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!

Good point - what states have their own estate taxes? We're in Michigan if that matters.

As of 2023, twelve states plus DC have estate taxes: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia. Michigan doesn't have a state estate tax, so you're fortunate there! The exemption thresholds vary widely - Massachusetts and Oregon have exemptions as low as $1 million, while states like Hawaii align more closely with the federal exemption. If your stepdad owned property in any of these states, you might still need to file a state estate tax return, even if most assets were in Michigan.

100% agree with this. When my husband died, having a separate estate account made everything so much clearer. Also made it easier to show the court during probate that I was handling things properly.

That's really helpful advice! I'll talk to mom about setting up a dedicated account with the EIN. Better to keep things organized from the start than trying to untangle them later.

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.

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.

That's a good point about business losses offsetting income! His business actually had a pretty good year, but there were some startup costs for new equipment. How exactly does the Qualified Business Income deduction work? Is that something we'd automatically get when filing jointly?

The QBI deduction generally gives you a deduction of up to 20% of your qualified business income, which can be significant! It's not automatic though - it has to be calculated on your return. For equipment purchases, those are usually handled through depreciation or Section 179 expensing, which allows you to deduct the full cost of qualifying equipment in the year it's purchased (up to certain limits). These deductions are available regardless of filing status, but when filing jointly, they can help reduce your combined tax liability. The benefit is that these business deductions can offset your income too, potentially putting you in a lower tax bracket together.

Filing status doesn't affect self-employment tax at all. Self-employment tax (15.3% for Social Security and Medicare) is calculated on the Schedule C profit regardless of filing status. But filing jointly might help with your overall tax situation in other ways.