


Ask the community...
One thing nobody mentioned yet - make sure you're issuing 1099s correctly in the first place. You only need to issue them if you paid a contractor $600 or more during the tax year AND the payment was for services (not goods). Also, if you paid through credit card networks or third-party payment networks (like PayPal Business), technically they're supposed to issue a 1099-K to the contractor if they meet the threshold, and you don't need to issue a 1099-NEC at all. But the rules keep changing, so double-check the current requirements.
Thanks for bringing this up! So if I paid them through PayPal Business, do I still need to issue a 1099-NEC? I thought the threshold for 1099-K was really high, like $20,000? Or did that change recently?
The 1099-K threshold has been a moving target the past few years. Originally it was dropping to $600 for 2023, but then they delayed it. For 2025 taxes, the threshold is $5,000 - so if your contractor received more than that through PayPal Business, then PayPal should issue them a 1099-K. You still have the option to issue a 1099-NEC if you want to be extra cautious, but technically you're not required to if the payment was made through a payment processor that will issue a 1099-K. Just make sure you keep good records of how each contractor was paid, in case of questions later.
I actually just got done with an IRS audit where this exact issue came up! My advice from painful experience: Keep VERY detailed records of all payment processor fees separate from the actual payments. For me, the IRS wanted to see that I wasn't double-counting the fees (deducting them separately AND as part of the contractor payment). I had to create a spreadsheet showing each payment, the fee amount, and the net amount received by the contractor. Also important: make sure your contractors understand how to report this on their end too, so their reported income matches your 1099s.
7 Something similar happened to my father last year. It turned out to be a legitimate letter but the amount was incorrect due to a missed 1099 form. A couple things to check: 1) Did your grandmother have any unusual income last year - like selling investments, taking an early withdrawal from retirement, or receiving unemployment? 2) Is there any way she could have forgotten to report some income? The IRS computers automatically match reported income from employers/banks against what's on tax returns. 3) Did she receive any prior notices? The IRS usually sends several notices before demanding payment. Ask her to check her mail carefully - sometimes people miss the earlier notices or don't understand what they mean.
19 This is great advice. My mother got a letter because she forgot about a small stock sale that generated a capital gain. The brokerage reported it to the IRS but she forgot to include it on her return. Does your grandmother have any investments or retirement accounts?
7 Both great questions! For unusual income, she did sell some stocks last year after my grandfather passed away. She's not very financially savvy and has been relying on their longtime accountant who's getting up there in age himself. Regarding prior notices, that's actually very possible. She doesn't open all her mail right away and sometimes sets aside things she doesn't understand. I'm going to visit her tomorrow and go through her mail from the past few months to see if there were earlier notices. The investment angle seems most likely based on your experiences. I'll definitely check on that specifically when I see the letter. Thank you both for the helpful suggestions!
16 Be really careful about this - my grandfather almost fell for a similar scam last summer. The giveaway was that they wanted payment in gift cards (which the IRS NEVER does). What kind of payment method does the letter request?
6 Those gift card scams are terrible! My neighbor fell for one of those and lost $2000. Definitely check the payment methods requested. The real IRS offers multiple payment options and NEVER asks for gift cards, wire transfers, or cryptocurrency.
4 Does anyone know if there's a legitimate way for someone with refugee status to operate a business in Canada while their application is being processed? My understanding is that they typically need a work permit with self-employment privileges, but that's different from running a construction company with employees.
22 Refugee claimants can apply for a work permit while their claim is being processed, but there are restrictions. The work permit usually specifies what type of work they can do, and running a business with employees is generally not permitted without permanent residence status or specific entrepreneurial immigration programs. The friend should consult with an immigration lawyer about proper pathways. There are sometimes special programs for entrepreneurs depending on the province, but trying to circumvent the system by using someone else's GST number could jeopardize their refugee claim entirely.
4 Thanks for the clarification. That's what I was afraid of - sounds like there's really no legitimate shortcut here. I'll suggest that my friend needs to consult with both an immigration lawyer and a business attorney before proceeding with anything. Better to do things properly than risk their status and my financial wellbeing.
12 Just want to point out that even if the business has an accountant, it doesn't protect you. A friend of mine got completely screwed when they let someone use their business number. The business racked up like $85k in unpaid GST before my friend even realized what was happening. Even with the accountant signing off on everything, CRA came after my friend personally. The "agreement" they had meant nothing.
Don't forget that even after you estimate your federal payment, each state handles extensions differently! I learned this the hard way. For example, California automatically gives you the extension if you get a federal one, but you still need to pay the estimated amount. New York requires its own extension form AND payment. Some states don't charge interest if your estimate is reasonable while others are strict about it. Make sure you check your specific state's rules about extensions and payments - don't assume they follow the federal guidelines.
Thanks for bringing this up! Do you know if there's a quick resource that breaks down different state requirements? My situation is even more complicated because I moved mid-year and had income in multiple states.
There isn't really one perfect resource that covers all states, but the Federation of Tax Administrators (taxadmin.org) has links to all state tax agencies where you can find the specific rules. For multi-state situations, each state you earned income in will have its own requirements. Most tax software platforms also have state-specific guidance built in if you're using one. They'll usually walk you through the proper forms needed for each state. With income in multiple states, you definitely want to be careful since some states have reciprocity agreements while others don't.
Just to add something here that nobody mentioned - make sure you remember to pay ESTIMATED TAXES too if you're self-employed or have other income without withholding! This is separate from your extension payment. Q1 estimated taxes for 2025 are also due April 15th, the same day as the 2024 tax year deadline. So you might need to make TWO payments - one for what you still owe for 2024 (your extension payment) and one for Q1 estimated taxes for 2025. I made this mistake and got hit with penalties even though I thought I'd done everything right with my extension.
Layla Mendes
One thing nobody mentioned yet - make sure you're addressing both federal AND state taxes. Each state has different rules about how far back you need to file and penalties for late filing. I was in a similar situation (4 years unfiled) and got federal sorted out only to get blindsided by my state tax authority, which was actually much more aggressive than the IRS. Check if your state has a voluntary disclosure program too - many do.
0 coins
Sophia Nguyen
ā¢That's a really good point I hadn't even considered. I've lived in the same state this whole time, but I should definitely look into their policies. Is there an easy way to find out about state voluntary disclosure programs?
0 coins
Layla Mendes
ā¢The easiest way is to just google "[your state] tax voluntary disclosure program." Most state tax department websites have a section for this. Some states are surprisingly forgiving if you come forward voluntarily. Be aware that some states have shorter lookback periods than the IRS. For instance, my state only required me to file 3 years back, even though federally I had to do 6 years. Some state programs will waive penalties but not interest on what you owe.
0 coins
Lucas Notre-Dame
I went through this after 7 years of not filing. Here's what surprised me: for most of those years, I was actually owed refunds! I ended up getting money back for 3 of the 7 years, even after penalties. Since you mentioned having maximum withholding, you might be in a similar situation. I used TurboTax for the more recent years and a CPA for the older, more complicated ones. Cost me about $1200 total for professional help with 4 years, which was worth it for the peace of mind. Don't panic about criminal charges - those are extremely rare and typically only happen in cases of deliberate fraud or extremely high dollar amounts. The IRS mainly wants compliance and their money.
0 coins
Aria Park
ā¢Did you file all 7 years at once or space them out? I heard you should do the most recent ones first.
0 coins