Thanks for this explanation! This makes so much more sense now. So even though my Airbnb isn't a "rental activity" under passive activity rules, I still report it in Box 2 because it's physically real estate. Does this mean I might be limited in how I can use the losses though? Our partnership is showing about $13,500 in losses this year.

Yes, you've got it exactly right - Box 2 is for the real estate itself regardless of how it's classified under passive activity rules. Regarding your losses, that's where the Pub 925 classification becomes important. Since short-term rentals (average stay <7 days) are considered "nonrental activities," you'll need to determine if you materially participate in the business. If you do materially participate (like managing bookings, coordinating cleanings, etc.), then the losses are nonpassive and can offset your other income like wages. If you don't materially participate, then the losses are passive and can only offset passive income.

I had this exact problem with TurboTax last year. You need to go into the income section, then after entering the rental income/expenses, there should be a question about average rental period. Make sure you select "7 days or less" if that applies to your Airbnb. TurboTax should then reclassify it properly. The income still shows in Box 2, but it gets the proper treatment for passive activity purposes.

I tried H&R Block and they have the same March 17th date for Form 8379. Tried TaxAct too and they said mid-March. It's definitely an IRS thing, not specific to any one tax software. Apparently, it's because they had to update how injured spouse allocations are calculated with some tax law changes.

Thanks for checking! Guess I'll just have to be patient then. At least now I know it's not worth the hassle of switching tax software just for this issue. Hopefully the processing will be quick once we can actually file after the 17th.

That's really helpful advice, thanks! Did you need to submit anything beyond your W-2s to show the separate withholdings? I'm worried because I had some 1099 work this year in addition to my W-2 job, and my husband has only W-2 income.

For W-2s, those were sufficient since they clearly show whose income is whose. For your 1099 work, make sure you have documentation showing you're the one who performed the services - contracts with your name, invoices you sent, etc. The biggest issue we ran into was with joint bank accounts where taxes were withheld (like on interest or dividends). For those, we needed to show whose money was originally deposited that earned the interest. Bank statements showing deposits from each person's employer helped prove this.

Do you think there's value in going back to the same preparer each year? Or should I shop around for the best price annually?

There's definitely value in building a relationship with the same preparer over time. They learn your specific situation and can provide more tailored advice as they get to know your financial patterns. They'll also notice changes year-to-year that might indicate new tax opportunities. Shopping based on price alone can backfire. The cheapest preparers are often the least experienced or may rush through returns during busy season. If you find someone who does quality work and you're comfortable with them, the continuity is usually worth any small premium you might pay compared to shopping around.

Not everyone is confident doing their own taxes, especially with self-employment income. I tried doing my own and missed a huge home office deduction that my preparer caught the next year. Sometimes paying a professional saves you more than their fee.

Not everyone is comfortable doing tax math though. My eyes glaze over whenever I try to calculate this stuff, and I inevitably make mistakes. I think the point is that the employer shouldn't be blamed for following the W-4 instructions correctly.

Fair point. I forget that not everyone is comfortable with tax calculations. You're right that the employer isn't at fault here - they processed the withholding correctly based on the form provided. A simpler approach would be to just use the IRS Tax Withholding Estimator online. It walks you through everything step by step and tells you exactly what to put on each line of the W-4. No math required.

I think the problem is that the withholding system is based on outdated assumptions about household income. The tables were designed when it was common to have one primary earner in a family. Now with two similar incomes, the system gets confused without specific instructions.

17 Would you recommend parents help them file or let them try to figure it out themselves? My son is pretty independent but I'm worried he might make mistakes.

22 I recommend a collaborative approach. Sit with them the first time, explain the concepts, but let them drive the process by entering information and reading through the questions. Most free tax software is very user-friendly and perfect for simple returns. For the first filing experience, I tell parents to treat it like teaching them to drive - be present and ready to provide guidance, but let them have the wheel. Review everything before submission, of course. What's great is that with such a simple return (just one W-2 and no deductions), there's very little room for serious mistakes.

8 That's completely incorrect information from your neighbor. Your son filing his own tax return has absolutely no impact on your ability to claim him as a dependent on your return. As long as your son meets the tests for being your qualifying child (age, relationship, residency, and support), you can claim him regardless of whether he files his own return. The only limitation would be if he provides more than half of his own support for the year, which is unlikely with $8,700 in earnings if he's living at home with you covering major expenses.