Thanks for all these options! I just checked and I do have a refund coming, so I'm guessing I wouldn't have been penalized anyway? Also, what's the tax transcript and how would that help? Never heard of that before.

Yes, if you're getting a refund, you wouldn't face failure-to-file penalties even if the extension wasn't properly filed. The IRS only issues penalties when you owe them money, not when they owe you. A tax transcript is a document from the IRS that shows key information from your tax record, including extensions filed, payments made, and return status. You can request one for free through the IRS website. For your situation, the "account transcript" would show if an extension was filed. It's basically a timeline of all transactions and status changes related to your tax account for a specific year.

Omg I didn't even think about state taxes! I'm in California - does anyone know if they automatically extend when federal is extended?

Thanks for sharing your experience! That's really helpful to hear from someone in a similar situation. Did you have to fill out any special forms to document the support calculation, or did you just keep your own records in case of an audit?

We didn't have to submit any special forms with our tax return specifically for the support calculation. Our tax preparer just had us keep good documentation (basically a spreadsheet showing our household expenses and what portion went to our daughter). The most important thing was making sure our daughter's tax return properly indicated she could be claimed as a dependent on someone else's return. That way the systems don't flag a conflict. Keep records of major expenses you pay for your daughter in case you ever get questioned, but in our experience, this was a pretty straightforward situation once we understood the support test isn't about income but about who's paying for living expenses.

The kiddie tax only applies to unearned income (interest, dividends, capital gains, etc.), not earned income from actual work. Since OP's child is earning money from modeling/commercial work, that's considered earned income and would be taxed at the child's own rate, not the parents' rate.

This hobby vs business distinction is worrying me now. I definitely intend to make a profit, but with only $360 in income for 2024 and thousands in expenses, will the IRS see this as a legitimate business? We had the property listed on several rental sites but just had bad timing with the market in our area.

Don't worry too much - the IRS looks at your intent and efforts, not just your initial results. Save copies of your rental listings, any advertising you did, and documentation of your efforts to rent the property. This shows you were genuinely trying to operate as a business. The IRS generally allows new businesses some time to become profitable. They use a guideline that if you show a profit in 3 out of 5 consecutive years, they'll presume you have a profit motive. Your first year being mostly preparation is very common in real estate. Just make sure you keep excellent records of all expenses and your efforts to rent the property. This documentation will be crucial if you're ever questioned about your business intent.

I had a similar situation last year. You need to allocate expenses based on both time and usage. For example, if your property was available for rent for 3 months out of the year, you'd allocate 25% of annual expenses like insurance, property taxes, etc. to the rental activity. Then within those 3 months, if it was only actually rented for 10 days, you need to keep personal use vs. rental use straight too. Publication 527 has worksheets for this. It gets complicated fast!

This is interesting! Do you know if there's any way to calculate exactly how much extra to withhold from my day job to cover my side business? I make about $65k at my regular job and maybe $15k from my online store.

You can use the IRS Tax Withholding Estimator on their website to calculate this pretty accurately. Enter both your W-2 income and your estimated business profit, and it will tell you how to adjust your W-4. For your specific situation with $65k from your job and $15k from your business, you'd probably need to withhold an extra $3,000-4,000 annually from your day job, which breaks down to about $250-350 extra per month depending on your other deductions and credits. This covers both the income tax and self-employment tax on that $15k. Just make sure to update your calculations if your business income changes significantly!

Oh good point. I'm in California and they definitely want their quarterly payments too. Anyone know a good resource for figuring out sales tax requirements across different states? My online shop ships to like 30 different states.

That's exactly what I'm worried about! How do you know for sure you've got everything? I usually get a W-2 from my main job and a 1098-T for my kid's college, but sometimes random 1099s show up.

I keep a checklist of all expected documents from previous years and mark them off as they arrive. I also wait until at least February 1st even though some forms come earlier - this gives stragglers time to arrive. For unexpected 1099s, I log into any accounts where I might have earned interest or made transactions (banks, investment accounts, payment apps like PayPal or Venmo if you use them for business) and check if they're issuing forms. Most places now let you see if a tax form is being generated before they actually send it.

I second FreeTaxUSA! Used it for the first time last year and it was super straightforward. The interview process walks you through everything, and they have good support articles if you get confused.