Thanks for clarifying this! I'm the contractor and my client asked me to complete this form so they can pay me and report it properly. So I'll put my full legal name and address in Box C. Just to double check - this isn't the W-9 form, right? Because I filled one of those out already.

You're welcome! If you already filled out a W-9, then this is probably a different form. The W-9 is what contractors fill out to give to clients (it provides your taxpayer info), while the 1099-NEC is what the client sends to both you and the IRS reporting how much they paid you. It's a bit unusual for a client to ask you to fill out your own 1099-NEC since they typically prepare that form based on the W-9 you already provided. They might be asking you to verify the information they have, or they could be confusing which form they need from you. Might be worth asking them to clarify which specific form they need you to complete.

This is actually not entirely accurate. The IRS does accept standard USPS abbreviations in addresses. I work in payroll and we use standard abbreviations all the time without issue.

How does a QCD work? My parents are over 70 and take RMDs but they don't get any tax benefit from their charitable donations anymore since the standard deduction increased.

A QCD allows people who are 70½ or older to direct up to $100,000 annually from their IRA directly to qualified charities. The distribution counts toward their Required Minimum Distribution (RMD) but doesn't get added to their taxable income. This is much better than taking the distribution, paying tax on it, and then donating (especially when taking the standard deduction). With a QCD, they effectively get a tax benefit from charitable giving even without itemizing. The charity gets the same amount, but your parents keep more money by reducing their tax bill on the RMD. It's completely legitimate and specifically encouraged by the tax code.

That makes sense. So basically don't create an explicit quid pro quo in texts or emails? Would verbal agreements be just as problematic if discovered?

Is there any way around the pro-rata rule? I have a large traditional IRA from an old 401k rollover but still want to do backdoor Roth contributions going forward.

There is actually a potential workaround! If your current employer's 401k plan accepts incoming rollovers from IRAs (sometimes called a "reverse rollover"), you could move your existing traditional IRA money into your 401k plan. This removes those funds from the pro-rata calculation. After doing that, your traditional IRA balance would be zero, so when you make a new non-deductible traditional IRA contribution and convert it to Roth, you'd have no pro-rata issues. Not all employer plans allow this though, so you'd need to check with your plan administrator first.

High income earners aren't allowed to contribute directly to Roth IRAs - in 2025, if you make more than about $161,000 (single) or $240,000 (married), you can't put money directly into a Roth. The "backdoor" is a workaround: you put money into a Traditional IRA (which has no income limits for contributions, though the deductibility may be limited), and then immediately convert that Traditional IRA to a Roth IRA. There's no income limit on conversions. If you do it with non-deductible contributions and convert quickly before any growth, you essentially end up with a Roth contribution without paying much additional tax, even though your income would normally prevent you from contributing to a Roth directly.

Oh that makes sense! So it's basically a loophole for higher income people. Thanks for explaining it so clearly!

Can you explain more about those education tax credits? I've heard of them but don't really understand how they work or if I'd qualify.

The American Opportunity Credit is the bigger one - worth up to $2,500, and you can claim it for the first 4 years of college. You get 100% of the first $2,000 you spend on qualified education expenses, and 25% of the next $2,000. The best part is that it's partially refundable - meaning you can get up to $1,000 back even if you don't owe any taxes. The Lifetime Learning Credit is worth up to $2,000 (20% of the first $10,000 in qualified expenses), but it's not refundable. However, you can use it for any year of education, including graduate school or professional courses. You generally qualify if you're paying for college expenses and your income isn't too high. For 2024, the AOTC starts phasing out at $80,000 for single filers, and the LLC at $59,000. Both have their own requirements, but most traditional college students will qualify for at least one of them.

You need to look at your student account statement from your school - it should show how much you paid for tuition and fees separately from housing, meal plan, etc. Compare that to your total scholarship amount. If your scholarship exceeds the tuition/fees/required books, then the excess is taxable. Your school's financial aid office can also help break this down if the statements aren't clear.

Omg I hadn't even thought about state taxes! So could I potentially owe state tax even if I don't owe federal tax on the sale? I'm in Pennsylvania if that matters.

Yes, exactly! Pennsylvania does tax capital gains from real estate sales. While they generally follow federal rules for calculating the gain, there can be differences in what exclusions or deductions are allowed. For example, even if you qualify for the full $250,000 federal exclusion under Section 121, PA might have different rules or limitations. Check with the PA Department of Revenue or a local tax professional to be sure. Some states also have transfer taxes that might have been paid at closing but should be included in your cost basis calculations.

This is so true! My cousin got audited 3 years after selling her house because she couldn't verify the improvement expenses she claimed. Keep those renovation receipts!