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Quick question - has anyone had this issue with TurboTax or other tax software? I'm trying to file both my federal and local returns through TurboTax but it keeps flagging the missing boxes and won't let me proceed.
I had this issue with H&R Block software. There should be an option to manually override or indicate that "no tax was withheld" for the locality. Look for that checkbox or option in the W-2 entry screen. If you're stuck, their customer support was actually pretty helpful with walking me through it.
Don't panic - this is actually more common than you think! The blank boxes 18-20 on your W-2s simply mean your employers didn't withhold local municipality taxes from your paychecks during the year. This doesn't mean you don't owe them - it just means you'll need to pay them now when you file. For your municipality filing, here's what you should do: - Use the wage amount from Box 1 (your federal wages) as your local taxable wages - Enter "0" for local tax withheld since nothing was taken out - For the locality name, use the municipality where you physically worked (or your employer's location) The reason your third W-2 has this information filled in is probably because that employer was located in your municipality and properly withheld local taxes throughout the year. You should also ask your employers (the ones with blank boxes) why they weren't withholding local taxes - they might need to correct this going forward so you don't face a big tax bill again next year. Some employers don't realize they need to withhold for the municipality where their employees live or work.
This is really helpful advice! I'm dealing with something similar right now. Just to clarify - if my employer is located in a different state but I work remotely from home in my municipality, which location should I use for the locality name? My employer is in Delaware but I live and work from home in Pennsylvania. I want to make sure I'm reporting this correctly to avoid any issues later.
Does anyone know if books and supplies count for AOTC? My scholarship covered tuition but I paid for all my textbooks out of pocket (like $1200 per year).
Yes! Books, supplies, and equipment required for your courses absolutely count as qualified education expenses for the AOTC, even if they weren't purchased directly from the school. This is actually a big advantage of AOTC over the Lifetime Learning Credit. If you paid $1200 per year for required books and supplies, you can claim those expenses toward your AOTC without having to reallocate any scholarship funds as taxable. Just make sure you have receipts or credit card statements showing those purchases in case you're ever asked to verify.
This is exactly the situation I was in! I had a full scholarship that covered tuition and fees, but I was kicking myself for not knowing about AOTC until after graduation. What really helped me was understanding that the IRS actually wants you to optimize your tax situation legally. The scholarship allocation strategy everyone's mentioned is completely legitimate - it's outlined in Publication 970. The key insight is that you're not "cheating" the system, you're just choosing how to characterize money you already received. One thing I'd add: when you're doing the math, don't forget to factor in your state taxes too. Some states will tax the scholarship income you're reallocating, but many also offer their own education credits that can help offset this. Also, if you're going to amend multiple years, consider doing them in order (2022 first, then 2023, then 2024) so if the IRS has any questions, they can see the consistent treatment across all years. This helped my amendments process much more smoothly. The fact that you were a full-time student with low income during those years makes this strategy even more beneficial for you. You're likely to come out thousands ahead after the amendments!
This is really encouraging to hear from someone who actually went through the process! I'm definitely feeling more confident about moving forward with the amendments now. The point about state taxes is something I hadn't even considered - I'll need to look into how my state handles scholarship income. Your suggestion about filing the amendments in chronological order makes a lot of sense. I want to make sure everything looks consistent and legitimate to avoid any unnecessary scrutiny. One quick question - when you say you came out "thousands ahead," are you talking about the full $2,500 per year credit, or did you have to pay some additional taxes on the reallocated scholarship income that reduced your net benefit?
This discussion has been incredibly enlightening! I'm facing a very similar situation where my employer has been treating backup childcare benefits as taxable imputed income, and I had no idea this could potentially violate Section 129 rules. What really strikes me from reading everyone's experiences is how widespread this issue seems to be across different companies and backup care providers. It appears there's a significant knowledge gap between what the tax code actually allows (the $5,000 exclusion for qualifying dependent care assistance) and how many payroll departments are actually implementing these benefits. I'm planning to follow the proven strategy that multiple people have shared: handle this year's taxes properly by claiming the imputed income amounts on Form 2441 (since I'm effectively "paying" for that care through additional taxes), while simultaneously working with HR to correct this for future years. The advice about approaching HR collaboratively rather than confrontationally seems crucial. I'm going to ask them to walk me through their reasoning for the current classification, then share documentation from our backup care provider showing how their program is structured to meet Section 129 requirements. Several people mentioned that the providers themselves design these programs specifically to qualify for the tax exclusion, which really reinforces that employers should be excluding these benefits up to the annual limit. It's frustrating that working parents have to become tax experts just to ensure we're not overpaying on benefits designed to help us, but this community discussion has made the path forward much clearer. Thanks to everyone who shared their experiences - it's exactly this kind of support that makes these complex tax situations manageable!
I've been following this thread closely as someone dealing with the exact same issue! My employer has been adding about $2,600 in backup childcare benefits as imputed income to my W-2 this year, and reading through everyone's experiences has been incredibly helpful. What really resonates with me is how this seems to be a systemic problem affecting working parents across many different companies. The disconnect between what Section 129 actually allows (up to $5,000 exclusion for qualifying dependent care assistance) and how payroll departments are implementing these benefits is clearly widespread. I'm definitely going to take the dual approach that seems most successful here: claim the imputed income amounts on Form 2441 for this tax year since I'm effectively "paying" for that care through extra taxes, while also working with HR to get this corrected going forward. The strategy about asking HR for their written rationale first, then sharing documentation from the backup care provider about Section 129 compliance, seems like the most diplomatic way to approach this. Making it collaborative rather than confrontational is clearly key to getting positive results. One thing I wanted to add - I noticed several people mentioned getting documentation directly from their backup care providers. This seems like a really smart move since these companies have designed their programs specifically to meet tax code requirements and probably have materials ready to help employers implement the benefits correctly. Thanks to everyone who shared their experiences and solutions. It's made what seemed like an impossible tax situation much more manageable!
This has been such an incredibly valuable thread for understanding what's clearly a widespread issue! I'm new to this community but dealing with the exact same situation - my employer has been treating our backup childcare benefits as fully taxable imputed income when it sounds like they should qualify for the Section 129 exclusion. What really stands out to me from reading through everyone's experiences is how consistent the pattern is across different companies and providers. It seems like there's a real education gap where many HR departments either don't know about the dependent care assistance rules or are defaulting to the "safe" approach of taxing everything rather than risk getting it wrong. The dual strategy that multiple people have outlined makes perfect sense - handle this year's taxes correctly by claiming the imputed income amounts on Form 2441 (since we're effectively paying for that care through additional taxes), while also working to get the underlying issue fixed with our employers for future years. I'm particularly grateful for all the tactical advice about approaching HR diplomatically. The suggestion to ask for their written rationale first, then share documentation from the backup care provider about Section 129 compliance, seems like a much more effective approach than just showing up with tax code printouts and telling them they're wrong. As a newcomer to navigating these complex tax situations, this community support has been invaluable. It's frustrating that working parents have to become tax experts just to make sure we're not overpaying on benefits that are supposed to help us, but at least we don't have to figure it out alone!
11 Random tip: make sure you're also tracking any leftover GoFundMe money if you didn't use it all for medical expenses. If you use the extra for non-medical purposes, that doesn't change the gift status, but it might affect your medical expense deduction calculations.
3 That's a smart point. I was wondering about that since medical expenses are only deductible if you itemize and exceed that 7.5% of AGI threshold, right? So if you received $32,500 but only had $29,000 in qualifying expenses, you can't claim the full amount?
Exactly right! You can only deduct the actual medical expenses you paid, not the full amount received from GoFundMe. So in your case, you'd be looking at deducting up to $29,000 in medical expenses (if you itemize and exceed the 7.5% AGI threshold), regardless of receiving $32,500 total. The extra $3,500 is still considered a gift and not taxable to you, but it doesn't create additional medical deductions since you didn't spend it on qualifying medical expenses.
Just to clarify one more important point - while the GoFundMe money is considered gifts and not taxable income to you, make sure you keep detailed records of how you used the funds. The IRS may want to see that the money was actually used for the stated medical purpose if there are ever any questions. Also, don't forget that you can potentially deduct medical expenses that you paid out of pocket beyond what the GoFundMe covered. If you had additional medical costs related to your TMJ treatment that weren't covered by the campaign funds, those could still count toward your medical expense deduction if you itemize and meet the 7.5% AGI threshold. Keep all your medical bills, insurance statements, and GoFundMe records organized together - it'll make things much easier if you ever need to reference them later!
This is really helpful advice! I'm actually in a similar situation with medical crowdfunding and had no idea about keeping such detailed records of how the funds were used. Do you recommend any specific way to organize all these documents? Like should I create a separate folder for GoFundMe records vs medical bills, or keep them all together chronologically? I want to make sure I'm prepared if the IRS ever has questions about it.
Alice Fleming
I'm in the exact same boat as so many of you here! Mailed my paper return about 5 weeks ago and have been checking that IRS portal religiously with no luck - just that same "Return Not Processed" message every single time. Reading through everyone's experiences has been both eye-opening and incredibly reassuring. I had no idea paper returns would take 8-12 weeks just to show up in their system! I was starting to panic that my return got lost or I made some major error, but it sounds like we're all just stuck in the same incredibly slow processing queue. I'm definitely going to set up that ID.me account this week based on everyone's recommendations to hopefully get more detailed information than just that vague portal message. The taxr.ai tool that several people mentioned also sounds really helpful for getting realistic timeline predictions instead of being left completely in the dark. It's honestly comforting (in a misery-loves-company way) to know so many of us are dealing with these exact same frustrating delays. At least now I know this is just the reality of paper filing right now and not something wrong with my specific return. Thanks to everyone for sharing their timelines and experiences - this community has made what could be a really stressful situation much more manageable! I've absolutely learned my lesson about e-filing for next year. I chose to mail because I thought it was "safer" but the months of anxiety definitely aren't worth it. Here's hoping we all start seeing some movement in our returns soon!
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Lim Wong
ā¢I'm dealing with almost the exact same timeline - mailed my return about 6 weeks ago and have been obsessively checking that portal! This thread has been such a lifesaver because I was genuinely convinced my return had disappeared into some kind of postal black hole. The 8-12 week processing timeline everyone keeps mentioning is absolutely mind-blowing to me. I had no idea paper returns would take this long just to get acknowledged by the system - I was expecting maybe 4-6 weeks maximum! I definitely should have done more research before choosing to mail instead of e-file. I'm going to set up that ID.me account this weekend based on all the recommendations here, and I'm also planning to try the taxr.ai tool around the 8-week mark for better timeline predictions. Anything has to be more helpful than just staring at that frustrating "not processed" status that tells us absolutely nothing! Thanks for sharing your experience - it's so reassuring to know we're all stuck in this same slow processing nightmare together. At least now I can stop checking that portal multiple times a day knowing this delay is completely normal for paper filers! Definitely joining the "e-filing next year" club after going through this stress.
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Dylan Fisher
I'm in almost the exact same situation as everyone here - mailed my paper return about 4 weeks ago and that "Return Not Processed" message has been driving me absolutely crazy! This entire thread has been such a huge relief because I was starting to think the IRS lost my return or I made some catastrophic filing error. The consistent 8-12 week timeline that everyone is sharing is honestly shocking to me. I had no idea paper returns would take this long just to show up in their system - I was naively expecting maybe 3-4 weeks maximum! I definitely should have researched this better before choosing to mail instead of e-file. I'm going to follow all the great advice here and set up that ID.me account this week to hopefully get more detailed information than just that vague "not processed" status. The taxr.ai tool that several people have mentioned also sounds really promising for getting realistic timeline predictions instead of being left completely in the dark about where my return is in the queue. Thanks to everyone for sharing your experiences and timelines - knowing that we're all stuck in this same incredibly frustrating processing situation makes the wait so much more bearable. This community has turned what could have been months of panic into just... well, months of informed waiting! I've absolutely learned my lesson about e-filing for next year. I thought paper filing was "more secure" but the anxiety definitely isn't worth it. Here's hoping we all start seeing some movement in our returns soon. At least we're all in this slow processing nightmare together!
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