That's an interesting idea. I never thought about filing separately. We've always filed jointly since we got married. Would that really make a difference with the retirement withdrawal?

For most married couples, filing jointly results in lower taxes, but there are exceptions especially with unusual situations like yours. With such a large disparity in incomes and a significant retirement withdrawal, it's worth calculating both ways. The potential benefit comes from keeping your 403b withdrawal in a lower tax bracket by not combining it with your wife's higher income. However, you'll lose some tax credits and deductions when filing separately. It's really just a math exercise - calculate your taxes both ways and see which results in a lower total tax. Just be aware that if you file separately, both spouses must either itemize deductions or take the standard deduction - you can't mix approaches.

This is good advice but won't help with the 10% penalty on the early withdrawal. Still worth doing though to reduce the overall tax hit. Also, with their income level, they might be limited in how much they can deduct for traditional IRA contributions.

Thanks, that's interesting! Do the same general tax advantages apply? Like with the SEP, would I still see a similar reduction in my current tax burden if I contributed the same amount to a Solo 401k?

Yes, you'd get the same tax deduction for equivalent contributions. The tax treatment is identical - both reduce your current tax burden and grow tax-deferred until withdrawal. The main advantage of Solo 401k is that you can potentially contribute more in total. For example, in 2023 you could contribute up to $22,500 as an "employee" contribution plus the same employer contribution you'd make with a SEP (up to 25% of compensation with a combined limit of $66,000). If you're over 50, you also get an additional $7,500 catch-up contribution option with the Solo 401k. Many people don't realize that a Solo 401k can be fairly simple to set up with major brokerages like Fidelity, Vanguard, or Charles Schwab.

This is so true. I maxed out my SEP last year and felt great about the tax savings, then my biggest client terminated their contract unexpectedly. I would have been in serious trouble if I hadn't kept a decent emergency fund. How much did you end up paying in penalties when you had to take that early distribution?

But weren't tariffs the main source of government revenue before the income tax was created? So it's been done before, right?

Yes, tariffs were the primary federal revenue source in the 19th century, but the federal government was also tiny compared to today - no Social Security, Medicare, modern military, etc. The entire federal budget in 1900 was about $0.5 billion (adjusted for inflation, that's still less than 0.1% of today's federal budget). The global economy is also completely different now. In the 19th century, international trade was a much smaller percentage of the economy, and supply chains weren't globally integrated like they are today. Imposing massive tariffs in today's interconnected global economy would have far more significant and immediate disruptive effects than it did 150 years ago.

Tax software companies would definitely take a hit, but they'd probably pivot to helping businesses comply with the new tariff system. Companies like Intuit (TurboTax) and H&R Block are pretty good at adapting to tax changes. They might focus more on helping businesses understand import costs and tariff implications.

This is great advice, but I think you mean Form 4506-T for the transcript request, not 8962 (which is for Premium Tax Credits). The Taxpayer Advocate suggestion is gold though - they really can help with these situations!

You're absolutely right, thank you for catching that! It is Form 4506-T for requesting transcripts, not 8962. I mixed up my form numbers. The Taxpayer Advocate Service was definitely the key to resolving my case. They have more direct access to various departments and can often get answers when regular channels fail. They're especially helpful in cases like this where you have evidence the IRS actually received payment but is still sending non-filing notices.

It's a CP59 notice, and it directs us to IRS.gov and the main IRS phone number, so unfortunately I think it's legitimate. We also verified by calling the IRS directly (not using any number from the letter). I wish it was a scam - would be easier to deal with!

Yep, CP59 is definitely a legitimate IRS notice for unfiled tax returns. Good job verifying independently by calling the main IRS number. Since we're dealing with a 2020 return (filed in 2021), you should know the IRS is still working through a massive backlog from the pandemic years. Paper returns especially got backed up severely. I've seen cases where returns were sitting in trailers in IRS parking lots for months before processing. Even with the payment being processed, the physical return could have been separated or lost. Follow the advice others have given about sending a clearly marked copy with a detailed cover letter. Persistence is key with these situations!

9 When you say "issued before 2009" - does that mean the original divorce decree or would modifications after 2009 still count? Our original divorce was in 2008 but we modified the child support arrangement in 2020.

3 It's specifically about when the original agreement about claiming dependents was executed. If your original 2008 decree included the language about who claims the child for tax purposes, that part might still be valid without Form 8332. But if that arrangement was only added in the 2020 modification, then you would need Form 8332. The key thing is that pre-2009 agreements containing "unconditional declarations" about who claims the child can sometimes serve in place of Form 8332. However, the IRS has gotten stricter about this over the years, so having the signed form is always the safest approach regardless.

11 Do you know if the form has to be signed every single year? Or can you have them sign once for multiple tax years?