19 Isn't there a penalty if you don't pay enough throughout the year though? How do you figure out the right amount for quarterly payments?

4 There can be a penalty if you significantly underpay throughout the year, but you can avoid this by making sure your total payments (withholding plus quarterly payments) equal at least 90% of your current year tax or 100% of your prior year tax (110% if your income is over $150,000). For figuring out the right quarterly payment amount, you'd take your expected additional tax from the side gig (including both income tax and self-employment tax which is about 15.3%) and divide by 4. For someone making $6,800 extra, the self-employment tax alone would be about $960 for the year, plus whatever income tax applies based on their tax bracket.

1 We do have tax forms and publications available, and I did offer those resources! But as anyone who's looked at IRS instructions knows, they can be pretty complicated to understand if you're not familiar with tax terminology. The patron seemed overwhelmed and was looking for someone to actually walk him through his specific situation, which is beyond our role as librarians. That's why I referred him to his employer's payroll department or his tax preparer. I was just personally curious about how this situation should be handled, especially with the newer W-4 format. The responses here have been really helpful!

Can you e-file a 1040X now? I thought you had to mail them in but I heard something changed recently. Would be much easier than dealing with certified mail etc.

You can e-file a 1040X now, but only for tax years 2019, 2020, and 2021 (and newer years going forward). Since the OP is amending a 2019 return, they should be eligible for e-filing, which is definitely easier than paper filing. However, if you have attachments like W-2s or 1099s that weren't included with your original return, you might still need to mail those in separately, depending on your tax software. Even with e-filing, I still recommend keeping detailed records of everything in case questions come up later.

I got my refund about 4 months after filing my 1040X last year. It takes FOREVER compared to regular returns. The IRS says to allow up to 16 weeks but that's definitely optimistic right now with their backlog.

I hadn't really considered a reverse mortgage. Are the fees for those reasonable? I've heard mixed things about them over the years. Also, wouldn't I need to be purchasing my new home before I could get a reverse mortgage on it? Since I don't currently own a property in my new town yet.

The fees can be substantial - typically 2-5% of the home's value. But compared to the tax hit from a large IRA withdrawal, it might still be advantageous. There actually is a specific type called a HECM for Purchase that lets you buy a new home with a reverse mortgage. You make a down payment (usually around 50-60% of the purchase price) and the reverse mortgage covers the rest. You'd never have mortgage payments, though you'd still be responsible for taxes, insurance, and maintenance.

A 1031 exchange wouldn't work if they're planning to live in the new property as their primary residence. The replacement property in a 1031 exchange must be used for business or investment purposes.

I've heard about the Offer in Compromise but don't think we'd qualify since we both have stable jobs. We're not destitute, just don't have $7k liquid cash sitting around. Do you know if they ever offer compromises for people with regular incomes who just can't pay a large lump sum?

You're right that OIC is tough to get with stable income. It's usually for people with serious financial hardship where they'll likely never be able to pay. For your situation, a payment plan is probably more realistic. If the lump sum is the issue but you could manage it over time, definitely go with the installment agreement. Pro tip: if you can pay it off within 180 days, you can set up a short-term payment plan with no setup fee at all. Otherwise, the long-term plans have reasonable monthly minimums based on how much you owe.

This is really good advice. The IRS has a Tax Withholding Estimator on their website that's much more accurate than the worksheet. It lets you put in both spouses' income and gives you the exact dollar amount to put on line 4(c) for extra withholding.

Do EAs actually handle the legal aspects of streamlined filings though? I thought those required actual attorneys since there can be potential criminal implications with unreported foreign accounts.

EAs can absolutely handle streamlined filings as they're authorized to represent taxpayers before the IRS for audit, collection, and appeal matters. The streamlined filing procedures are specifically designed for taxpayers whose conduct was non-willful, meaning there was no intentional wrongdoing - these cases typically don't involve criminal implications. Where attorneys become necessary is when there's potential criminal exposure or if the non-compliance might be considered willful. If you're concerned your situation might involve willful non-compliance, then yes, you should consult with an attorney who specializes in criminal tax matters. But for the majority of streamlined filing cases where someone simply didn't understand their foreign reporting requirements, an EA or CPA with international tax experience is completely qualified and often more cost-effective.

I worked at H&R Block for 5 tax seasons. While they have some good preparers, most don't have specialized knowledge in international compliance issues like streamlined procedures. Their training focuses primarily on domestic tax matters that affect the average taxpayer. For something as specific as streamlined filings for unreported foreign accounts, you really need a specialist. I'd be very cautious about using a general tax preparation service for this kind of situation.

Thanks for the insider perspective. That's disappointing but good to know before I waste my time. I guess for specialized stuff you really do need specialists, even if it costs more.