Does this actually work? Wouldn't you still get penalized for those early quarters where you didn't pay enough? I thought the penalty was calculated per quarter, not just at the end of the year.

The underpayment penalty is actually calculated for each quarter separately, but it's based on how much you're short for the required payment for that period. So you're right that you could face some penalty, but it's usually quite small. For me, the calculation worked out to a penalty of about $240 on a $120,000 income. That was worth it for me to maintain better cash flow throughout the year. It's really a business decision - pay the mathematically correct amount each quarter or pay a small penalty for the flexibility. Form 2210 will calculate the exact penalty amount.

Yep, EFTPS works great for this! I use it and you can definitely schedule different payment amounts for each quarter. You can even make extra payments anytime you want. The interface looks like it's from 1995, but it's actually really reliable.

Thanks for confirming! I'll set it up this weekend. Does it send reminders before the scheduled payments go through? I'm worried about forgetting and not having enough in my account when it processes.

I actually moved in with him about 18 months ago to help take care of him before he passed. So I wouldn't qualify for that 2-year requirement yet. Do you know if I'd need to live there longer to get that exclusion? Or does the clock reset when I inherited it?

The clock doesn't reset upon inheritance - it's based on your actual residency. So if you've already lived there for 18 months, you'd need to stay another 6 months to hit the 2-year requirement. That could save you a lot if the house appreciates beyond your stepped-up basis. Also keep in mind that you'd need to claim it as your primary residence, not just occasionally staying there. But it sounds like you've already been using it as your main home, so that part should be covered.

We used a certified appraisal dated within 30 days of my mom's passing. Cost about $500 but worth every penny for documentation. I also kept comps from similar homes that sold in the neighborhood around the same time as backup evidence.

I messed up my W-4 last year and had way too little withheld. Ended up owing $1200 at tax time that I wasn't expecting! Is there an easy way to estimate how much should be withheld?

The IRS has a tax withholding estimator tool on their website that's actually pretty good. You enter your income, filing status, and other details, and it gives you the exact numbers to put on your W-4. If you're worried about owing again, you can also just put a specific additional amount to withhold on line 4(c) of the W-4. Even an extra $25-50 per paycheck can make a big difference at tax time and give you a buffer. Better to get a small refund than owe money you haven't budgeted for!

Thanks so much for this breakdown! I had no idea about all these differences. I'm definitely going to ask for the W-4 form when I go in tomorrow. If they keep pushing for the W-9, I'll show them this explanation about why I should be classified as an employee. Is there anything specific I should say if they try to insist on the W-9? I don't want to lose this job but also don't want to get stuck with a huge tax bill later.

Just be straightforward but polite. Say something like: "I've done some research, and based on my role here, I should be classified as an employee and fill out a W-4. Employee classification is determined by IRS rules, not by preference." If they still push back, you could mention that employee misclassification is something the IRS takes seriously, and you're concerned about potential tax issues down the road. You could also ask what specifically about your role makes them think you should be a contractor rather than an employee. As a last resort, you can always contact your state's Department of Labor or the IRS directly for clarification. But hopefully a straightforward conversation will resolve it!

Wait, are you serious?! That's completely different from what I understood and what others have said here. Do you have a source for this? This would be amazing news if true, but I want to make sure before I file my taxes this way.

Yes, absolutely serious. The provision was included in the COVID-related Tax Relief Act of 2024, which clarified that "no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income." The IRS then issued Revenue Ruling 2025-02 confirming this treatment. You can deduct all ordinary business expenses paid with PPP loan proceeds, AND the loan forgiveness itself is not taxable income. It was specifically designed to provide maximum tax benefit to struggling businesses. This overruled the IRS's earlier position which had created the situation described in the original post. Congress decided businesses needed the additional tax relief.

For partial PPP forgiveness, only the forgiven portion receives the special tax treatment. The unforgiven portion is treated as a regular loan. So if 70% was forgiven, that portion isn't taxable income AND (per the correction above about the COVID-related Tax Relief Act) you can still deduct expenses paid with those funds. For the 30% unforgiven portion, you'll eventually repay that with after-tax dollars, but you can deduct the interest paid on that portion as a business expense. Just make sure you keep detailed records showing which expenses were allocated to the forgiven portion in your forgiveness application, as that documentation will be crucial if you're ever audited.

Be REALLY careful with tax relief companies! Most of them charge huge fees and promise things they can't deliver. They basically do the same things you can do yourself (set up payment plans, apply for currently not collectible status, or submit an offer in compromise). The IRS has their own programs that don't require paying a middleman. Check out the IRS Fresh Start program before paying some company thousands of dollars for something you could do yourself for free.