1 I tried using that IRS calculator but got stuck when it asked for YTD income and withholding amounts. Since I haven't started the job yet, I don't have that info. Should I just put zeros?

8 For your new job, yes, you would put zeros for the YTD income and withholding since you haven't started yet. The calculator will still work - it'll just base the calculations on projected amounts for the remainder of the year. For your wife, you should use her actual YTD information from her most recent paystub. That way, the calculator can give you the most accurate recommendation based on what's already happened this year and what's projected to happen with both incomes going forward.

3 The IRS doesn't have an "online portal" for W-4 adjustments - you have to submit a new W-4 to your employer anytime you want to change withholding. I usually file a new W-4 quarterly since my commission income fluctuates. Most HR departments let you update it anytime.

Good point about state taxes! I'm in Illinois - do you know if they have any special rules for small amounts of self-employment income? I'm already stressing about the federal forms.

Illinois follows the federal guidelines pretty closely for self-employment income. They don't have a separate self-employment tax, but you do need to report that income on your IL-1040 form. The $842 will flow through to your state return once you've completed the Schedule C for your federal taxes. It's actually pretty straightforward on the state side compared to the federal requirements.

This is such overkill for a one-time payment under $1000. The tax system is ridiculous for small amounts. In other countries they make this so much easier!

Thanks for bringing this up! I don't plan on doing more freelance work this year, this was really just a favor for my cousin. Based on my regular tax situation I usually get a refund of about $800, so I'm guessing this small amount won't push me over that $1000 threshold?

Thanks for pointing out the actual tax difference! I was thinking about the $5 of income, not the actual tax amount which would be even smaller. That makes me feel better about the situation. Did you send your late 8606 forms with an amended return or just on their own with the cover letter? I'm debating both approaches and trying to figure out the easiest way to handle this without triggering unnecessary scrutiny.

I sent the late 8606 forms on their own with just the cover letter since they didn't actually change my tax liability for those years. The 8606 forms were just establishing basis for future use. In your case, since you do have a small change to your actual tax liability for 2019, I'd probably file an amended return for that specific year along with all the 8606 forms and a comprehensive cover letter explaining both issues. The reality is that the IRS isn't going to launch an audit over a dollar and change, but it's still technically the correct way to handle it. And having everything documented properly will save headaches down the road if you ever need to reference your IRA basis.

First Time Abatement is for failure-to-file and failure-to-pay penalties on returns, not specifically for the $50 penalty for late 8606 forms. Those are two different types of penalties. Are you sure that's what you received?

Is there a specific place on the tax return where we note that we're using Form 4852 instead of a W-2? Or does just attaching the form take care of that?

Just attaching the Form 4852 to your return takes care of it - there's no special place you need to note it elsewhere on your return. The form itself has a field where you explain why you're using it instead of the W-2 (missing W-2, incorrect W-2, etc.), which gives the IRS all the information they need.

Yes! TurboTax actually handles this pretty well. When you get to the income section, there's an option that says something like "I don't have a W-2" or "My employer didn't give me a W-2." If you select that, it walks you through entering all the information from your paystubs and generates Form 4852 automatically.

1 I didn't have any side income and I don't think I had any special credits before. I've always just taken the standard deduction since my situation is pretty simple. I did pick up more hours at work toward the end of the year but I didn't think that would affect things so much.

13 The additional hours actually might be a big part of it. If you earned significantly more in the last quarter of the year, the withholding system might not have adjusted properly. The system typically assumes you'll earn the same amount consistently throughout the year. Another thing to check is if you had any changes to your health insurance situation. If you started getting insurance through your employer or had marketplace coverage with premium tax credits, these can significantly impact your refund calculation.

4 This is a good point. I've seen this happen with friends who didn't realize that just checking different boxes could change their refund by hundreds of dollars. Especially things like whether someone can claim you as a dependent.