Do they really care about such a small amount though? The tax difference would only be like $20-30. Seems like more trouble than it's worth to amend.

While the IRS is certainly more concerned with larger discrepancies, their automated matching system flags all mismatches between reported income and what they received on information returns, regardless of the amount. A $100 discrepancy alone probably wouldn't trigger an audit, but it could trigger an automated CP2000 notice proposing additional tax, interest, and potentially penalties. When you receive such a notice, you'll end up having to respond anyway, and at that point, interest will have accrued. It's generally better to correct small issues proactively rather than dealing with IRS notices later. Plus, establishing a pattern of compliance and good faith corrections helps if you ever face more serious tax issues in the future. Think of it as an insurance policy against future headaches.

I ignored a similar situation with a $200 discrepancy back in 2020 and got a CP2000 notice about 18 months later. Had to pay the tax, plus interest, plus a 20% accuracy-related penalty. The penalty was small, but it was annoying to deal with. Definitely would just amend if I could do it over.

Thanks for breaking this down! Yes, my niece had almost no income in 2023 (less than $2,000 from a part-time job that didn't last). And for the baby, they both lived with me from birth in November through the entire year, and I provided well over 90% of all support. The father only lived there briefly and contributed almost nothing financially. Would bank statements showing I paid for diapers, formula, doctor visits, etc. be good evidence? And what about proof that they lived with me - would utility bills showing my address be enough?

Bank statements showing purchases of baby supplies and medical expenses would be excellent evidence. For proving they lived with you, utility bills are helpful, but even better would be: Medical records showing your address for the baby's appointments Any official documents like the birth certificate that might show your address Statements from doctors, childcare providers, or even neighbors confirming they lived with you Letters from social services or benefits offices if any benefits were received at your address The more documentation the better, but focus on official documents when possible. Also, if you can show that the father's address was different during most of this period, that would further strengthen your case.

Actually this isn't completely true anymore. With the new IRS systems, sometimes you CAN e-file even with a duplicate SSN claim. The system will accept it but flag it for review. A friend of mine was able to do this last year rather than paper filing.

What about retirement contributions? Do those reduce your qualified business income? I contribute to a SEP IRA and I'm wondering if that affects my QBI calculation.

Retirement contributions like SEP IRA, Solo 401(k), or SIMPLE IRA contributions do not directly reduce your QBI. These deductions are taken "above the line" on your personal tax return, but QBI is calculated at the business level before these personal deductions. However, retirement contributions do lower your overall taxable income, which can be beneficial if you're near the QBI phase-out thresholds. By reducing your taxable income through retirement contributions, you might avoid or reduce the phase-out limitations on your QBI deduction, potentially making more of your business income eligible for the full 20% deduction.

Generally, you'd want to keep them separate since the SSTB limitations would only apply to your consulting business. If you aggregated them, your rental income might get caught in the SSTB limitations. The regulations allow aggregation in certain cases but don't require it.

Thank you for bringing this up! My parents do still claim him as a dependent. But he definitely had taxes taken out of his checks - I remember him complaining about it lol. So even if he's not required to file, he'd basically be giving free money to the government by not filing, right?

Exactly right! Even if he's not legally required to file, any federal income tax withheld from his paychecks is essentially an interest-free loan to the government. Filing would get that money returned to him. At $7,500 income as a dependent, he'd likely get most or all of his federal withholding back as a refund. Many young workers don't realize they're leaving hundreds of dollars on the table by not filing. Plus, getting into the habit of filing annually is a good practice for his financial future.

Is this really true? So if I'm pretty sure I'm getting a refund, I can just file whenever I want with no consequences? That seems too good to be true.

17 Quick question - for the home office deduction, does it matter if the space is also sometimes used for other things? Like, I have a desk where I package all my items, but sometimes my kids do homework there too.

22 For the home office deduction, the space needs to be used "regularly and exclusively" for business purposes to qualify. If your kids are doing homework at the same desk, unfortunately that area wouldn't qualify for the deduction since it's not exclusively business use. However, you might be able to claim a portion of your utilities, internet, and phone as business expenses based on the percentage used for business activities without taking the formal home office deduction. Just make sure you can reasonably justify the business percentage you're claiming if ever questioned.

5 Technically, the IRS requires you to report ALL income, regardless of the amount. There's no minimum threshold for self-employment income. If you earned $500 from your side business, you should report it. That said, self-employment tax (Social Security and Medicare) only kicks in when your net earnings are $400 or more. But income tax could still apply to amounts less than that, depending on your overall tax situation.