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I went through this exact same situation with a small private school I worked for. Here's what happened: they gave me a 1099 but had been withholding taxes. I filed Form SS-8 with the IRS to determine my correct worker status, and Form 8919 with my tax return like someone mentioned above. The IRS ruled I was an employee and my employer got in serious trouble because they had been pocketing the withheld taxes rather than sending them to the IRS! Make sure you keep all your paystubs showing the withholding - that's key evidence. The good news is that the IRS waived all penalties for me since I reported it. The bad news is my employer had to pay significant penalties and back taxes. They actually went out of business a few months later (though they had other financial issues too).
How long did the whole process take from filing the SS-8 to getting a determination? I've heard the IRS is super backed up.
It took about 7 months to get the official determination after filing the SS-8. The IRS is definitely backed up with these cases. The good part was that I didn't have to wait for the determination to file my taxes - I filed Form 8919 with my return and explained the situation. I was able to file my taxes as an employee would (paying only my share of Social Security and Medicare taxes) while the determination was pending. When the official ruling came through, it confirmed I'd filed correctly. If you have solid evidence like paystubs showing withholding, you're in a pretty strong position.
One thing nobody has mentioned - GET A NEW JOB ASAP!!! Any employer pulling this kind of stunt is shady af and probably doing other illegal stuff too. My sister's daycare did the same thing and when the state investigated they found all kinds of violations beyond just the tax fraud.
3 Don't forget energy efficiency tax credits if you made any improvements! I bought a fixer-upper last year and got credits for: - New energy efficient windows ($600 credit) - Heat pump water heater ($2,000 credit) - Added insulation ($1,200 credit) These are straight tax credits, not deductions, so they directly reduce what you owe. Check out Form 5695 - the credits were expanded under the Inflation Reduction Act.
8 Do these credits apply if the improvements were done by the previous owner right before selling? The listing mentioned they installed new energy efficient windows and HVAC a month before I bought the place.
3 Unfortunately, no. The energy efficiency tax credits only apply to improvements you made yourself after purchasing the home. The previous owner would have been eligible to claim those credits on their return, but you can't claim credits for improvements made before you owned the property. If you make your own energy efficient upgrades in the future though, definitely keep all receipts and manufacturer certifications. The credits are quite generous through 2032 under current law!
19 Quick tip for first-time homebuyers: if you withdrew money from an IRA for the down payment, you might qualify for an exception to the early withdrawal penalty (though you'll still pay income tax on the distribution). Up to $10,000 can be withdrawn penalty-free for a first-time home purchase. Check out Form 5329!
11 Is this true for Roth IRAs too? I took out some money from my Roth for closing costs and wasn't sure if I needed to report it.
Don't forget to check if your mom kept old bank statements from 2017! My father used to pay his property taxes through his bank's bill pay service, and when I needed proof for an audit, I was able to find the payment that way. The bank statements showed the payment to "[County Name] Treasurer" which was enough for our tax preparer. Most banks keep records accessible for 7 years.
That's a great idea! I hadn't thought of checking her bank statements. Do you think the amount would be specifically labeled as "car tax" or would it just show as a payment to the county?
It probably won't say "car tax" specifically. In my dad's case, it just showed as a payment to the county treasurer with a reference number. But if you can match the amount and approximate date (usually due the same time each year), that can be enough. Your tax preparer mainly needs the amount paid for deduction purposes. If your mom paid by check, there might even be a memo line notation, or you could look at the back of the canceled check image to see how it was processed. Sometimes the county puts identifying numbers on those.
Has anyone mentioned checking with the tax preparer who did her taxes in 2016 or 2018? They might have a copy of the 2017 statement if they were handling her taxes regularly before her dementia progressed. My mom's accountant kept copies of everything for like 10 years.
This is what saved me when dealing with my grandpa's taxes! His accountant had backups of almost everything, including property tax statements going back nearly a decade. Worth a phone call at least.
Have you considered setting up a more formal arrangement like a Community Supported Agriculture (CSA) program with the school? My brother did something similar where he: 1. Created a formal business entity for the orchard 2. Set up the CSA with the school as the primary customer 3. Then donated most of the profits back to the school This gave him business deductions for the orchard maintenance plus charitable deductions for the donations. His accountant said this was much cleaner from a tax perspective than trying to donate "use" of the property.
Wouldn't creating a business entity and then donating back the profits create more paperwork and possibly more taxes than it saves? Seems like you'd have to report all the income first, pay self-employment taxes on it, and then get a deduction for the donation. Am I missing something?
You raise a good point about the additional paperwork - it definitely creates more administrative work. However, it can still be advantageous in certain situations. The business entity allows you to deduct all legitimate expenses related to the orchard maintenance (equipment, supplies, utilities, property taxes, etc.) against the income. These are deductions you might not otherwise get. While you would pay self-employment tax on the net profit, if your expenses are significant, the net taxable amount could be minimal.
Just wanted to add - we did something similar with our maple syrup operation and the local school. Our tax guy set it up as an educational easement on the property, which gave us a one-time deduction for the easement value (which was substantial!), while still letting us own the property. It's more permanent than what you might want, but the tax benefits were significant upfront rather than spread over many years.
Did you have to get a professional appraisal for that educational easement? And was there a minimum time commitment? I'm curious because I have property I'd consider for something similar but don't want to be locked in for decades.
Liam Cortez
Have you considered that your refund might be delayed because it's your first time filing? The IRS sometimes puts extra verification steps on first-time filers to prevent fraud. My first return took around 31 days even though it was super simple. Also, pro tip: if you're getting a sizable refund, you might want to adjust your W-4 withholding with your employer. A big refund feels nice, but it basically means you gave the government an interest-free loan of your money all year!
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Dylan Baskin
ā¢Oh I hadn't thought about being flagged as a first-time filer! That actually makes a lot of sense. 31 days isn't terrible I guess, just longer than that 21 day estimate. What's the best way to adjust withholding? I'd rather have the money throughout the year for sure, but I'm nervous about accidentally owing taxes next year if I mess with my W-4.
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Liam Cortez
ā¢The easiest way to adjust your withholding is to fill out a new W-4 form with your employer. The form was redesigned in 2020 to be more straightforward. If you want to be conservative about it, you can start by claiming just a little less withholding and see how it affects your paychecks. The IRS has a Tax Withholding Estimator tool on their website that can help calculate the right amount based on your specific situation. It's better to slightly overwithhold than underwithhold, so you still get a small refund rather than owing money at tax time. Just update your W-4 with your employer's HR department once you figure out the right numbers.
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Savannah Vin
My refund timeline from filing to deposit this year: Filed electronically on Feb 3 Acceptance confirmation Feb 4 Refund approved Feb 14 Deposit hit my account Feb 16 So about 13 days total from filing to money in my account. Not bad!
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Mason Stone
ā¢What tax software did you use? I'm wondering if some get processed faster than others.
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