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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!
22 One thing to be aware of that nobody mentioned yet - if your brother was living in the house and continued to live there after your mom passed away, but before he bought you out, there might be questions about fair rental value during that period. This can sometimes complicate inheritance situations.
1 That's a good point I hadn't considered. My brother did continue living there those 6 months before buying us out. We didn't charge him rent since we were figuring out the estate. Would that create any tax issues? The executor (my older brother) just had him pay the utilities during that time.
22 In most cases, this wouldn't create significant tax issues for you as the person selling your share. The rental value question typically affects the person living in the property (your brother) or possibly the estate during administration. Since this was a relatively short period (6 months) and you were in the process of settling the estate, the IRS is unlikely to be concerned about the lack of rental payments. The main focus for your tax reporting remains the sale of your inheritance share and ensuring you correctly report the basis as the fair market value at the date of death.
8 Do you need to use a special tax software to report this correctly? I'm worried my regular tax program won't handle inheritance properly.
16 Most major tax software (TurboTax, H&R Block, TaxAct) can handle inheritance and property sales. The key is making sure you enter the correct basis information. When it asks about the sale of property and you input the 1099-S information, it should specifically ask if this was inherited property and when the person died, then calculate the stepped-up basis correctly.
I know you specifically asked about fully online solutions, but I wanted to mention that many desktop tax software providers are moving toward hybrid models. For example, I use Drake Tax which has a desktop component but also offers several cloud features: - SecureFilePro for client document exchange and signatures - Web-based client organizers - Online client portals for document sharing - Mobile app for document capture This combination gives me most of the benefits of an online system while retaining the power and reliability of desktop software. The desktop application handles the complex calculations and form generation, while the cloud components handle client interaction and document management.
Does Drake's cloud functionality allow multiple preparers to work on the same return simultaneously? That's one feature I really need in a cloud solution.
Has anyone looked into Canopy recently? Last I heard they were developing a full tax preparation module to complement their practice management software. Their practice management system is already fully cloud-based and quite good.
I'm using Canopy for practice management and client interaction, but their tax module is still very limited. They've scaled back their tax prep ambitions significantly from what they originally announced. It handles basic individual returns but is nowhere near ready for complex business returns. Great practice management system though!
Sophia Long
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!
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JacksonHarris
ā¢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?
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Sophia Long
ā¢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.
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Angelica Smith
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!
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Logan Greenburg
ā¢This is so important! My first year being self-employed I completely underestimated my tax liability because I forgot about the self-employment tax. Ended up owing a bunch more than I planned for.
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