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Has anyone actually received notices from the IRS about excess Roth IRA contributions? I'm in a similar situation (discovered I overcontributed by about $1,200 three years ago), but I'm wondering if the IRS even catches these things? Not trying to avoid paying what I owe, just curious if they actively look for this or if it's more of a "fix it if you realize it" situation.
The IRS absolutely does catch these eventually through their matching programs. My brother ignored his excess contribution for 4 years thinking they wouldn't notice, and then got hit with the 6% penalty for all 4 years PLUS interest and an accuracy-related penalty. The IRA custodian reports all contributions to the IRS on Form 5498, and they cross-check that against your income on your tax returns.
That's good to know - definitely going to address this ASAP then. I was hoping maybe they had bigger fish to fry, but sounds like their systems eventually catch up to these issues. Better to pay the penalties now than wait for them to find it and potentially face even more penalties and interest.
One thing nobody's mentioned yet - check if you might have been eligible for those contributions after all! I thought I had made excess Roth contributions for two years, but when I reviewed my tax returns more carefully, I realized my MAGI calculation was wrong. I had included some one-time items that shouldn't have been in the calculation, and I was actually under the limit for those years. Worth double-checking your MAGI calculation before going through the hassle of removing excess contributions. The definition of MAGI for Roth IRA purposes is pretty specific.
This is actually super helpful. What specific items don't count toward MAGI for Roth contribution purposes? I'm wondering if I might have made the same mistake in my calculations.
Something nobody has mentioned yet - there could be state tax implications here too depending on where you live. Some states don't recognize all federal filing statuses the same way or have different rules for non-citizen spouses. I found this out the hard way last year. Saved a bunch on federal by filing HOH but got hit with a surprise state tax bill because my state has different rules for qualifying dependents when one parent has exempt status.
Which state was this in? I'm in California and my husband works for a consulate with tax exemption. Been wondering if state taxes work differently for us.
I'm in New York, which has some unique rules for diplomatic and international organization families. California also has its own system that doesn't perfectly align with federal filing statuses, especially for international employees with special tax treatment. For California specifically, even if your husband has federal tax exemption through his consulate work, you may still need to report his income on your state return depending on your filing status. California looks at worldwide income for residents even when it's exempt at the federal level. I'd recommend consulting with a tax professional who specializes in diplomatic/international tax situations in California to avoid surprises.
Has anyone actually amended previous returns after filing incorrectly? I've been doing Single for 3 years now when I should've been HOH (my wife works for World Bank, tax exempt). Worried about triggering an audit if I suddenly change and file amendments.
I amended 2 prior years returns in a similar situation (spouse with NATO exemption). No audit but the refund for the older year took almost 11 months to process! The more recent one came in about 5 months. Just be prepared to wait forever if you're owed money.
Everyone's talking about services but no one answered OP's actual question about how much they'd need to donate for it to make sense. For 2023, you need your TOTAL itemized deductions to exceed $13,850 (single filer). This includes: - State and local taxes (capped at $10k) - Mortgage interest - Charitable donations - Medical expenses exceeding 7.5% of AGI So if you have like $8k in state/local taxes, $3k in mortgage interest, and say $1k in medical expenses that qualify, you'd need about $2k in charitable donations to make itemizing worthwhile.
Thanks, this is exactly what I needed to know! I pay about $6k in state income taxes, no mortgage, and minimal medical expenses. So it sounds like I'd need to donate around $8k worth of stuff to make itemizing worthwhile, which is definitely not happening this year lol. I'll just take the standard deduction and be happy the clothes are going to someone who needs them more than me.
Yep, you've got it right. In your situation with $6k in state taxes, no mortgage, and minimal medical expenses, you'd need about $8k in charitable donations to make itemizing beneficial. The good news is that even without the tax benefit, your donation will help others. And if your financial situation changes in future years (like buying a home with a mortgage), the equation might change too!
Am I the only one who thinks it's weird that we penalize people who donate to charity by only giving tax benefits to those who donate a lot or have expensive homes? Like, someone who donates $500 while earning $40k a year is probably making a bigger sacrifice than someone donating $14k while making $500k, but only the rich person gets a tax break. The system is messed up.
You're not wrong, but there are other tax benefits designed for lower/middle income folks that high-income people don't get. The tax code is complicated. Also, the standard deduction is basically a "freebie" deduction whether you donate or not, so at least there's that.
Don't mean to scare you, but my brother got audited for this exact thing - selling a car he used for Uber at a loss. The issue wasn't reporting the loss itself, but that he claimed 90% business use when his actual mileage logs only supported about 55% business use. The IRS made him pay back a portion of his refund plus penalties. Make sure you have good documentation showing exactly what percentage of the car's use was actually for business vs. personal! Delivery apps sometimes track your miles while delivering, but they don't track miles between deliveries or personal usage.
This is exactly what I was worried about. I kind of estimated my business use at around 75% but I don't have perfect records. I do have all my delivery app summaries though - would those be enough to support my claim if I get audited? And how long after filing did your brother get audited?
The delivery app summaries are a good start, but they usually only show miles while actively on deliveries. They don't capture dead miles (driving to busy areas, returning home, etc.) which are still business miles. My brother got audited about 14 months after filing, and the IRS wanted to see a mileage log showing business vs. personal trips. If you don't have perfect records, reconstruct the best log you can from the app summaries, your calendar, bank statements showing gas purchases, etc. Even a reconstructed log is better than nothing. Also, in my brother's case, they only went back one year, so if your return from last year doesn't get flagged in the next 6-12 months, you're probably in the clear.
Has anyone here dealt with the QBI (Qualified Business Income) deduction for delivery driving? I think OP was right to put zero since they're not doing deliveries anymore, but last year I qualified for a 20% QBI deduction on my net profit from deliveries which was sweet. It's one of the few perks of being a 1099 contractor instead of an employee.
Yeah, the QBI deduction is awesome! But keep in mind it gets complicated if your income is above certain thresholds or if you have multiple businesses. For simple delivery driving below the threshold amounts, you basically get to deduct an extra 20% of your net business income, which can really help offset the self-employment tax burden.
Liv Park
From personal experience, I always file early and it works great BUT only if you're 100% sure you have all your documents. My sister filed early last year and then got an unexpected 1099 two weeks later. The amended return was a nightmare and her refund was delayed by months. Just make sure you've accounted for everything!
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JaylinCharles
โขThat'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.
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Liv Park
โขI 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.
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Leeann Blackstein
Personal opinion - file whenever you're ready but don't rush it and make mistakes. I used FreeTaxUSA last year after using TurboTax for years and was really happy. Handled my EIC perfectly and was totally free for federal (small fee for state). Saved me $120 compared to TurboTax and got the same refund amount!
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Ryder Greene
โขI 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.
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