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One thing nobody mentioned yet is estimated tax payments for self-employment or investment income. If you've had a good year with extra income, you might need to make a Q4 estimated payment by January 15th to avoid penalties. This isn't technically a "tax reduction" strategy but can save you money in penalties!
Good point! I got hit with a penalty last year because I didn't realize this. Is there any kind of safe harbor rule that helps avoid the penalty even if you owe a lot?
If you have kids, look into contributing to a 529 college savings plan before year end. Many states offer tax deductions for contributions. Also, review any medical procedures you might need - sometimes it makes sense to bunch them in December if you're close to exceeding the medical expense deduction threshold (which is 7.5% of your AGI).
Something nobody's mentioned yet - make sure your mom doesn't claim herself as independent on her own tax return if she files one for her part-time job. You'll both get flagged if she claims herself and you also claim her as a dependent.
This! My brother and I got audited because my mom filed her own taxes claiming herself while my brother also claimed her. What a nightmare that was to sort out.
Have you tried looking into tax attorneys who offer consultation services? I had a similar situation last year when I was starting a small business but wanted to handle the ongoing tax work myself. I found a tax attorney who charged me for a 2-hour consultation where I brought all my questions. She answered everything, gave me some resources to reference, and didn't try to sell me on recurring services. It wasn't cheap (about $400 for the session), but the advice saved me probably thousands in potential mistakes.
That's an interesting approach. Did you just search for "tax attorney consultation" or how did you find someone willing to do this?
I actually found her through my state's bar association website. They have a referral service where you can search for attorneys by specialty and many list whether they offer consultation services. I called a few and specifically asked about a one-time paid consultation. A good approach is to be very clear upfront about what you want - I literally said "I'm looking for a one-time paid consultation to get answers to specific tax questions as I'll be handling my own filing." Some weren't interested, but others were perfectly happy with this arrangement.
Don't overlook the free resources! I know you said you're willing to pay, but I've had great experiences with VITA (Volunteer Income Tax Assistance) volunteers. If your income is under $60k, they offer free tax help. Even if you don't qualify for their free filing help, many of the volunteers are really knowledgeable and can answer questions. The same goes for Tax-Aide from AARP - they focus on seniors but often help others too.
Can confirm this! I volunteered with VITA for 3 years and we regularly had people come in just to ask questions about their tax situation. As long as it's not during the busiest parts of tax season, most volunteers are happy to help even if you're not having them prepare your return.
I went through bankruptcy with about $500k in IRS debt last year. Few things to keep in mind: 1) Make sure you file all required returns before bankruptcy. Any unfiled returns will definitely not be dischargeable. 2) Be careful about any transfers of assets in the years leading up to bankruptcy - the court looks back several years and can claw back anything they consider inappropriate. 3) Document EVERYTHING about your current financial situation very thoroughly. The courts are more skeptical when large tax debts are involved. 4) The IRS will scrutinize your case much more closely than a typical bankruptcy. They may send their own attorneys to challenge the discharge of tax debt. 5) Your trading accounts and history will be examined closely. Be prepared to explain any large withdrawals. Good luck! It's a stressful process but there is light at the end of the tunnel.
Thanks for sharing your experience! How long did the whole process take from filing to discharge? And if you don't mind sharing, were you able to get all of your tax debt discharged or just a portion?
The entire process took about 9 months from filing to discharge, which is longer than typical bankruptcies. The tax components definitely slow things down because the IRS reviews everything carefully. I was able to get about 80% of my tax debt discharged. The remaining 20% wasn't dischargeable because those taxes were from a year where I filed late and hadn't yet hit the 2-year mark from filing date. I ended up on a payment plan for that portion, but having 80% wiped out made that manageable.
Don't overlook the emotional toll this will take. Bankruptcy with the IRS involved is WAY more stressful than regular bankruptcy. I went thru this in 2022 and spent almost every night unable to sleep. Get some support - therapist, support group, whatever. The stress can be unbearable especially when ur young and feel like ur life is ruined. Also prepare for after bankruptcy. Trading might be harder without capital. Have a backup plan for income. The discharge feels amazing but then reality hits that you need to rebuild completely.
This is so true. I went through tax bankruptcy last year and the emotional side was the hardest part. Did you find that lenders were especially harsh because it was tax debt rather than credit cards or medical bills? I've been struggling to rebuild my credit because it seems like lenders see tax bankruptcy as a bigger red flag.
NebulaNova
Quick tip from someone who's been through this - if you have your last paystub of the year, it usually has your year-to-date info which is basically what goes on your W2! Most restaurants use standard payroll systems that calculate this automatically. Might be worth checking if you have that last stub somewhere.
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Sofia Ramirez
ā¢That's a great point! I don't think I saved my last paystub, but now I'm going to check my email to see if they sent electronic copies. I vaguely remember getting emails when a new paystub was available, but I usually just checked the deposit amount. If I can find that last one from December it would solve everything! Thanks for the suggestion!
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NebulaNova
ā¢Happy to help! Even if you can't find the December one, any paystub from late in your employment might be useful since it would have the year-to-date totals up to that point. You could then estimate the additional earnings for your remaining time there. And don't forget to check your spam folder - payroll emails often end up there.
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Keisha Williams
Has anyone here ever had the IRS penalize them for filing with Form 4852 instead of a W2? I'm worried my refund will get flagged or delayed if I go this route. My old employer is being difficult about sending my W2 and I need to file soon.
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Paolo Conti
ā¢I had to use Form 4852 two years ago and had zero issues. The IRS actually processes these pretty routinely. As long as your estimates are reasonable and you document your attempts to get the W2, you should be fine. My refund wasn't delayed at all. The employers are the ones who typically get in trouble, not you.
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