I did put in a new sound system about 8 months ago for around $1,100. Do you think that would help? Insurance just seemed to use some generic value for my car's make and model.

Absolutely mention the sound system! Insurance companies use standard values unless you specifically tell them about upgrades. You'll probably need to provide the receipt if you have it, or some kind of proof of the upgrade. Even without a receipt, take photos if the system is still intact and visible. This is exactly the kind of thing that gets missed in standard valuations. $1,100 is significant and should definitely be factored in. Call them and specifically ask to have your claim adjusted to include the aftermarket sound system. Be persistent!

Diminished value claims are really state-dependent though. Some states make them nearly impossible to collect on, while others are more consumer-friendly. Worth looking into for sure, but don't get your hopes up too high.

Thank you for this suggestion! I just checked both of our paystubs and mine actually does say "Single" for the withholding status even though I thought I'd updated it. Going to talk to HR tomorrow and get this fixed immediately. This might explain a big part of the problem!

Glad you checked! That's likely a significant part of the issue. When you speak with HR, make sure they apply the correction going forward and ask if they can adjust the withholding for the remainder of the year to compensate for the under-withholding from earlier months. If they can't make that adjustment, you might need to specify an additional amount on line 4(c) that's higher than you'd normally need for the remaining months to make up the difference.

This is super important! I was still thinking in terms of "allowances" for years after the change and it messed up my withholding. The new W-4 is actually more accurate if you fill it out correctly.

Thanks for the reality check. I'm guessing I'll need to reclassify it as a distribution then. Is there any downside to doing that versus a loan to shareholder? And will I get in trouble for having initially run it through the business account?

A distribution is simpler than a loan in most cases. With a loan, you need to create proper documentation, charge interest at market rates, and set up a legitimate repayment schedule - otherwise the IRS might still classify it as a distribution anyway. You won't get in trouble for the initial miscategorization as long as you correct it. This happens frequently with small business owners. Your accountant will simply reclassify the transaction properly in your books. What would cause trouble is if you tried to deduct the kitchen remodel as a business expense and got audited. By being proactive and fixing the categorization now, you're doing exactly what you should be doing in this situation.

Yeah but the IRS doesnt look at every transaction right? Couldnt they just call it "building materials" or something vague and avoid the whole issue? My brother in law does that kinda stuff all the time with his business.

Can you explain exactly how to get the transcript? I logged into my IRS account but got confused by all the different transcript options. Is it the "Record of Account" or the "Account Transcript" or something else?

You want to request the "Wage and Income Transcript" which shows all information returns filed with your SSN (like W-2s, 1099s, etc.) for the tax year in question. This will show exactly what the IRS has on record. Also request the "Account Transcript" for the specific tax year, which shows actions taken on your account including assessments, payments, and adjustments. These two together will give you the complete picture of what the IRS is seeing versus what you reported.

TurboTax Audit Defense does cover CP2000 notices! I used it last year when I got one. You just need to call them and they'll assign a tax professional to help prepare your response. They won't represent you before the IRS, but they'll help you figure out what documentation to send and review your response letter.

Thank you so much for this additional perspective! If I file as HOH and then reconcile with my husband later this year, would that create any issues with either my taxes or benefits?

Your filing status is determined by your situation on December 31st of the tax year. If you reconcile later this year, that would affect next year's tax filing, not the current one. For benefits, you should update your SNAP case whenever your household situation changes. There's usually a requirement to report changes within a certain timeframe (often 10 days). Failing to update your household composition can potentially result in an overpayment that you might have to pay back. The specifics vary by state, so I'd recommend checking with your caseworker about your local reporting requirements.

The 6 month rule is so important! I messed this up one year and got a letter from the IRS later asking for proof. Had to refile and pay penalties because I misunderstood the timing requirement.

Exactly! And the burden of proof is on the taxpayer. I always recommend people keep documentation of separate residences (lease agreements, utility bills, etc) for at least 3 years after filing. The IRS can come back and question your filing status, and without proof, you could face not just having to pay the difference but penalties and interest too.