Would I still use TurboTax to do the rest of my return and just attach this form separately? I'm a little worried about how that would work with e-filing. Has anyone successfully done that?

You'd still complete the rest of your return in TurboTax, but when it comes to filing, you'd need to print and mail the return instead of e-filing. Just print everything from TurboTax, then attach your manually completed Form 8965. The downside is you'd have to paper file, which means a slower refund if you're getting one. But it's better than paying a penalty you don't owe! Another option might be to check out FreeTaxUSA or another software that might have updated their systems correctly for the 2018 hardship exemption changes.

Was it complicated to switch software mid-way through doing your taxes? Did you have to re-enter everything?

That's so helpful to know about! Does this penalty abatement apply even if I've been claiming exempt incorrectly on my W-4? And would I need to specifically request this through a phone call or is it something I'd note when filing the back returns?

The First Time Penalty Abatement can still apply even if you claimed exempt incorrectly on your W-4. The IRS looks at whether you've had penalties in the prior 3 tax years, not how you filled out your withholding forms. You typically request it after you file all your returns and receive a bill from the IRS that includes penalties. You can request it by phone, mail, or sometimes through your online account. The easiest method is usually to call the IRS after you receive a bill and specifically ask for "First Time Penalty Abatement" - just be prepared to explain that you've had a clean compliance history before this.

Thank you! I had no idea about potentially qualifying for Head of Household status - I thought since I'm not married I'd just remain "Single" for filing status. Are there specific requirements for Head of Household that I should know about?

To qualify for Head of Household, you need to be unmarried at the end of the year, pay more than half the cost of keeping up a home for the year, and have a qualifying person (like your child) living with you for more than half the year. The benefit is substantial - the tax brackets are more favorable than single status, and you'll get a larger standard deduction ($20,800 for 2023 vs $13,850 for single filers). When you update your W-4, check the filing status box for Head of Household to have the correct amount withheld going forward.

15 Is there any way to reduce that self-employment tax? That's a huge chunk of money on top of regular taxes!

5 You can reduce your self-employment tax by forming an S-Corporation instead of operating as a sole proprietor. With an S-Corp, you pay yourself a reasonable salary (which is still subject to self-employment tax) but can take the rest of your profits as distributions that aren't subject to SE tax. However, there are additional costs and complexities with an S-Corp, including payroll processing, separate tax returns, and other compliance requirements. Generally, it's not worth considering until you're consistently making at least $80-100K in profit. Given your income level, it might be worth consulting with a tax professional who specializes in small businesses to see if this strategy would benefit you.

8 BAD idea. The IRS has been cracking down hard on unreported income, especially from payment apps. As of 2022, platforms like CashApp, Venmo, PayPal etc. are required to report transactions to the IRS if they total over $600 in a year. Even if you don't get a form, they're sending the info to the IRS. Plus, if you have large deposits going into your bank account that don't match your reported income, that's a major audit flag. The penalties for intentional underreporting can include up to 75% of the unpaid tax plus interest, and potentially criminal charges for tax evasion. Not worth the risk with six-figure income!

Do penalties continue to stack up forever? At what point would they stop adding more penalties?

The failure-to-pay penalty stops when it reaches 25% of the unpaid tax. So if you owe $5,000 in tax, the maximum penalty would be $1,250. However, interest continues indefinitely until the debt is fully paid. One thing I learned through my payment plan is that the IRS applies payments to penalties first, then interest, then the tax principal. This means if you're only making minimum payments, a larger portion goes to penalties and interest rather than reducing your actual tax debt.

I submitted an OIC last year and it got accepted! Settled $27k of tax debt for about $8k. But it's definitely not for everyone - you have to prove genuine financial hardship. They look at your assets, income, expenses... basically everything. And the process took almost 9 months.

Good point about the life estate! My family got caught in that exact situation. Does anyone know if improvements made by the grandmother after transfer would count toward the basis? Like if she paid for a new roof in 2018?

If your grandmother truly gifted the entire property and your aunt is the legal owner, then any improvements made after the transfer would be added to your aunt's basis - but only if your aunt paid for them. If grandmother paid for the roof after no longer owning the house, that would generally be considered a gift of the improvement cost. However, if there was an informal arrangement where grandmother retained some ownership interest (like a life estate), the situation gets more complicated. This is actually why documenting who pays for what becomes really important in family property situations.

Not all quitclaim deeds are treated differently for basis purposes. The type of deed doesn't determine whether it's a gift or not - the consideration (payment) does. A quitclaim just means the grantor isn't guaranteeing they have good title to transfer, but it can still be either a gift or a sale depending on whether money changed hands.