Oh that's something I hadn't considered at all! I bought the furniture back in October but didn't actually set it up and start using it until November. Does the "placed in service" date mean when I bought it or when I actually started using it? And what's this half-year convention thing?

The "placed in service" date is when the property is ready and available for its intended use - so that would be November when you set it up, not when you purchased it in October. The half-year convention is a simplification rule that assumes you placed assets in service halfway through the year, regardless of when you actually started using them. So for the first year of a 7-year property with straight-line depreciation, you'd take 1/14th of the cost (half of 1/7th). However, if you place more than 40% of your total assets for the year in service during the last 3 months, you have to use the mid-quarter convention instead, which is more complicated and bases your first-year depreciation on which quarter you placed the asset in service.

I use TurboTax Self-Employed and it handles depreciation pretty well. When you get to the business expenses section, there's a separate category for assets that need to be depreciated. Just follow the prompts and it'll ask for purchase date, cost, and business use percentage. It automatically applies the correct MACRS schedule for office furniture (7 years). Office furniture isn't "listed property" so you'd select "no" for that question.

That's amazing! I didn't know about this policy. Do you know if it would apply to my situation since I missed 2021 and 2022? Could I get the penalties waived for just 2021 or would it not work since I missed multiple years?

The First Time Penalty Abatement typically only applies to the first tax year in which you had an issue, so in your case, it would likely only apply to 2021. It wouldn't cover 2022 because by then, you no longer had a "clean compliance history" due to the 2021 issue. The good news is that getting the penalties waived for even one year can make a significant difference. For your 2021 tax year, this could potentially save you hundreds or even over a thousand dollars depending on your original tax amount. After you file all your returns, you can call the IRS and specifically request a "First Time Abatement" for the 2021 tax year. Just make sure you've filed all your back taxes before making the request.

I used FreeTaxUSA for my previous year returns and it worked great. They charge like $15 for prior year federal returns and their interface is easy to use. You just need to make sure you're in the right tax year when you start - they have separate sections for each year.

Do you pay your kid weekly or monthly? And do you need to do any quarterly filings with this approach?

I pay my kids bi-weekly to establish a regular pattern (looks more legitimate to the IRS). You will need to do quarterly 941 filings even though you're exempt from some taxes, but the form is pretty simple when you're just reporting one employee with FICA exemptions. You'll also need to do annual FUTA (form 940) filing, though you're exempt from paying federal unemployment tax when it's your child under 21. The first year takes a bit of learning, but after that it becomes pretty routine. The tax savings make it worthwhile - you're essentially shifting income from your tax bracket to your child's (likely 0%) bracket.

I did the math when I hired my daughter. For a sole proprietor in the 22% federal bracket plus self-employment taxes, paying your child $2000 can save around $600-700 in taxes. Plus there are non-tax benefits - teaching your kid about work, responsibility, and money management. My daughter loves having her own money and learning about saving/investing.

1 I thought about that, but wouldn't that potentially cause me to be underwithholding federal taxes? I'm worried about ending up with a big tax bill or underpayment penalties when filing time comes around.

9 It could potentially result in underwithholding if not calculated carefully. The key is to only reduce your federal withholding by the amount of the excess SS tax, not more. You'd need to calculate how much extra SS tax is being withheld per pay period and adjust accordingly. You generally won't face underpayment penalties if you've paid at least 90% of your current year tax liability or 100% of your prior year tax liability through withholding (110% if your AGI was over $150,000). Since you're only adjusting to offset the SS overwithholding, you should still meet these safe harbor provisions if your withholding was otherwise appropriate.

8 Employers generally won't issue a corrected W-2 for SS overwithholding in multiple-employer situations. The W-2 from each employer should correctly reflect what they actually withheld, even if the combined amount exceeds the maximum. The IRS expects you to reconcile this on your tax return rather than having employers issue corrected W-2s. This is specifically addressed in the instructions for Form 1040, where you claim the excess Social Security tax withholding as a credit.

Thanks for suggesting the Taxpayer Advocate Service! Have you heard if they're also dealing with major backlogs like the regular IRS departments? I'm wondering if it's worth contacting them now or waiting until I'm physically back in the US next month.

They definitely have backlogs too, but in my experience, they're still faster than waiting for the regular IRS channels to resolve issues. If you contact them now, they might be able to start your case so that by the time you're back in the US, they'll be ready to work with you more directly. One important tip: when you contact them, be very specific about the financial hardship the delay is causing. They prioritize cases partly based on the level of hardship, so if this money is important for your relocation or getting established back in the US, definitely mention that.

'Where s My" Refund has limited historical data - it usually only shows information for the current tax year and sometimes the previous one. For older refunds, especially from streamlined filings, it probably'won t show anything helpfulnow.