Thanks for bringing this up! During those years I was making around $25-28k annually as an independent contractor, so I'm pretty sure I needed to file. I didn't have any taxes withheld since I was getting 1099s, not W-2s. Does that change anything about whether I should file those back years?

Oh, with 1099 income of $25-28k per year, you absolutely need to file those back years! The self-employment filing threshold is much lower - you're required to file if you have net self-employment income of $400 or more. More concerning is that you likely owe self-employment tax (15.3% for Social Security and Medicare) plus regular income tax on that money. With no withholding, you could be facing a significant tax bill for each unfiled year, and the penalties and interest have been accumulating. I'd strongly recommend getting those filed ASAP, as the IRS is much more likely to work with you on payment arrangements if you come forward voluntarily rather than waiting for them to find you.

There's also the Failure to Pay penalty which is 0.5% of unpaid taxes per month, up to 25%. And don't forget the interest that compounds daily on both the unpaid tax and penalties! I learned this the hard way...

Thanks for sharing your experience. What kinds of deductions did they find that you weren't aware of? I'm trying to get a sense of whether I'm missing major opportunities by using TurboTax.

My CPA found several deductions I had missed completely. The biggest was properly documenting home office expenses since I occasionally work from home - this included a portion of utilities, internet, and even some home maintenance costs that I never would have thought to deduct. They also helped me properly categorize some of my investment expenses and found that some financial advisory fees I was paying were partially deductible. For your specific situation, they might find ways to optimize your stock grant taxation or identify deductions related to your attempted business venture that go beyond just the direct ad costs. A good CPA doesn't just file forms - they look at your whole financial picture and find optimization opportunities. The first year with mine, she saved me about $3,200 compared to what I would have paid using TurboTax, which more than covered her fee.

I've tried both and honestly they're pretty similar for stock stuff. The real difference comes with having someone who can give you planning advice BEFORE tax time. Software just helps you report what already happened, not optimize for the future.

That's a fair point about the planning aspect. I guess my experience was that H&R Block's interface specifically for stock grants and basis tracking was more intuitive than TurboTax, but you're absolutely right that neither one provides forward-looking strategic advice. For someone with the OP's income level, getting that proactive guidance could definitely be worth the CPA cost, especially with the mix of salary, stock grants, and trading activity. I still use software myself, but I'm also not dealing with $110K in stock gains!

What percentage should married couples have withheld? We both put "married" on our W-4s but still ended up owing this year.

There's no one perfect percentage that works for everyone, but for married couples with two incomes, a common issue is that both of you are having taxes withheld at the married rate, which assumes the other spouse doesn't work. If both of you select "Married" on your W-4 without any adjustments, you're essentially both claiming the full married tax bracket benefit, which results in underwithholding. In 2025, you should either select "Married, but withhold at higher Single rate" on your W-4s, or use the Two-Earners/Multiple Jobs worksheet (or your company's payroll system calculator) to determine the additional amount to withhold per paycheck.

Yes! This is the simplest solution. I use TurboTax and it lets you compare both filing statuses side by side to see which saves you more. MFS was worse for us by about $3k.

This! I switched to an S-Corp last year and it saved me about $4k in self-employment taxes. Just make sure your salary is "reasonable" for your industry or the IRS might get suspicious. Also, you'll need to run actual payroll which adds some complexity and costs.

That's exactly right. The key is finding the sweet spot where the tax savings outweigh the additional costs and complexity. For my web development business, I waited until I was consistently making about $60k before making the switch. The "reasonable salary" part is crucial - you can't just pay yourself $1 and take everything else as distributions. I researched industry standards for my area and skill level, then documented why my salary was reasonable. Having this documentation is important if you're ever questioned. Also worth mentioning that with an S-Corp, you'll need to separate your personal and business finances completely, run payroll (usually through a service), and file more complex tax returns. There's software that helps with this, but it's definitely more work than a sole proprietorship.

I vaguely remember seeing something about this when I was researching, but wasn't sure if it applied to me since my income is relatively low. Does it work for all self-employed people or are there specific requirements? How complicated is it to calculate?

Question - if you go on a payment plan, does that put you on some kind of IRS watchlist for future audits? I've always been afraid to do this.

No, setting up a payment plan doesn't increase your audit risk or put you on any kind of "watchlist." The IRS actually prefers taxpayers to voluntarily set up payment plans rather than not paying at all or ignoring tax debts. Millions of taxpayers use installment agreements every year, and it's considered a normal administrative function. What can increase audit risk are things like claiming unusual deductions, having extremely high income, operating primarily in cash businesses, or having large discrepancies between your reported income and your lifestyle.

This is such a good point that people miss! When I did a similar withdrawal last year, I needed $8,000 for taxes but had to take out almost $10,500 to end up with enough after the withholding. And then I still owed more on that withdrawal when I filed!