Thanks for this suggestion! I tried the online transcript option but couldn't get through the identity verification (apparently my phone isn't registered in my name for some reason). I'll try requesting by mail, but I'm in a bit of a time crunch - do you know if there's any way to expedite that?

Unfortunately there's no way to expedite the mail transcript that I know of. The 5-10 business days is the standard timeframe. If you're in a time crunch, you might want to try one of the other suggestions like the Claimyr service to speak with an IRS agent directly, or see if you can find a copy of last year's return somewhere in your records or email. If you used tax software last year, definitely try logging into that account first - most services keep your returns available for several years. Even if you don't remember which service you used, try the major ones (TurboTax, H&R Block, TaxAct, etc.) with your email to see if you have an account.

This is exactly right! I work seasonal tax prep and we tell clients this all the time. AGI is always on Line 11 of the main 1040 form (at least for current forms). And yes, most tax software keeps your returns for several years - TurboTax keeps them for 7 years I believe.

Do you think this would affect different types of restaurants differently? Like would high-end places where servers make $300+ per night handle it differently than diners where tips might be way smaller?

Absolutely. High-end establishments would likely see even more dramatic effects. In fine dining where servers can make $70,000-$100,000 annually primarily through tips, the impact on lending, retirement, and benefits would be catastrophic. Their reported income would suddenly appear to be just $15,000-$20,000 on paper. Smaller diners and casual places would still see negative effects, but the dollar amount difference wouldn't be as extreme. However, servers at these establishments often rely more heavily on programs like EITC and healthcare subsidies, which are all income-based. So while the absolute numbers might be smaller, the relative impact on their financial lives could actually be worse.

I did the calculations for my situation. Last year I made about $42k total, with $35k from tips. I paid roughly $4,800 in federal taxes on that income. But I received $2,300 in EITC and child tax credits. I also qualified for a $1,200/month apartment based on that income and got approved for a car loan at 5.9% interest. If only my hourly wage counted ($7k), I'd save $4,800 in taxes but lose $2,300 in credits. Plus my apartment application would be rejected (they require income 3x rent) and my car loan interest would jump to 18.5% as a "high-risk" borrower. Not worth it at all.

That's really helpful info! Did she have to go through multiple appeals or did they accept everything after the first detailed submission with the Form 8862?

It took two submissions. The first one was rejected with a form letter, but she called (after struggling to get through) and spoke with an agent who advised her to resubmit with even more documentation and a more detailed timeline of the birth certificate delays. The second submission included everything from the first plus school enrollment records, health insurance coverage documentation, and a more detailed letter citing specific sections of the tax code related to qualifying children. That one was finally approved, though it took about 4 months to process.

I second this! The Taxpayer Advocate Service helped me resolve a much simpler issue when regular IRS channels were going nowhere. They're specifically designed to help with situations where the standard process isn't working due to special circumstances.

What happened with your audit? Did you end up having to pay back taxes plus penalties? I'm considering a similar strategy but worried about the consequences if it doesn't work out.

The audit was brutal. They disallowed about 70% of my claimed business expenses, including most of the vehicle depreciation, because my documentation wasn't sufficient to prove predominant business use. I had to pay back taxes, interest, and a 20% accuracy-related penalty. The biggest issue was that I couldn't demonstrate I was spending enough time in real estate activities to justify such a large vehicle expense, especially given my full-time medical practice. The IRS agent specifically noted that my income level made the large loss suspicious. They applied the hobby loss rules and reclassified much of my activity as passive. The total hit was around $45,000 including professional fees for representation during the audit.

Opportunity zones are interesting but completely different from what OP is asking about. 1031 exchanges defer capital gains on property sales, while opportunity zones provide capital gains tax reductions. Neither helps reduce taxes on current W2 income like OP wants.

We got a bunch of papers from the insurance company but honestly we were so overwhelmed with grief and funeral arrangements I don't remember a 1099. We just saw the check and deposit instructions. Maybe we missed something important! Actually think I still have the folder with all the insurance papers. Going to dig through it tonight. Do you know if it would specifically say "1099" or could it be called something else?

It would definitely say 1099 on it, but could be different types like 1099-R (for retirement distributions), 1099-INT (for interest), or even 1099-MISC. Look for any form with numbers broken down into different boxes or categories. Also check if the policy had what's called a "Modified Endowment Contract" or MEC status. These are life insurance policies that have been funded with more money than tax law allows, which changes how they're taxed. If the policy was a MEC, then part of the payout could definitely be taxable.

I'm not OP but have a similar situation. If the policy was whole life and the death benefit was $200K but only $150K was the actual insurance (with $50K being cash value that built up), is only that $50K taxable? Or is it more complicated?

Not to hijack this thread, but what about if someone cashes out a life insurance policy before death? My uncle is considering this with his policy and I'm trying to help him understand the tax implications.