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I had the same issue last month! What worked for me was selecting Form 1040, then choosing "social security" as the payment type, and using 12/2020 as the tax period. Make sure you're not selecting "estimated tax" or any other payment type, as that will direct your money to the wrong place. Also, print out your confirmation page after submitting the payment. I learned the hard way that the EFTPS email confirmations sometimes get delayed or lost, and having that paper confirmation saved me when I had to prove I made the payment on time.
Did you also have to file an amended return, or was the payment enough? I'm not sure if I need to do additional paperwork or if just making the EFTPS payment takes care of everything.
Just making the payment is enough - you don't need to file an amended return for this specific situation. The deferred social security tax was always a payment timing issue, not a tax calculation issue. When you make the payment correctly through EFTPS, the system will match it with your outstanding liability. Just make sure you keep your payment confirmation for at least 3 years in case there are any questions later.
Has anyone had their deferred social security payment incorrectly applied? I followed what I thought were the right steps on EFTPS, but when I checked my account a month later, the payment had been applied to my regular 2025 estimated taxes instead of the 2020 deferred amount. Now I'm stuck in a loop trying to get it corrected.
This happened to me too! Call the EFTPS customer service line at 800-555-4477 (not the regular IRS line). They can help reassign the payment to the correct tax period and type. Have your confirmation number ready. I was able to get mine fixed within a week. Don't bother with the general IRS line for this specific issue - the EFTPS folks can handle it directly.
Your accountant isn't handling this well. Partnership distributions aren't that complicated! I'm not a tax pro but have been doing my own taxes with these for years. Basically, it sounds like you invested in an MLP (Master Limited Partnership) or PTP (Publicly Traded Partnership) through either Robinhood or Stash. These investments are popular because they often have good yields, but they create K-1 forms instead of 1099s. Check your email and mail carefully - the K-1 form is usually sent separately from your 1099s, often later (sometimes not until March or even April). It might even be in your Robinhood or Stash account under tax documents. Once you have the K-1, any decent tax software can handle it, or you can find an accountant who isn't afraid of a simple K-1. Some accountants charge extra for K-1s because they take a bit more time, but refusing to do it is weird.
If I get rid of these partnership investments now, will I stop getting K-1s next year? This is all way more complicated than I signed up for when I started investing.
Yes, if you sell all your partnership investments now, you won't receive K-1s for those investments next year. You'll just have a final K-1 for this tax year that includes the sale. Just be careful about which investments you're selling. Look specifically for anything labeled as MLP (Master Limited Partnership), LP (Limited Partnership), or PTP (Publicly Traded Partnership) in your portfolio. Don't just randomly sell investments because most normal stocks and many ETFs don't generate K-1s. Some platforms like Robinhood actually mark which investments might generate K-1s in their descriptions.
Has anyone had experience with what happens if you just ignore the K-1? I got something similar from Robinhood last year but I had already filed my taxes and honestly just pretended I never saw it...
Bad idea. The IRS gets a copy of your K-1, so they know you received partnership income even if you ignore it. Ignoring it basically guarantees an audit or at minimum a tax notice and potential penalties. A friend tried this and ended up owing the original tax plus a 20% accuracy penalty and interest.
If you're worried about late fees, you should know there are actually two different penalties that can apply: the failure-to-pay penalty (0.5% per month) and interest charges (federal short-term rate plus 3%). If you can't pay in full right away, you might qualify for a payment plan which can reduce the monthly penalty rate. Also check if you qualify for first-time penalty abatement - if you've had a clean tax record for the past 3 years, the IRS might waive your penalties (though not the interest).
What's considered a "clean tax record"? I filed late one year but paid everything I owed. Would that disqualify me from the first-time penalty abatement?
A clean tax record generally means you've filed all required returns and haven't had any significant penalties in the previous 3 tax years. Being late to file one year could potentially disqualify you, but it depends on whether you were assessed a failure-to-file penalty at that time. If you filed late but used an extension or weren't required to file that year, it shouldn't affect your eligibility. When in doubt, it's still worth asking the IRS about abatement - the worst they can say is no, and many people get approved even with minor issues in their history.
I'm in a similar situation and called the IRS directly. The wait was about 45 minutes but the agent was actually super helpful and not scary at all! She set me up with a payment plan where I only have to pay $100 a month. The penalties are still there but at least it's manageable now.
You got lucky with that wait time! What number did you call? I've been trying the general line and it just disconnects me after saying they're too busy.
You should think of cash tips as similar to credit card tips in terms of tax treatment. For credit card tips, you're collecting the money and then distributing it to employees - clearly part of their wages. Cash tips ultimately work the same way in the tax code, even though they go directly from customer to employee. Smart move is to factor the approximate employer tax on tips into your overall business model. At my restaurant, we assume about 15% of sales will be tips, so we include the expected employer FICA in our pricing strategy. That way you're never caught off guard.
That makes sense from a business strategy perspective. Do most POS systems automatically track this for you? I'm using a pretty basic one right now and doing some calculations manually which is where I noticed this issue.
Most modern POS systems have tip tracking features, but they vary in sophistication. Basic systems might just record the tips but not calculate the tax implications. More advanced restaurant-specific POS systems will actually estimate your employer FICA obligation from tips and can generate reports for payroll. If you're using a basic system, it might be worth upgrading if tips are a significant part of your business. In the meantime, a simple spreadsheet that calculates 7.65% of reported tips will give you a quick estimate of your additional tax responsibility. Some owners I know actually set aside this percentage from daily sales automatically to cover the eventual obligation.
Has anyone figured out the best way to handle cash tip reporting for employees who work multiple jobs? I have a server who also works at another restaurant and we're both confused about how the tip allocation requirements work when someone has split employment.
Each employer is separately responsible for their own FICA taxes on tips earned at their establishment. Your employee needs to keep tips separate by workplace and report them accordingly to each employer. You're only responsible for tips earned while working for you.
Oliver Brown
To answer your original question - in my experience CPAs are worth it in certain situations: 1. If you're self-employed or have rental properties 2. If you have complicated investments or cryptocurrency transactions 3. If you've had major life changes (inheritance, bought/sold property) 4. If you're close to retirement and need tax planning For your situation (two W-2s, standard mortgage), probably not worth the $300-500 a good CPA would charge. You might be better off just adjusting your W-4 withholding at work to avoid owing next year. The standard deduction is so high now ($27,700 for married filing jointly in 2023) that most people don't itemize anyway, making tax situations much simpler than they used to be.
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Mary Bates
β’This is good advice. I'm a bookkeeper (not a CPA) and I always tell people that the best time to hire a tax pro is BEFORE the tax year ends, not after. By April 15, most of what can be done has already been determined by your actions the previous year.
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Reina Salazar
β’Thanks, this really helps put things in perspective. We definitely fall into the simpler category. I did adjust my W-4 after this surprise, but I was mainly wondering if we were missing something obvious that a professional would catch. Sounds like for our situation, probably not enough to justify the cost.
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Clay blendedgen
Has anyone tried those tax planning apps that let you estimate your taxes throughout the year? I've been thinking about using one since I got surprised with a big tax bill last year too.
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Ayla Kumar
β’I've been using TaxCaster from Intuit (free app) to do quarterly check-ins on our tax situation. It's not perfect but it helps me see if we're on track or need to adjust withholding. Saved us from a surprise last year when my wife got a big bonus that was under-withheld.
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