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Something that confused me when I was doing estimated taxes was that the line numbers changed from 2018 to 2019 to 2020. For 2018 returns, total tax was on line 15, for 2019 it was line 16, and for 2020 it's line 24. The IRS keeps reorganizing the 1040 form, so make sure you're looking at the right line for the right year!
Thank you all for the helpful responses! I checked my 2020 return and found line 24 showing my total tax liability. Just to confirm, this is the amount I should use to make sure I've paid enough for 2021 through the combination of withholding and estimated payments, right?
Exactly right! Line 24 from your 2020 return is the number you should use as your target for total 2021 payments (both withholding and estimated payments combined). If your income in 2020 was less than $150,000, you need to pay 100% of that line 24 amount. If your 2020 income was over $150,000, you need to pay 110% of that line 24 amount to hit the safe harbor protection against underpayment penalties.
Don't forget if you're self-employed, you might also need to look at Schedule SE for the self-employment tax portion of your liability, although that gets rolled into the total tax on line 24 anyway. Self-employment tax can be a nasty surprise the first time you deal with it!
Another tip - check if any of those transactions qualify as wash sales (buying substantially identical securities within 30 days before or after selling at a loss). Robinhood marks them on the statement, but when you import, sometimes these don't get flagged correctly. My tax preparer said this is the #1 issue they're seeing with all the new day traders. If you misreport wash sales, it can trigger an automatic notice from the IRS later.
I've seen those "W" markings on some of his trades but wasn't entirely sure what they meant. Do I need to do something special with those during tax filing?
Those "W" markings are exactly what I'm talking about - they indicate wash sales. When you see that marking, it means your husband sold something at a loss and then bought back the same (or very similar) security within 30 days before or after that sale. The special handling required is that you can't claim the loss from that sale on your taxes right away. Instead, the loss amount gets added to the cost basis of the replacement shares. It essentially defers the loss until you finally sell the replacement shares without buying back in again. Most good tax software will handle this correctly if you import properly, but it's worth double-checking those specific transactions after import to make sure they're coded as wash sales.
Has anyone used the tax summary report that Robinhood provides instead of the detailed 1099-B? I've heard mixed things about whether that's sufficient for tax filing.
DON'T just use the summary! I did that last year and got a CP2000 notice from the IRS months later saying I underreported my income. The summary doesn't always capture everything correctly, especially for wash sales and cost basis issues. The IRS gets the detailed information directly from Robinhood, so they know exactly what trades happened. If your summary numbers don't match their detailed records, you'll likely get flagged.
14 I'm not a tax expert, but did you switch jobs in 2024? Sometimes when you start a new job in the middle of the year, the withholding calculations get messed up because the system assumes you'll only make that amount for the full year and withholds at a lower rate. Happened to me when I started a higher-paying job in July - they weren't withholding nearly enough because the payroll system prorated my annual income.
1 I didn't switch jobs, but I did get a significant raise in March 2024. Maybe that affected the calculations? My salary went from about $75,000 to $82,500, so it was a pretty big jump. Could that have messed up the withholding calculations? I'm wondering if my employer's payroll system just didn't adjust properly.
5 Did you check if your employer might have classified too much of your income as non-taxable benefits? Sometimes if you have a lot of pre-tax deductions like health insurance, HSA, dependent care FSA, or retirement contributions, it can significantly reduce your taxable wages, which would result in less withholding. Might be worth checking your paystubs to see if there's anything unusual in how your taxable wages were calculated.
1 I did start maxing out my 401k contributions this year, which is about $22,500. And I also contribute to an HSA ($3,850) and have health insurance premiums taken out pre-tax (about $4,500 annually). So that's around $30,850 in pre-tax deductions. Would that be enough to cause such a dramatic reduction in withholding? My total federal withholding for the entire year was only $1,250 which seems incredibly low even with those deductions.
For what it's worth, your situation screams "the company is not reporting these payments to the IRS." Companies that pay contractors properly don't dodge providing 1099s - it's literally a basic business function. Here's what I think is happening: They're either classifying these payments as something else in their books or they're not recording them properly at all. Either way, it likely means they're trying to reduce their tax liability by not properly documenting contractor payments. As others have said, you MUST report your income regardless. I'd strongly recommend keeping documentation of your attempts to get the 1099 from them. Take screenshots of emails or texts where you're requesting the form. This creates a paper trail showing you were trying to comply properly.
That's what I'm afraid of. Do you think there's any chance the IRS would come after me if the company is doing something sketchy, even if I report all my income correctly?
If you accurately report all your income, you're protecting yourself regardless of what the company does. The IRS is generally more interested in people who don't report income than in those who report it correctly, even when there are discrepancies in how it's documented. Keep detailed records of all payments you received, your communications with the company requesting the 1099, and any business expenses related to this work. If questions ever arise, these records show you acted in good faith and tried to do everything properly. The company would be the one with potential problems for failing to issue required tax forms and potentially misclassifying payments in their accounting.
One thing nobody's mentioned - if you've been a contractor making that much ($24k) and haven't been making quarterly estimated tax payments, you might have an underpayment penalty coming. Since no taxes are being withheld, you're supposed to be making those quarterly payments yourself. The good news is you can avoid the penalty if you owe less than $1,000 after accounting for any withholding from other jobs, or if you paid at least 90% of this year's tax or 100% of last year's tax (whichever is smaller). Just something to be aware of when filing!
Tasia Synder
One thing nobody has mentioned yet - check if you qualify for any additional credits or deductions before you file! You might be able to reduce what you owe. Do you have any education expenses? Student loan interest? Did you make any energy-efficient home improvements? Contribute to retirement accounts? You can still make IRA contributions for 2024 until April 15, 2025, which could lower your tax bill. Even if you can't eliminate the whole bill, reducing it by even $1,000 would make a payment plan much more manageable. Don't just accept the TurboTax number without seeing if there are legitimate deductions you might have missed.
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Sydney Torres
ā¢We actually do have some student loan interest from my wife going back to school part-time! I completely forgot about that. And I think we might qualify for the child care credit since we pay for after-school programs. Do you know if TurboTax automatically checks for these or do we need to specifically enter them somewhere?
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Tasia Synder
ā¢TurboTax should ask about these items during the interview process, but sometimes it's easy to miss them if you're rushing through. Look specifically for the "Deductions & Credits" section in TurboTax and make sure you go through every category. For student loan interest, you should have received a Form 1098-E from the loan servicer showing how much interest was paid last year. For child care expenses, you'll definitely need to enter those manually. Look for the Child and Dependent Care Credit section. You'll need the provider's tax ID number and the total you paid for each child. This credit can be worth up to $1,200 per child depending on your income, so it could significantly reduce what you owe!
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Selena Bautista
When this happened to me, I also discovered I could file Form 2210 to get the underpayment penalty waived. Check box A in Part II if this is your first time owing taxes. Many tax situations qualify for penalty relief, especially if your tax situation changed significantly this year. Also, don't panic about the amount - set up a direct debit installment plan and the IRS is actually pretty reasonable to work with. I was paying about $150/month on a $3600 bill and the total interest ended up being way less than a credit card would have charged.
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Mohamed Anderson
ā¢This is really helpful! Does filing Form 2210 complicate your return though? I've always been nervous about filing anything that might increase audit risk.
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