Thanks for the suggestion. It wasn't identity theft - my dad knowingly let my sister use the card to help her out, so we can't go that route. He's on SSDI, not SSI, so that's somewhat reassuring. I'm still concerned about how this might impact his tax situation though, especially since he's normally not required to file due to low income. Does the 1099-C automatically mean he must file now, even with SSDI being his only income source?

If your dad is only receiving SSDI and is single, he generally wouldn't need to file a tax return unless his total income exceeds the standard deduction (which is $14,600 for 2024 if he's over 65). The 1099-C amount would count toward that threshold. So if his SSDI benefits plus the $8,200 canceled debt amount is less than the standard deduction, he still wouldn't be required to file. However, if it puts him over that threshold, then yes, he would need to file - but should definitely look into the insolvency exception in that case.

Form 8275 seems risky to me. I've heard it's like waving a red flag at the IRS saying "look at me!" Wouldn't it be better to just file Form 982 and only provide additional explanation if they actually question it?

Thanks for pointing this out! My income was definitely below those limits in 2021 (around $65k) so I was eligible for the full contribution. I think I might have been confused about how much I actually contributed - just double checked and it was exactly $6k, not $8k like I initially wrote. My memory isn't what it used to be lol. If I'm understanding everyone correctly, since the Roth contribution doesn't affect my tax liability and my income was too high for the Saver's Credit but below the Roth income limits, there's really no benefit to amending my return. Does that sound right?

That's exactly right. If your contribution was $6k (within the limit), your income was below the Roth IRA income thresholds but above the Saver's Credit limit, there's really no reason to amend your return. The IRS already has the information from the Form 5498 that your financial institution filed, and since Roth contributions don't impact your tax liability, you're good to go. One less thing to worry about!

Can you explain what a "backdoor Roth conversion" is? I keep hearing about it but don't really understand the concept or why it matters for record keeping.

Good point! I just checked and you're right - my state withholding also changed on my part-time job. I'm in Illinois, and it looks like they increased the state withholding percentage at the same time as the federal. Any specific suggestions for handling state withholding with multiple jobs? Is it similar to federal or do they have different rules?

State withholding generally follows similar principles to federal, but each state has its own specific forms and calculation methods. For Illinois, they use your federal allowances as a starting point for state withholding calculations. I'd recommend checking the Illinois Department of Revenue website for their withholding calculator or Form IL-W-4. Since both jobs are now withholding correctly, you might just need to make sure your additional withholding amount on your full-time job's W-4 is adjusted downward to account for the new withholding happening at your part-time job. The goal is to get your total withholding across both jobs to match your expected tax liability.

That's actually by design! The 2020 W-4 redesign and IRS withholding tables are set up so that if you check the multiple jobs box, your second/lower paying job often has a higher withholding percentage. This is because the system assumes your first job already uses up your standard deduction and lower tax brackets, so additional income is taxed at higher marginal rates.

This is super important! I messed this up my first year and both me and my parents got letters from the IRS because we had conflicting filings. Such a headache to fix.

I hadn't even thought about state taxes! I'm in Texas - do you know if they have state income tax here?

You're actually in luck! Texas is one of the few states with no state income tax, so you don't need to worry about filing a state return. Just the federal one. That makes things much simpler for you! If you ever move to another state though, definitely check their specific requirements. States like California, New York, and many others have their own income taxes with different thresholds and rules.

Wait, so if he enrolled in college classes the income limit wouldn't matter? Even at a community college? My daughter works part-time making about $8k but she's taking 3 classes each semester.

That's correct! If your daughter is under 24 and a full-time student (generally defined as taking a full course load for at least 5 months of the year), then the gross income test doesn't apply for determining if she's your qualifying child. She would need to meet the other tests: relationship (your daughter, so check), residency (lived with you for more than half the year), age (under 19 or under 24 if full-time student), and support (you provide more than half her support). The number of classes determines full-time status according to the school's definition, so 3 classes might qualify if her school considers that full-time.

Your friend is probably claiming her daughter as a qualifying child rather than a qualifying relative. If her daughter is a full-time student under 24, the income limit doesn't apply. The rules are different depending on which type of dependent they are.