Thank you for bringing this up - I hadn't even thought about withholding! Does the school typically report scholarship/grant info to the IRS? Or would they only know if I report it? And how would I even calculate how much I should pay in estimated taxes?

Yes, schools report your scholarship and grant information to the IRS using Form 1098-T, which shows your tuition and related expenses as well as scholarships/grants received. So the IRS does know how much you received, even if you don't report it. This is why people sometimes get letters from the IRS later asking about unreported income. For calculating estimated taxes, you'd need to figure out approximately how much of your scholarship/grant money will be used for non-qualified expenses (the taxable portion), then calculate the tax on that amount based on your tax bracket. The IRS has worksheets in the Form 1040-ES instructions to help with this. Since you're a dependent, your tax situation might be affected by the kiddie tax rules depending on your total income.

Is there a specific form we need to use for reporting scholarship income? I don't see anything specific about this on the 1040.

Thanks for mentioning this! I didn't realize there was a checkbox specifically for multiple jobs. Do you know if checking that box results in the same withholding as calculating the extra amount manually? I'm wondering if one method withholds more accurately than the other.

The checkbox generally works well if both jobs have similar pay levels. It essentially tells your employer to withhold taxes as if you're single (which is higher) rather than married, which compensates for having two incomes. If there's a big difference between your incomes, or if you have other income sources like investments or rental properties, the manual calculation might be more accurate. The checkbox is basically a simpler but slightly less precise approach. I chose it because I didn't want to recalculate every time we got raises or bonuses - the checkbox automatically adjusts when your income changes.

I've used it for three years straight and it's been pretty accurate for me. Last year it predicted a $720 refund and we got back $678. The year before it was within about $200. You have to make sure you're including ALL income sources though. If you have investments, side gigs, or anything that doesn't have withholding, that could explain why your results were off.

Thanks for sharing your experience. Maybe I need to check my inputs more carefully this time. I think part of the problem might have been that I got a bonus halfway through the year that messed up the calculations, and I also had some stock sales I didn't account for properly. I'll try the calculator again and make sure I'm including everything. It's reassuring to hear it can actually be accurate when used correctly!

Can you claim any penalties or extra interest if your refund was delayed because of an IRS error? My refund was delayed for 6 months last year because they incorrectly flagged my return!

Unfortunately, no. The standard interest they pay for delayed refunds is the only compensation you'll receive, regardless of why the delay occurred. The IRS pays interest on delayed refunds if they're issued more than 45 days after the return due date or the date you filed, whichever is later. Even if the delay was caused by an IRS error, there's no additional penalty or interest payment beyond what they automatically calculate. It's frustrating, but the 1099-INT interest payment is all you'll get. The interest rate they pay is set by law and adjusts quarterly based on federal short-term rates.

lol welcome to government efficiency! they literally could just adjust your taxes automatically but instead they send you a form to tell you to tell them about money they paid you. peak bureaucracy right there

Thanks, that makes sense in a completely nonsensical way lol. Government gonna government I guess. Just seems like such a waste of paper and time to send us forms about information they already have!

Thanks for the accounting perspective! Would it be worth asking them directly if they plan to issue a 1099 for this reimbursement? Or is there specific language I should use when I submit the W9 to make it clear this shouldn't be treated as income?

Yes, it would definitely be worth asking them directly if they plan to issue a 1099 for the reimbursement. A simple email saying "I'm submitting the W-9 as requested, but want to confirm you won't be issuing a 1099 for this payment since it's a reimbursement for expenses I incurred due to construction issues, not income" should do the trick. As for specific language when submitting the W-9, I'd attach a brief cover letter stating: "This W-9 is being provided solely for your vendor setup requirements. The $750 payment represents reimbursement for mold testing expenses I incurred as a result of construction defects, not payment for services or taxable income. Please ensure this is properly coded in your accounting system as an expense reimbursement to prevent incorrect 1099 reporting." That clearly documents your position if there are any questions later.

Bad advice. If a company asks for a W-9, refusing to provide it could cause them to withhold payment entirely or potentially subject you to backup withholding at 24%. Much better to provide the W-9 with a clear explanation that this is a reimbursement, not taxable income.

Wait, really? I've been investing for 5 years and never knew this. So if my dividends automatically buy more shares, I need to add those amounts to my original investment when calculating gains/losses?

Exactly! When dividends are automatically reinvested to buy more shares, you've already paid income tax on those dividends in the year you received them. Those reinvested amounts become part of your cost basis. If you don't add them to your cost basis, you'll end up paying tax twice - once when you received the dividend, and again when you sell the shares (because your gain would appear larger than it actually was). This is especially significant for long-term holdings where years of reinvested dividends can substantially increase your true cost basis.

I've been using TaxAct for the last three years and it's pretty good with investments. You can import most 1099-B forms directly or enter them manually. Much cheaper than TurboTax but still gets the job done.