Does increasing W-2 withholding actually prevent underpayment penalties the same way estimated payments do? I thought those were treated differently by the IRS.

Yes, it absolutely works! The IRS doesn't care how you pay as long as enough tax is withheld throughout the year. W-2 withholding is actually treated even better than estimated payments because withholding is considered to have been paid evenly throughout the year even if it wasn't. For example, if you realize in December that you're going to owe more, you could have extra withheld from your last few paychecks. The IRS treats that withholding as if it had been paid evenly across all quarters, which can help you avoid underpayment penalties even if your first few quarters were underpaid. Many people find this easier than keeping track of quarterly payment deadlines. Just make sure you're withholding enough total to meet your safe harbor requirement (either 90% of current year tax or 100% of prior year tax).

Try setting aside 30% of everything you make from 1099 work right when you get paid. I have a separate savings account just for taxes. That way you never "feel" like that money is yours to spend, and you're not scrambling at tax time.

This is super helpful! Quick question - how far back can you go with TurboTax for previous years? I haven't filed since like 2019 and I'm trying to get caught up without making the same mistake as OP.

TurboTax typically keeps the last 7 years of tax software available, so you should be able to file returns back to 2019 without issues. You'll need to download the specific software version for each tax year you need to file. Start with your oldest return (2019) and work forward chronologically. Each year's return may affect the next, especially if you're carrying forward losses or credits. Just be prepared for potential late filing penalties if you owed taxes for those years. The IRS generally has a 10-year collection period for unpaid taxes, so it's definitely good you're getting caught up now.

Yeah, prior year returns definitely get processed differently. The IRS prioritizes current year returns during tax season. Did you get any kind of notice or explanation for the delay?

Oh that's good to know! I'm in Pennsylvania - does anyone know if we have something similar here? How would I find out if my state offers rent credits?

Pennsylvania has what's called a "Property Tax/Rent Rebate Program" that might apply to you depending on your age, income, and other factors. It's primarily designed for seniors, widows/widowers over 50, and people with disabilities, but it's worth checking if you qualify. The best way to find out about rent-related tax benefits in your state is to visit your state's department of revenue website - for PA, it would be the Pennsylvania Department of Revenue site. They usually have specific sections about rebates and credits available. You can also use the IRS's Interactive Tax Assistant or contact your state tax agency directly to ask about rent-related tax benefits.

You should report what you actually paid, not what was scheduled or what your landlord claims. Check if there's a reason for the discrepancy - did you miss a payment? Did you prepay January 2024 rent in December 2023 (which would count for 2023)? Ask your landlord to explain the difference.

Does the holding period start from the day you sign the purchase papers or the day the sale officially closes? My closing took almost 2 months!

The holding period is generally calculated from the day the first sale closes (when you acquired the property) to the day the second sale closes (when you sold it). The date on the closing documents is what matters, not when you signed the purchase agreement. So in your case, the 2-month closing period would count toward your holding time, which is good if you're trying to reach that 1-year mark for long-term capital gains treatment.

You'll need at least Premier for capital gains from land sales. Deluxe won't handle Schedule D properly. I tried last year and had to upgrade mid-filing.

Thanks for saving me the headache! I'll just go straight for the Premier version then.

Just to clarify, you cannot put a negative number on line 4(c) of the W-4. That line only allows for additional withholding, not reduced withholding. To reduce withholding, you'd need to use line 4(b) to indicate deductions that would lower your taxable income, or line 3 for tax credits and dependents. The IRS won't accept a form with negative values in those fields.

He gets paid every two weeks. I hadn't thought about how the pay frequency might affect things! Does getting paid weekly really help that much with the withholding calculations?