That's a good point! I'll double check all the credits. I don't think I should qualify for education credits since I haven't been in school for a few years, but maybe something got checked accidentally. I didn't get any unusual questions about education expenses though. Is there a way to see a summary of which credits and deductions were applied on my return? I'm using TaxSlayer if that helps.

In TaxSlayer, you should be able to view a summary of your return before filing. Look for the "Review" or "Summary" section, which typically shows all the credits and deductions that were applied. Pay special attention to any refundable credits like EITC, American Opportunity Credit, or Child Tax Credit. You can also look at the actual tax forms that are generated - specifically check Schedule 3 and Form 1040 to see which lines have amounts that might be surprising. If you see amounts on lines for credits you don't think you qualify for, that's a red flag.

Tax software rarely makes actual calculation errors - they're pretty rigorously tested. It's almost always user input errors. The most common mistakes I see (I help friends with taxes) are: 1. Entering the same income twice 2. Mixing up which numbers go in which fields (like the withholding error OP probably made) 3. Missing a form entirely 4. Clicking yes/no incorrectly on a qualifying question

Thanks for clarifying. That makes me feel better about my return. I was starting to wonder if I needed to redo everything in another software just to double check the calculations!

But don't you lose flexibility with a 1031? I want to invest the proceeds in my new business venture, not just more real estate. Did your accountant discuss that limitation?

That's absolutely correct - 1031 exchanges definitely lock you into real estate investments, which was fine for my situation since I wanted passive income. For business investments, it wouldn't work. For investing in a new business venture, you might want to look into Qualified Small Business Stock (Section 1202) if you're setting up a C-Corp, or potentially an installment sale with a longer genuine payment period (without the monetization aspect that triggers IRS concerns). Both have limitations but might be less risky than DSTs or monetized installment sales. The right strategy really depends on your specific goals and risk tolerance.

I know someone who did a DST about 6 years ago. They're still getting payments from the trust and haven't been audited...yet. But they're constantly worried about it, especially with the increased IRS funding. Not sure the stress is worth it honestly.

Does the IRS ever pre-approve these kinds of deductions? I'm worried about claiming it then getting hit with penalties later.

The IRS doesn't offer pre-approvals for specific deductions before you file. They review after the fact if questions arise. The best protection is thorough documentation. This means doctor's letters clearly stating medical necessity, history of treatments for issues caused by the excess skin, and a clear connection between the gastric bypass and the need for skin removal. The better your documentation, the stronger your position if questioned later.

That's really helpful! Did you have any issues with the IRS questioning the deduction? And did you need to get specific CPT codes included in your documentation?

That's a really good suggestion about the percentage-based withholding! I never even considered that possibility. Since the amount does seem to be consistently around 0.25% of his gross pay, that explains why it's so weirdly consistent. I'll have him specifically ask HR about this tomorrow. If they entered 0.25 when they meant 25, that's a massive error affecting everyone's taxes!

Glad I could help! This is exactly the kind of data entry error that can slip through, especially if the payroll person isn't carefully reviewing the resulting withholding amounts for reasonableness. If multiple employees are having the same issue, it strongly suggests a system-wide problem rather than individual W-4 issues. One more thing - make sure your husband documents all communications with HR about this. If the IRS questions the underwithholding or assesses penalties, having proof that you identified and tried to correct an employer error can help with penalty abatement.

Yes! Request a First Time Penalty Abatement if you haven't had tax issues in the prior 3 years. The IRS is generally pretty reasonable with this, especially if you can document that the error was with your employer's payroll system and not your withholding choices.

Thanks for the info! I didn't know about the First Time Penalty Abatement option. We've always filed and paid on time before this, so sounds like we should qualify. Gonna call the IRS tomorrow and request this.

This is super helpful, thank you! The CRS report looks amazing. Does the Tax Foundation have a specific page for all their energy tax analyses or do I need to search through their site?

The Tax Foundation doesn't have a dedicated page just for energy tax credits, but if you go to taxfoundation.org and search for "energy tax credits," you'll find about 15-20 analyses they've published. Their most comprehensive one is titled "Cost Recovery for Energy Investments" which breaks down all the current business energy credits. I'd also recommend checking their analysis of the Inflation Reduction Act's energy provisions since that legislation substantially changed many business energy credits in 2022. Their analyses typically include tables comparing before and after values, which is gold for debate prep.

This is actually brilliant for debate prep! Having the dollar amounts associated with each credit gives great impact framing for arguments. Does this show which ones are specifically business credits versus individual?