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Have you considered a 72(t) distribution? It's called Substantially Equal Periodic Payments (SEPP). You can take money from your 401k before 59½ without the 10% penalty if you take distributions according to specific IRS formulas. The catch is you have to continue the payments for 5 years or until you reach 59½, whichever is longer.
Just to add something nobody mentioned - check if your 401k plan allows for an in-service distribution. Some plans let you take money while still employed. Also, if you're 55 or older and leave your job, you can take penalty-free distributions from THAT employer's 401k (not IRAs or previous employers).
A couple more options I've found helpful: VITA (Volunteer Income Tax Assistance) - free in-person help if your income is under about $60k. They can do most basic returns including self-employment, but not complicated business stuff. AARP Tax-Aide - despite the name, they help people of ANY AGE, not just seniors. Income limits are a bit more flexible than VITA. Both programs are staffed by IRS-certified volunteers and they're completely free. The big advantage is having someone look over everything and catch mistakes. You do need an appointment though, and they fill up fast!
Are these open now for 2025 filing season? I tried calling my local VITA center but couldn't get through. Do they take walk-ins or is it appointment only?
Most VITA sites open in late January and run through April 15th. A few sites operate year-round but with limited hours. Almost all require appointments now, especially since COVID - very few take walk-ins anymore. The best way to find sites is through the IRS website locator tool or by calling 211 in most areas. They can tell you which sites are open and how to make an appointment. Book early if you can - my local site is usually fully booked by mid-February!
Has anyone used OnLine Taxes (OLT.com)? It's one of the IRS Free File options and I'm considering it since TurboTax dropped out of the program. I have a pretty simple return with just a W-2 and some student loan interest, but I'm nervous about trying something new.
I used OLT last year and it was fine! The interface isn't as polished as TurboTax, but it gets the job done. It asked all the same questions and I got the same refund amount when I compared with a calculation I did separately. They do have live chat support if you get stuck on something. The best part was it was completely free for both federal and my state return which saved me about $70 compared to what TurboTax wanted to charge.
Whatever you do, don't ignore this! I made that mistake and ended up with a tax lien that destroyed my credit score for years. The IRS has more collection power than any other creditor. Call them directly, be honest about your situation, and they'll usually work with you. Despite their reputation, most IRS agents I've dealt with have been reasonable when you're proactive about resolving your debt.
This is so true. My brother ignored his tax debt and eventually had his wages garnished - they took 25% of his paycheck until the debt was paid. The IRS doesn't mess around with collections.
Exactly. And garnishment is actually worse than a payment plan because you have no control over the amount taken. With a payment plan, you can at least negotiate a monthly amount that works for your budget.
Has anyone actually tried requesting penalty abatement themselves? I've heard mixed things about how likely the IRS is to approve these requests.
I successfully got First Time Penalty Abatement last year. The key is that you need a clean compliance history for the 3 prior years. If you meet that criteria, they almost always approve it. I just called and specifically asked for "First Time Penalty Abatement under IRM 20.1.1.3.3.2.1" and the agent processed it right away.
I experienced this exact problem last tax season. Here's what worked for me: I filed the corrected 1099-MISC forms with zeros AND included a detailed cover letter explaining the situation. In the letter, I emphasized that I had made a good faith effort to file on time but used the wrong form type due to confusion about the new requirements. I received no penalties and got confirmation that everything was processed correctly. The key was documenting the timeline clearly in my letter - when the original forms were filed, when I discovered the error, and how promptly I submitted corrections. The IRS has been pretty reasonable about this specific issue because the 1099-NEC rollout created confusion for many businesses. Just make sure your corrections are clear and done properly to avoid creating even more problems.
Did you file electronically or paper forms for the corrections? I'm wondering which method is better for ensuring they connect the corrected forms to the originals.
I filed the corrections electronically through the same service I used for the originals (in my case, Tax1099). Electronic filing is generally better because it processes faster and has fewer chances for manual errors. The system is designed to connect the corrected 1099-MISC forms to the originals automatically through the TIN (tax ID) matching and the "corrected" checkbox. For the new 1099-NEC forms, make sure you're using the same payer and recipient information exactly as it appeared on your incorrect 1099-MISC forms to help their systems match everything up correctly. Consistency in how names and TINs are formatted between all forms is crucial.
Has anyone had success getting these penalties waived after they've already been assessed? I made the same mistake (filed MISC instead of NEC) but didn't realize it until I got a CP2100 notice with proposed penalties of $2,400 for my 48 incorrect forms. Feeling sick about this.
Yes! I received a penalty notice for a similar situation and successfully got it waived. Write a penalty abatement letter citing "reasonable cause" and explaining the confusion with the new form requirements. Include timeline details showing you acted in good faith and corrected promptly once you discovered the error. Reference IRS's First Time Abatement policy if this is your first penalty. In my case, they waived 100% of the penalties after review. Don't pay until you've gone through the abatement process - it works more often than people realize, especially for this specific 1099-NEC transition issue.
Diego Vargas
Has anyone considered filing a paper return this year instead of e-filing? With all these security issues, I'm thinking old school might be safer, even if it means waiting longer for a refund.
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NeonNinja
ā¢Paper filing is even worse right now. My brother filed paper last year and it took 11 MONTHS to get his refund. The IRS is still struggling with massive paper backlogs from the pandemic. Plus mail theft is at an all-time high, so your tax documents with SSN and all your info could get stolen from your mailbox.
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Diego Vargas
ā¢I had no idea the paper backlog was still that bad! Thanks for the warning about the mail theft too, that's something I hadn't considered. I definitely don't want to wait 11 months for my refund either. Looks like I'll need to find a secure e-filing option after all. This whole situation with eFile.com is making me paranoid about which tax software to trust. Maybe I'll look into those options the cybersecurity person mentioned above.
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Anastasia Popov
I just checked and the IRS has actually removed eFile.com from their authorized e-file providers list as of this morning. I was halfway through my return with them - thank god I didn't submit yet! Anyone know if there's a way to report if you think you might be affected? I entered my SSN and everything...
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Sean Murphy
ā¢You can report it to the IRS Identity Theft department. Call the dedicated Identity Theft line at 800-908-4490 or fill out Form 14039 if you suspect your info was compromised. Also freeze your credit reports ASAP with all three bureaus!
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