My daughter just has her job income from working at the campus bookstore, no investments or anything fancy. But I'm curious - what counts as "unearned income" exactly? And does scholarship money factor into any of this tax stuff? She got a partial scholarship last year.

Unearned income includes things like interest, dividends, capital gains, rents, royalties, etc. - basically money received from sources other than working a job. It's passive income rather than earned income. As for scholarships, they're generally tax-free if used for qualified education expenses like tuition, fees, books, and required supplies. However, any scholarship money used for room and board, or other non-qualified expenses would be considered taxable income. But this would be considered earned income, not unearned income, so it wouldn't trigger the kiddie tax rules. It would just be added to her regular taxable income.

The federal rules for standard deduction for dependents are the same regardless of what state they're in. But for state taxes, it gets complicated. Some states may require your son to file a return as a part-year resident or non-resident of that state if he earned money there. Most states follow similar dependent rules as federal but there are exceptions. Check both your home state and his college state rules.

Thanks for mentioning this! I just checked my December paystub and you're right - it does show up there in a separate category called "Relo-MIDP" with the tax withholding. That's really helpful to know it should be on my W-2. Did you need to do anything special when filing your taxes, or did the tax software handle it automatically since it was part of your W-2 income?

Since it was included in Box 1 of my W-2, I didn't need to do anything special when filing. The tax software handled it automatically as regular income. The only thing I made sure to do was keep documentation from my relocation company that explained the payment, just in case I ever got audited. The one thing to double-check is that the withholding amounts match up with what was actually withheld from your MIDP payment. Sometimes companies withhold at a higher supplemental rate for these kinds of payments.

That's a good point about grossing up! My company did that for some relocation expenses but not others. It's definitely worth asking about.

H&R Block absolutely does NOT offer free filing for self-employment anymore. I tried them this season and ended up with a $134 bill at the end - more expensive than TaxAct! They don't tell you about the fees until you've already spent hours entering all your information. Total waste of time.

That's actually not true - the threshold is $400 in net earnings, not $1,000. If you make more than $400 profit from self-employment, you are required to file Schedule C and pay self-employment tax. This is a common misconception.

Thanks for mentioning insurance! What's a ballpark figure I should expect to pay for decent coverage as a solo preparer? And are there specific coverage amounts you'd recommend?

For a new solo preparer with no prior claims, expect to pay between $500-800 annually for a basic policy with $100,000 in coverage. I'd recommend starting with at least $250,000 in coverage if you can swing it, especially if you'll be doing anything beyond basic W-2 returns. As your practice grows and you take on more complex returns like business filings, you'll want to increase coverage to $500,000 or more. Many policies also include coverage for representation costs if a client is audited, which clients really appreciate. Some insurers offer monthly payment options which helps with cash flow when you're just starting out.

Flat rate all the way. Clients hate surprises with billing. I have a menu of services with set prices based on form complexity. Like $350 for basic returns, $500 with Schedule C, etc. Then add-ons for extra schedules. Much easier to market and clients know exactly what they're getting.

Have you seen clients successfully do this themselves without professional help? I'm in a similar situation but really can't afford to pay someone thousands right now. Is the DIY route completely impossible?

I have seen clients successfully handle smaller tax debts themselves, especially for straightforward installment agreements. The IRS website actually has decent self-help resources for setting up payment plans. For your situation though, I'd be cautious about going completely DIY. The OIC program has a very specific formula and about 60% of applications get rejected, often for simple errors or missing documentation. If you do try the DIY route, get the IRS Form 656 Booklet which walks through the whole process. Also consider getting just 1-2 hours of consultation with a professional to review your application before submission - this middle ground approach can save you money while avoiding major mistakes.

Those "pennies on the dollar" claims are very misleading. What they're referring to is the IRS Offer in Compromise (OIC) program, which is completely legitimate but has very specific qualifying criteria. The reality is that only a small percentage of taxpayers actually qualify for significant reductions. The IRS uses a formula based on your income, expenses, assets, and ability to pay. If you have significant income or assets relative to your tax debt, you likely won't qualify for a dramatic reduction.