That's a good point I hadn't considered! I'm pretty sure I'm taking the standard deduction in both cases since my mortgage interest and charitable donations probably don't add up to enough to itemize, but I should double check. As for state taxes, I'm in Texas so we don't have state income tax, which makes things a bit simpler. Do you think that could still be affecting the calculation somehow?

If you're in Texas with no state income tax, then that eliminates one possible source of discrepancy. That's actually helpful for narrowing down the issue. Even if you're taking the standard deduction, check if both systems are using the correct amount for your filing status. The standard deduction for single filers is $13,850 for 2023 tax year. If H&R Block somehow miscategorized your filing status, that could explain part of the difference. Another area to check is qualified retirement contributions. Sometimes tax software requires you to manually enter 401(k) contributions even if they're shown on your W2. If H&R Block missed those, it would calculate a higher taxable income than the IRS calculator.

This is solid advice! Line-by-line comparison is tedious but effective. I work in payroll and Box 12 codes cause the most confusion with tax software. Codes D, E, F, G, H and S all relate to different types of retirement contributions and sometimes software doesn't categorize them correctly.

This is exactly what I've been wondering. Beyond just getting my tax situation fixed, can I sue them for damages? The stress this has caused has been unbelievable. I've had trouble sleeping, my credit score dropped, and I've spent countless hours trying to fix this mess. Would small claims court be appropriate, or should I look for an attorney who works on contingency?

This case is too complex and the damages potentially too large for small claims court. You need an attorney who specializes in tax identity theft or financial fraud. Many attorneys in this field will offer a free initial consultation. The damages you could pursue include: all tax penalties and interest, compensation for credit damage, costs for credit monitoring services, time spent resolving the issue (calculated at a reasonable hourly rate), and potentially punitive damages since their actions appear willful rather than accidental. Some states also allow for statutory damages for identity theft. I'd recommend contacting your state bar association for a referral to attorneys specializing in identity theft or tax fraud. Look for someone who has experience specifically with business-related identity theft, as this is more complex than typical consumer identity theft cases.

I was strictly a volunteer. I helped at events and occasionally assisted with marketing materials, but I was never an employee, never received compensation, and had no financial authority or access to accounts. I was not an officer or board member. I just let them use my SSN temporarily to set up the Square account when they were in a rush one day, with the explicit understanding that they would immediately change it to their Tax ID.

That makes this WAY worse from a legal perspective. As someone with nonprofit experience, I can tell you that what they did borders on criminal fraud. Nonprofits have EINs (Employer Identification Numbers) specifically for financial transactions. There is NEVER a legitimate reason to use a volunteer's SSN for merchant processing.

Wouldn't filing an amended return be redundant at this point? The IRS already knows about the income and has calculated what I owe. Would there be any benefit to going through that process now?

Filing an amended return is still beneficial even after receiving an audit notice. When you file your own amendment, you have the opportunity to present the complete picture of your tax situation - including any deductions or credits related to that income that the IRS might not have considered. The IRS calculation in the notice only adds the income they discovered and recalculates your tax. They don't automatically apply any potential deductions you might be entitled to from that business relationship. By filing Form 1040-X, you're taking control of the narrative rather than just accepting their adjustment.

I second this. I had penalties waived using Form 843 when I had a similar situation with a late 1099-K from PayPal. Make sure to include dates, copies of when you received the 1099, and a clear explanation. Be super polite and straightforward in your letter!

How do you handle insurance and registration for the 100% business car? Do you put that in your business name? My insurance was weird about covering a personal vehicle used primarily for business.

I have the business vehicle registered and insured under my LLC name with a commercial auto policy. You're right that it can be tricky with personal policies - many won't properly cover business use or will charge extra. The commercial policy actually ended up being around the same price after shopping around, and it provides better coverage for my situation. The registration in the business name also makes it clearer to the IRS that it's a dedicated business asset. One thing to note though - if you go this route, you need to be disciplined about never using that vehicle for personal trips, not even stopping for personal errands during business trips.

Did you have to pay a higher rate for a business lease vs a personal one? I looked into this and the dealer wanted to charge me more when I mentioned it was for my business.

Thanks for the suggestions! I checked and my withholding percentage definitely dropped. Looking at box 2 of my W-2, last year they withheld about 18% of my total income but this year it's only 15%. That seems to be where the problem is. The bonus was about $8500 so that explains a good chunk of the difference.

Yeah that withholding percentage drop is definitely your answer. For the bonus specifically - they typically withhold a flat 22% from bonuses (called supplemental wages), but if you're in a higher bracket overall, that's not enough. If you expect similar bonuses in the future, you can add an extra withholding amount on line 4(c) of your W-4. Calculate roughly how much more you'd need based on your actual tax rate minus the 22% they'll withhold automatically.

Does your company let you do this? Mine requires submitting W-4 changes like 3 weeks in advance so it's hard to time it exactly with the bonus paycheck.

Yeah my company lets us make W-4 changes through our online portal and they take effect in the next pay cycle. I just mark myself as "Married but withhold at higher Single rate" and add 0 dependents instead of my usual 2 for the bonus check. I've also started just having an additional $50 withheld from each regular paycheck throughout the year (line 4c on the W-4) which builds a little cushion. I'd rather get a small refund than owe.