taxes). The fact that solutions like TRAC and TRDA programs exist but restaurants don't use them because it would cost them more money really shows how the incentives are completely backwards. The stories from actual servers about having to choose between immediate financial survival and long-term tax compliance are heartbreaking. When you're making $2.13/hour base pay and living shift-to-shift, setting aside cash tips for taxes can literally mean not making rent. But the potential consequences of getting audited years later - like that $8,500 notice mentioned earlier - are devastating. I'm particularly troubled by how this puts young workers entering the industry in an impossible position. They get conflicting advice, face subtle workplace pressure to under-report, but ultimately they're the ones who face legal consequences if caught. Meanwhile, the "everyone does it" culture perpetuates the cycle. This seems like it should be a major labor rights issue requiring structural reform - whether that's eliminating the tipped minimum wage, mandating restaurant participation in IRS compliance programs, or creating automatic reporting systems. Individual solutions help people cope, but they don't fix the underlying system that puts vulnerable workers at such high risk.

This entire discussion has been incredibly eye-opening for someone who's never worked in the restaurant industry. What really strikes me is how this creates a perfect storm where the most vulnerable workers bear all the risks while restaurants reap the financial benefits. The systematic nature of this problem is what's most troubling - it's not just individual bad actors, but an entire industry structure that incentivizes tax non-compliance among workers who can least afford the consequences. When servers are making $2.13/hour base and living paycheck-to-paycheck, asking them to set aside cash tips for taxes can literally mean choosing between paying rent or staying compliant. What's particularly frustrating is learning that actual solutions exist (like TRAC and TRDA programs) but restaurants don't use them because compliance would cost more in employer taxes. Meanwhile, servers face the terrifying possibility of audit notices like the $8,500 example mentioned earlier. I think what we really need is policy reform that addresses the root cause rather than just individual coping strategies. Whether that's eliminating the tipped minimum wage entirely, mandating participation in IRS compliance programs, or creating automatic reporting systems - we need structural changes that don't force workers to choose between immediate survival and long-term legal compliance. This seems like it should be getting much more attention as a labor rights issue, but I suspect restaurant workers don't have the political influence to push for these kinds of systemic reforms on their own.

This is incredibly helpful! I'm planning to get married next year and have been trying to wrap my head around the tax implications. My partner and I are both in tech (data scientist and software engineer) making $145k and $165k respectively, so we're definitely going to hit that dual high-earner penalty. What really strikes me about this discussion is how many factors beyond just salary income can dramatically change the calculation. The RSU timing, irregular income patterns, state-specific rules, and all these phase-outs for various credits and deductions - it's way more complex than I initially thought. I'm particularly interested in the timing strategies that @Mei Chen mentioned about shifting income between tax years. Since we both have some flexibility with stock option exercises and my company allows some deferred compensation, this could be a game-changer for minimizing our penalty. One question for the group: has anyone dealt with cross-state complications? My partner works remotely for a California company while living in Texas, and I'm wondering if that creates additional complexity for marriage penalty calculations beyond just the normal state tax differences. Brady, would love to beta test your simulator if you're looking for more users - our situation might help you identify edge cases with tech compensation packages!

This is such a comprehensive discussion! As a financial planner who works with a lot of engaged couples, I see the marriage penalty/bonus confusion all the time. What I love about Brady's approach is that it goes beyond the oversimplified "high earners = penalty" narrative that causes so much anxiety. One area I'd love to see explored more is how retirement account contribution strategies can help mitigate penalties. For couples facing significant penalties, maximizing both 401(k) contributions ($23,000 each for 2024) plus backdoor Roth conversions can meaningfully reduce AGI and move you out of some penalty territory. I've also noticed that couples often focus too heavily on the federal penalty while ignoring state-level impacts. Some states like New York actually have larger marriage penalties than federal, while others like Florida (no state tax) make the federal penalty more tolerable. The real-world examples everyone's sharing here - healthcare workers with irregular income, tech folks with RSUs, federal employees with TSP - really highlight why generic online calculators fall short. These edge cases are actually pretty common but rarely addressed in standard tax planning resources. Would be interested to hear if anyone has experience with "tax equalization" strategies where couples actively balance their individual tax burdens even when filing jointly. Sometimes restructuring who owns what investments or timing income differently can create significant savings.

I completely understand your frustration with getting such a vague notice about something from 7 years ago! The LTR 672C is notorious for being unhelpfully brief, but this situation is actually more common than you'd think. The timing delay could be due to several factors - the IRS has been working through massive backlogs since 2020, or they may have recently completed an internal review/audit of your 2018 return that resulted in this adjustment. Sometimes it's as simple as them finally getting around to processing a correction they identified years ago. My recommendation would be to start by requesting your tax account transcript for 2018 from the IRS website (IRS.gov - search for "Get Transcript Online"). This will show you exactly what the IRS processed versus what you originally filed, including any adjustments they made that created the overpayment. The transcript should also indicate which tax year or type of debt they applied your overpayment to. Most of the time these situations involve relatively minor issues - math errors, duplicate income reporting, or small penalties you weren't aware of. While the 7-year delay is unusual, it's likely just bureaucratic cleanup rather than anything serious. The transcript should give you all the details you need to understand what happened without having to spend hours trying to reach someone by phone. Don't stress too much - this is probably just the IRS finally getting their paperwork in order!

I can definitely relate to your confusion about getting a LTR 672C notice for something from 2018! These notices are frustratingly vague by design, but don't panic - this situation happens more often than you'd think. The 7-year delay is definitely unusual, but given the IRS's massive processing backlogs since the pandemic, they're still working through older adjustments and corrections. It's likely they found a discrepancy during a routine review or audit that just got processed. Here's what I'd suggest: First, get your tax account transcript for 2018 from the IRS website (go to IRS.gov and search for "Get Transcript Online"). This will show you exactly what the IRS processed versus what you originally filed, including any adjustments that created the overpayment. The transcript should also indicate which tax year they applied your overpayment to. Common causes for these situations include math errors, duplicate income reporting (like accidentally including the same 1099 twice), or small penalties from other years that you weren't aware of. In most cases, we're talking about relatively minor amounts - maybe a few hundred dollars at most. The transcript will give you way more detail than that vague notice ever could. Once you understand what adjustment they made, you'll probably realize it's just routine administrative cleanup rather than anything serious. If you still need clarification after reviewing the transcript, then you can consider calling the IRS with specific questions rather than going in blind. Don't stress too much - this is likely just the government finally getting their paperwork sorted out!

I'm probably too late but here's my 2 cents as someone who had to deal with this last tax season. Whatever you do, DO NOT use F&F for transactions that are actually purchases! PayPal watches for that pattern and will absolutely limit or freeze your account. Instead, I created two separate PayPal accounts - one strictly for business and one for personal transactions. Both are properly verified with my real info. This makes tax time so much easier because my business 1099-K actually reflects my business. I still keep records of everything, but having the natural separation makes the whole process cleaner.

I went through this exact same nightmare last year! As someone who does freelance graphic design but also buys/sells vintage camera equipment as a hobby, I totally understand the frustration. Here's what I learned after consulting with my CPA: The separate PayPal accounts approach is actually the cleanest solution, despite what some people say about the IRS tracking by SSN. Yes, they can see everything tied to your SSN, but having separate accounts makes YOUR life so much easier come tax time. I now use my business PayPal exclusively for client work, and my personal PayPal for hobby transactions. When I get my 1099-Ks, my business one actually reflects real business income, which makes Schedule C straightforward. For the personal account, I keep a simple spreadsheet showing original purchase prices vs. sale prices to document that these were personal items sold at a loss. The key thing everyone's mentioned but I want to emphasize: KEEP RECEIPTS. I scan everything into a Google Drive folder. Original purchase receipts, sale confirmations, even shipping costs. This documentation is what protects you if the IRS ever questions why you're not reporting certain transactions as income. One more tip: Don't stress too much about the inflated 1099-K numbers. Your tax software (I use FreeTaxUSA) has fields specifically for this situation now because it's become so common with the new PayPal reporting rules.

I'm with Republic too and completely understand the anxiety! My DD date was 3/13 and I'm still waiting. After reading through all these comments, I decided to set up those text alerts someone mentioned - wish I'd known about that feature sooner! It's frustrating that we have to wait extra days after the IRS already sent our money, but at least knowing about the 11am-1pm and 4-5pm processing windows helps me stop checking every 10 minutes. Has anyone noticed if Republic posts deposits on weekends during tax season, or should I just plan to wait until Monday if nothing hits today?

Republic Bank customer here too! 🙋‍♀️ My DD date was 3/15 and I'm still refreshing like crazy. Reading through everyone's experiences is actually really comforting - at least I know I'm not the only one obsessively checking my account every few minutes! I've been with Republic for about 4 years now and their tax refund timing has been pretty consistent, usually within 24-48 hours of my DD date. Last year mine hit on a Tuesday around 12:30pm, right in that midday processing window everyone's mentioning. I just set up the text alerts after reading these comments (why didn't I know about this feature before?!). For anyone else waiting, I found that checking the "recent activity" section sometimes shows pending deposits before they actually post to your available balance. Fingers crossed we all see our money soon! The waiting game is brutal when you have bills to pay! 💸