Something important to understand about Roth IRAs: you can always withdraw your contributions (not earnings) at any time without taxes or penalties. But the catch is you need to have properly documented those contributions with Form 8606 when you made them. The IRS can't just take your word for it years later. I recommend also sending a letter with a spreadsheet showing all your contribution dates and amounts along with your completed 8606 forms. This extra documentation helped me when I was in a similar situation. The more organized your response, the faster the IRS will process it.

One thing nobody has mentioned - make sure you respond to the CP2000 notice within the deadline even if you're still gathering documentation! You can send a letter stating you're disputing the assessment and are in the process of preparing your documentation. This buys you time while still meeting their response deadline.

Don't forget about tip pooling situations! If your restaurant has tip sharing/pooling, you're only responsible for reporting the tips you actually take home after the pool. My restaurant takes 30% of our tips for the kitchen and support staff, so I only have to report 70% of what customers leave me. Also, many restaurants have automatic reporting systems now - ours calculates a minimum tip declaration based on our sales and automatically reports it if we don't manually enter a higher amount. Just something to be aware of.

One thing to remember - your employer is REQUIRED BY LAW to report to the IRS when your reported tips don't equal at least 8% of their gross receipts. This is called allocated tips. If you consistently report less than 8% in tips, your employer will allocate additional tip income on your W-2 in box 8, and you'll end up paying taxes on that amount anyway. Also, remember that properly reporting tips affects more than just your income tax. It impacts your social security benefits later in life, your ability to qualify for loans (since your reported income will be higher), and even unemployment benefits if you ever need them. I've seen so many servers struggle to get approved for apartments or car loans because their reported income was so low compared to what they actually make.

One thing nobody's mentioned yet - go back to HR Block ASAP! If they told you they set up a payment plan but didn't, that's their mistake and they should help fix it. Many of their offices have an accuracy guarantee. Bring all your notices and documentation from your original appointment. I had a similar issue with a different tax prep company. They ended up covering the penalty fees when it was clear their preparer had made promises they didn't follow through on. At minimum, they should help you navigate the resolution process at no additional cost.

Make sure you request a payoff amount when you talk to the IRS! The interest and penalties continue to accrue daily, so the amount you owe now is higher than the original $39k. When you set up your payment plan, get a clear breakdown of principal, interest, and penalties so you know exactly what you're paying for. Also, depending on your financial situation, you might qualify for an Offer in Compromise where you settle for less than the full amount. Worth asking about if you truly can't afford the full payment over time.

Make sure you're keeping track of ALL your freelance expenses, not just the laptop! I do side photography work and track things like: - Software subscriptions - Internet costs (percentage used for work) - Office supplies - Professional development/courses - Website hosting fees Every little bit helps reduce that taxable income. And don't forget about the QBI deduction if your freelance work shows a profit! You can potentially deduct up to 20% of your qualified business income.

I'm confused about the whole Schedule C thing. If I'm only making like $2000 a year from my side gig, do I still need to fill out the entire form? Seems like a lot of work for so little income.

Have you checked if you qualify for the retirement savings contribution credit? If your income is below certain thresholds and you contributed to retirement accounts, you might get a tax credit on top of the deduction. I used it last year and it knocked $1k off my tax bill!

I had almost IDENTICAL situation last yr!! Our HHI went up by like 30k but our withholdings only went up like 2k. Called our HR dept and apparantly the witholding tables changed a few years ago and they dont automatically adjust when ur income increases. We had to manually update our w4s to withhold extra each check. For this year tho its probably too late to fix withholding. Try bunching charitable donations if u can. We donated a bunch of household stuff to Goodwill and got receipts. Also check if ur state has tax deductible 529 contributions!