Would you have to pay additional taxes when you got those 2439 forms? I'm wondering if answering "no" when you should have said "yes" would result in underpaying taxes or if it's more of a credit situation where you'd be missing out on money back.

That's really helpful! Is the Wage and Income Transcript something I could still get now before filing? And do you know how long it takes to get it if I request it today? My tax deadline is coming up pretty soon.

If you create an account on the IRS website (irs.gov), you can access your Wage and Income Transcript immediately online. The electronic version is available for the previous tax year by late May or June, but we're still early in the filing season, so the 2023 information might not be complete yet. If you request it via Form 4506-T by mail, it typically takes 5-10 business days after they receive your request. Given the filing deadline approaching, the online method would be much faster if you qualify for online access. You'll need to verify your identity through their secure access process, which requires a financial account number or a mobile phone in your name.

If it's properly registered as a CCPC, you might qualify for the Small Business Investment Tax Credit, but only if the corporation issued eligible shares to you and meets all the other criteria. Did you receive actual shares in the company or just an agreement promising a percentage of profits?

How exactly do you calculate the support test? I paid rent and groceries, but my parents helped with tuition for part of the year and kept me on their health insurance. Does the insurance count as support?

Yes, health insurance premiums paid by your parents would count as support they provided. For calculating total support, you need to add up ALL expenses: housing, food, utilities, clothing, education, medical/dental care, transportation, and other necessities. If your parents paid tuition and health insurance, you'd need to get the dollar value of those benefits. For health insurance, it would be the portion of the premium attributable to your coverage. Then compare their contribution to the total support amount to see if it exceeds 50%.

That's not always true though - my tax guy said the exception does apply in some cases, especially for college students with very little income. It's not "super rare" if you actually have no tax liability.

Thanks for this tip! Do I need to specifically ask for a "first-time penalty abatement" using those exact words, or can I just explain the situation? Also, since I'm now disputing part of the 2021 amount with the collection agency, should I wait for that to resolve before addressing the 2022 taxes?

You don't need to use those exact words - just explain that this was your first time dealing with this township's taxes, you weren't aware of the requirement after moving, and you're now trying to get into compliance. Ask if they have any programs for waiving penalties for first-time issues or good-faith mistakes. Being polite and showing that you're trying to fix the problem goes a long way. I wouldn't wait on addressing the 2022 taxes. Handle them separately from your 2021 dispute. The sooner you file and pay your 2022 taxes, the less interest will accrue, and it demonstrates to the township that you're being proactive about compliance going forward. This good-faith effort might even help your case with the 2021 dispute.

Adding to this - some states like PA have really complicated local tax systems where the credits aren't automatic. You have to specifically request them and provide proof of payment to the other locality. Don't assume the townships talk to each other because they definitely don't!

That's absolutely right. The reciprocal agreements exist in many places, but you definitely have to claim them yourself. The townships don't communicate with each other about who paid what. Be prepared to provide documentation showing exactly how much local tax you paid to your previous township during the part of the year you lived there. W-2s, paystubs, and your state tax return can all help establish this. If your employer was withholding for the wrong township entirely (which happens a lot), you might need to request a refund from the incorrect township while paying the correct one.

This is super helpful! I've been keeping receipts but wasn't sure what counts as a legit business expense. For my home office, is there a specific formula to calculate that deduction? And do I need any special documentation for these deductions?

For your home office, you can use the simplified method of $5 per square foot (up to 300 sq ft) or the regular method where you calculate the percentage of your home used for business and apply that to your housing expenses. Most freelancers find the simplified method easier unless you have a large dedicated space. As for documentation, keep all receipts and maintain a log that notes the business purpose for each expense. For things like mileage, keep a log of dates, destinations, and business purposes. Digital receipts are fine - just make sure they show what was purchased, date, and amount. The IRS doesn't require you to submit these with your return, but you'd need them if you're ever audited.

Same thing happened to me my first year. If you can show reasonable cause (like you didn't know about the requirement), sometimes you can get the penalty waived. Worth calling the IRS to ask about penalty abatement for first-time offenders.