Thanks for the explanation! Do you know if there's any legal requirement for which method employers use? And would switching to a salaried position solve this problem, or would we still have issues if she took unpaid time off?

There's no legal requirement for which withholding calculation method employers use - it's usually determined by whatever payroll software they've implemented. Some systems allow changing the method, but many smaller employers are locked into whatever their provider offers. Switching to a salaried position would generally solve this problem since salary typically means consistent paychecks regardless of hours worked (within reason). Even with unpaid time off, most salary calculations are more consistent with withholding. However, part-time salaried positions are relatively uncommon in pharmacy settings. Another option is to ask if they can set up a "minimum withholding" arrangement where taxes never exceed a certain percentage of gross pay.

This is smart advice! My paycheck once went to zero and I assumed it was taxes, but it turned out they were taking uniform fees, health insurance for the whole month, and a retirement loan repayment all from one small check. Worth investigating all deductions!

FreeTaxUSA actually handles Schedule C pretty well! I've been using it for my side gig for 3 years. The interface for business expenses is straightforward and they have good explanations. The best part is they don't charge extra for self-employment forms like some other providers do.

Oh wow, thanks for pointing that out! I had no idea there was a $5,000 limit for tax refund bonds. Would've been a huge headache if my return got rejected because of that. I'll definitely adjust my Form 8888 to allocate $5,000 to bonds and the remaining $1,630 to direct deposit instead. Does anyone know if there's any special processing time I should expect when buying I bonds with my refund? Is it slower than a regular refund?

You're welcome! Glad I could help. From my experience, refunds with I-bond purchases do typically take a bit longer to process - usually 1-2 weeks longer than standard direct deposit refunds. The IRS needs to coordinate with Treasury Direct to create your bonds, which adds some processing time. Last year, my regular refund portion hit my bank account about 3 weeks after filing, but the confirmation email about my I-bonds didn't come until almost 5 weeks after filing. Just something to keep in mind if you're watching for your refund.

You don't need a pre-existing Treasury Direct account! When you purchase I bonds with your tax refund through Form 8888, the Treasury will actually mail you paper I bonds. These aren't the electronic bonds you'd get through TreasuryDirect.gov. It's one of the few ways to still get paper savings bonds nowadays.

How do you qualify for their help? Do you need to show proof of hardship or something? My CP2000 is for $4k and there's no way I can pay that right now.

You need to demonstrate that the tax issue is causing you significant financial difficulty or that the normal IRS processes aren't working correctly in your case. Examples would be if paying the amount would prevent you from affording necessary living expenses or if you've made multiple attempts to resolve the issue through normal channels without success. You can call them directly or fill out Form 911 (Request for Taxpayer Advocate Service Assistance). You'll need to explain your hardship situation clearly. For your $4k situation, if paying that would prevent you from paying rent, utilities, or medical expenses, that could qualify. They can sometimes help set up manageable payment plans or put a temporary hold on collection activities.

I used the payment plan last year. It was actually pretty straightforward. You can set it up online for smaller amounts or by phone/mail for larger ones. Interest still accrues but the penalties are much less. I did $100/month and it was manageable.

I amended my 2022 return to claim the Lifetime Learning Credit for past tuition I paid that year. Got about $1,100 back. Definitely worth it but took about 5 months to process. Just make sure you're within the 3-year window for amendments.

This! I made this mistake and it triggered an audit. Had to provide detailed documentation showing what portion of my collections payment was actually for tuition versus housing charges. Ended up having to pay back part of the credit plus interest.

Absolutely right. The IRS is pretty specific about what counts as a qualified education expense. Tuition and required course materials are in, but optional expenses are out. Another thing to watch for is if your tuition was paid by any grants or scholarships (even in previous years). If the school applied those to your tuition and what went to collections was actually your housing bill, you might be out of luck for education credits.