Thank you for mentioning this! I just checked my 1099-B and I think this might be part of my problem. The cost basis seems lower than what I remember the shares being worth when they vested. How exactly do I use this Form 8949 to make the adjustment?

You'll need to complete Form 8949 with your tax return. In column (a), enter the description of the property (your company stock). In columns (b) through (g), enter the information from your 1099-B. Then in column (g), enter the correct amount of gain or loss using your actual cost basis (the FMV on vesting date). In column (f), check box B to indicate you're reporting a basis different from what was reported to the IRS. You'll also need to attach an explanation statement to your return that explains why you're adjusting the basis - something like "Adjusting cost basis to fair market value at RSU vesting date, which was included as income on my W-2.

Great point! I mixed up my RSUs and ESPP shares last year and almost reported everything wrong. ESPP shares are WAY more complicated tax-wise because of the discount and lookback provisions. What helped me was downloading a detailed transaction history from my company's stock administrator (like E*TRADE, Fidelity, Morgan Stanley, etc.) and looking at the transaction types. RSUs will show as "RSU Release" or similar when they vest, while ESPP purchases will show as "ESPP Purchase.

Does the W-4 have different fields or requirements for someone with an ITIN vs SSN? I'm about to hire my first employee with an ITIN and want to make sure I'm handling the paperwork correctly.

The W-4 form itself is exactly the same whether someone has an SSN or ITIN. There are no special fields or differences in how it should be completed. The employee simply enters their ITIN in the space where it asks for "Social Security Number." The potential confusion comes from the terminology and concepts on the form that might be unfamiliar to someone new to the US tax system. Things like "tax credits," "dependents," and "deductions" might need more explanation. The multiple jobs worksheet can be particularly confusing for first-time filers, so I usually take extra time to explain these sections regardless of whether they have an ITIN or SSN.

Which payroll software were you using? I'm with QuickBooks and wondering if I'll run into the same issue.

Good point about the state return! If I amend my federal return for this 1099 income, do I need to wait until the IRS processes that amendment before filing the state amendment? Or should I do both at the same time?

You should check your specific state's requirements as they vary. Most states want you to wait until the federal amendment is completed and accepted by the IRS before filing a state amendment. This is because they'll want you to include a copy of your federal acceptance letter or transcript showing the changes. Some states have a specific timeframe (like 60 or 90 days) after your federal amendment is finalized to submit your state amendment. Missing this deadline can result in penalties, so definitely check your state tax agency's website for their specific process.

It depends on who controlled the work. If the family directed exactly how and when care was provided, it might be household employment. If OP was more independent in providing care on their own terms, it's likely self-employment. The distinction matters because household employees don't pay self-employment tax, but employers should pay their share of FICA taxes.

But wouldn't they still have to pay self-employment tax too? Even with $40k net income, shouldn't that be more than $4k total tax between income tax and SE tax?

You're absolutely right about self-employment tax. Even with $40k net income, they would owe about 15.3% in self-employment tax alone, which would be around $6,120. Then they'd still owe some amount of income tax on top of that, even after taking the standard deduction.

That's a great point. For 2023, self-employed individuals could contribute up to $66,000 to a Solo 401(k) if they're under 50. Add in a maxed HSA contribution and some business expenses, and you could bring that taxable income way down legitimately.

Is FreeTaxUSA actually user-friendly? I tried using the IRS free file system directly once and it was a nightmare to navigate. I ended up going back to paying for TurboTax because the interface was better, but I'd love to save some money.

FreeTaxUSA is surprisingly user-friendly! It's not as flashy as TurboTax, but the interface is clean and straightforward. It walks you through each section with simple questions and explanations. You can save and come back to it, and it has a good review system to catch common errors. The best part is they don't do that annoying bait-and-switch that some other "free" services do where they surprise you with fees at the end for slightly more complex returns. Federal is actually free for almost all personal tax situations, and state is a flat $15 fee.

Exactly! Tax evasion charges are for people hiding millions in offshore accounts or completely fabricating businesses, not someone who made a mistake entering their dividend income. Your friend needs to realize the IRS has bigger fish to fry than simple returns with minor errors.