Thanks for the detailed response! I did notice our health insurance section on the paystub looks different than it did a few months ago. Do employers have to notify employees when they make these kinds of changes to how benefits are taxed?

Employers should notify employees about changes to benefit taxation, but the requirements vary by state and the type of benefit. For health insurance specifically, they should provide updated plan documents that explain the tax treatment. However, these notices are often buried in annual enrollment materials or benefit updates that employees might overlook. The best approach is to request documentation from HR about any recent changes to benefit tax treatment. Ask specifically about your health insurance premiums and whether they changed from pre-tax to post-tax deductions. If they made this change without proper notification, you might have recourse through your state's labor department depending on your location.

Good point. For 2025, the Social Security wage base (the FICA cap) increased to $168,600, up from $160,200 in 2023. This means employees earning above the previous threshold are now paying Social Security tax on a larger portion of their income.

Thanks for confirming! That makes sense. So higher earners would definitely see more coming out of their checks without any shady business practices being involved. Probably worth checking if all the affected coworkers are earning above that previous threshold.

That's really helpful to know about Form 982! I think I might actually qualify for the insolvency exclusion because I was basically underwater on everything when this happened. Is the form complicated to fill out? Do I need to gather a lot of documentation to prove I was insolvent?

Form 982 isn't terribly complicated, but you do need to calculate your assets and liabilities at the time the debt was canceled to prove insolvency. Make a list of everything you owned (house, car, retirement accounts, checking/savings, etc.) and all your debts (mortgage, car loans, credit cards, student loans, etc.) at that specific time. You'll need to be able to document these values if you're audited, so gather bank statements, loan statements, property assessments, etc. from that period. Keep all this documentation with your tax records. If your total debts exceeded your assets, you can exclude the canceled debt from your income up to the amount you were insolvent.

Generally, creditors must issue a 1099-C in the year that they actually cancel the debt (not when you stop paying). Sometimes they hold charged-off debt for years before officially canceling it. They're required to issue the form by January 31 of the year following cancellation. For a 2018 charge-off, they might have actually canceled it in a later year or might still be holding it as an asset. Check your credit report - if the debt still shows as outstanding, they might not have officially canceled it yet. If it shows as "canceled" or "settled," then they should have issued a 1099-C.

Thank you - that's really smart advice. Do you think I should communicate with them in writing about this issue so I have a paper trail? I'm worried if I call, they'll just deny everything.

Yes, absolutely communicate in writing - email is perfect for this. Clearly state what specific expenses you've identified as incorrect and ask for an explanation of where that information came from since you didn't provide it. Be professional but direct, and specifically request that they file a withdrawal of the incorrect return immediately. Keep it factual and avoid accusations or emotional language. Something like: "I've reviewed my tax return and found several business expenses listed that I did not incur and did not report to you. For example, [specific examples]. Please explain the source of this information and what steps you'll take to correct this immediately.

You're right - once an e-filed return has been accepted by the IRS, it can't be withdrawn. The proper procedure is filing an amended return (Form 1040-X). You can request a withdrawal only if the original return was rejected or is still in processing. Since OP mentioned their return was already e-filed, they'll need to go the amendment route. This is actually better in some ways because it creates a clear record of self-correction, which can help demonstrate good faith compliance.

I used FreeFile last year for my side gig. It worked fine for basic self-employment stuff but doesn't offer much guidance. If you already know which forms you need and how to fill them out, it works. But don't expect it to catch mistakes or suggest deductions you might have missed.

Thanks for sharing this! Do you remember how long it took after you filed the missing year for them to release your refund? And did you end up owing anything for the year you missed?

It took about 3 weeks after I submitted the missing return for them to release my refund. I actually ended up with a small refund for the missed year too, so they combined them. I did get hit with a failure-to-file penalty though, even though I was due a refund. It wasn't huge but still annoying - I think it was the minimum penalty amount. The letter explained that the penalty applies for filing more than 60 days after the due date, even if you're owed money.

How do you get that transcript thing? Is it online or do you have to call them?

You can get it online through the IRS "Get Transcript" tool on their website. You'll need to create an account if you don't already have one, and they have a pretty strict verification process with multiple authentication steps. If you can't verify your identity online (which happens a lot), you can also request it by mail using Form 4506-T. That takes about 10 days to arrive. The transcript will show all income documents that were reported to the IRS under your SSN for that tax year.