Thanks for this info! So even if Zelle doesn't report it, I should still be reporting this income? Would I just add it as "miscellaneous income" or would I need to file as self-employed with a Schedule C?

You should definitely report the income regardless of whether Zelle issues a 1099-K. Since you're receiving regular payments for work performed, this would be considered self-employment income, not miscellaneous income. You'll need to file Schedule C to report your business income and expenses, and Schedule SE to calculate your self-employment tax. This is actually better for you in many ways because with Schedule C, you can deduct legitimate business expenses that reduce your taxable income. If you have a home office, use your phone for work, or have any other expenses related to this work, those can potentially be deductible.

Same experience here. I got a 1099-K from PayPal but nothing from Venmo despite making similar amounts on both. I reported everything anyway because I don't want headaches with the IRS, but the inconsistency is frustrating. I think different platforms are interpreting the requirements differently.

Do you know if this same process works in H&R Block's software? I'm having the same issue there and their support has been useless.

I haven't personally used H&R Block's software recently, but the general principle is the same. You need to make sure you've entered your non-deductible contribution information and completed the equivalent of Form 8606 before you enter the conversion information. The specific navigation and screens will be different, but the sequence is what matters. Most tax software struggles with backdoor Roth conversions if you don't follow the correct order of operations. Try looking specifically for the Form 8606 section in H&R Block's software and complete that first before handling the conversion.

This is such an important point! I got hit with an unexpected tax bill because of this last year. Had a small old IRA with about $12k in it that I forgot about, and it completely changed how my backdoor Roth was taxed.

That's a great point! I didn't even think about my scholarship reducing my eligible expenses. I received about $3,500 in scholarships last year. So if my tuition was $5,000, I would only be able to claim $1,500 for the Lifetime Learning Credit?

That's exactly right! You would only be able to claim $1,500 as your qualified education expenses in that scenario. And remember, the Lifetime Learning Credit is calculated as 20% of your qualified expenses, so your potential credit would be $300 ($1,500 × 20%). Then, that potential credit amount gets compared to your remaining tax liability on the Credit Limit Worksheet. If your remaining tax liability is less than $300 (or zero), that's why you'd end up with zero or a reduced credit amount on line 19 of Form 8863.

I used both TurboTax and H&R Block and got the same zero result with the Lifetime Learning Credit. I think different software might do the calculations slightly differently, but the end result should be the same if you're entering the same information. Might be worth double-checking that you input everything identically in both programs.

Wait, so are you saying I could sell some of my underwater crypto positions to harvest the losses, then immediately rebuy the same crypto, and it's not subject to the 30-day wash sale rule that applies to stocks? That would be helpful for offsetting some of the gains.

Yes, that's exactly right. Currently, cryptocurrency is treated as property by the IRS, not as a security, so the wash sale rules don't apply. You can sell crypto at a loss, claim the tax deduction, and then immediately repurchase the same crypto without waiting 30 days. Just be aware that this is a loophole that Congress has been talking about closing. There have been several proposed bills that would apply wash sale rules to crypto in the future, so this strategy may not be available forever. Always document these transactions carefully in case questions come up during an audit.

I switched to CoinTracker + H&R Block this year and it's working much better than TurboTax did for my crypto. You can export directly from CoinTracker to H&R Block and it handles all the specific identification stuff correctly.

Thanks for mentioning the payment plan option! Do you know if setting up a payment plan today (even if I plan to pay it off tomorrow) would help me avoid the penalties completely? Or would I still get hit with the 0.5% for the unpaid portion?

Setting up an installment agreement (payment plan) doesn't eliminate penalties completely, but it reduces the late payment penalty from 0.5% to 0.25% per month. You'd still owe interest on the unpaid balance too. If you're literally only going to be one day late, it might not be worth the hassle of setting up a formal payment plan, especially since there's a fee to establish one ($31 for online setup with automatic payments). For a one-day delay on $6k, you're looking at around $30 in penalties without a plan versus maybe $15 with a plan, but then you'd pay the $31 setup fee. The math doesn't work in your favor for such a short delay.

Was the abatement automatically applied or did you have to wait for them to send you something? I'm in a similar situation but hate waiting for mail from the IRS.