Thank you so much for this checklist! I definitely didn't realize I needed my bank statements showing interest. How much interest needs to be reported? My savings account only earned like $25 last year.

You should report all interest income, even small amounts. Your bank should have sent you a 1099-INT form if you earned more than $10 in interest. Even if it's only $25, it's technically required to be reported. Don't stress too much about small amounts though. The IRS is mainly concerned with larger discrepancies. Just enter what you have documented and keep good records going forward. Tax software makes it really easy to enter these small amounts.

It depends on your situation, but generally if you're single and earned less than $12,950 in 2022, you're not required to file. HOWEVER, you should probably file anyway because you'll likely get back all the federal taxes that were withheld from your paychecks!

What specific things should we include in our partnership agreement regarding the payment for performances? We have a basic agreement but didn't get that detailed.

You should specifically include language about "guaranteed payments" for services performed by partners. This would clearly state that your partner receives $X per performance, regardless of the partnership's profitability, as compensation for services rendered in their capacity as a partner. You should also include how profits and losses will be allocated after accounting for these guaranteed payments. In your case, it would specify that after paying all performers (including your partner) and other business expenses, the remaining profits are split 50/50. Having this clearly documented will make your tax filings much more straightforward and defensible if ever questioned by the IRS.

This is really important advice. First-time business owners often miss this and end up with underpayment penalties. I've found that setting aside about 30% of net income for taxes is a good rule of thumb for most partnerships.

Is that $1,000 per partner or for the partnership as a whole? And how do we calculate how much to pay each quarter?

Did you use a tax professional to help set up your payment plan or did you negotiate it yourself? I'm in a similar situation ($56k debt) but worried about saying the wrong thing if I try to handle it myself.

I initially tried to set it up myself, but I made some mistakes on the financial forms that got my first proposal rejected. After that frustration, I hired a tax resolution specialist who helped me properly document my financial situation and negotiate terms that worked for my actual circumstances. It cost about $1,800 for their services, but they saved me way more than that by properly structuring everything. If your situation is straightforward and you're comfortable with financial forms, you might be able to handle it yourself. But in my experience, having a professional who knows exactly what the IRS is looking for made a huge difference in both the monthly payment amount and my stress level. They also helped identify which penalties could be abated, which I wouldn't have known to ask about.

100% this. My parents got scammed by one of those "we'll settle your tax debt for pennies on the dollar" companies. They paid $4500 upfront and got literally nothing but a standard installment agreement they could have set up with a 20-minute phone call. Complete ripoff.

Is there a specific credential or certification I should look for when hiring someone to help with tax debt? I see all these different titles - tax attorney, CPA, EA, tax resolution specialist - and don't know which is most appropriate.

Thanks for this explanation! I went back and checked our paystubs from this year vs last year and you're totally right. We're getting about $280 more per month in our paychecks compared to last year. That adds up to around $3,360 for the year, which almost exactly accounts for the difference in our refund. I guess I never noticed the slightly larger paychecks since it wasn't a huge difference per pay period, but it definitely adds up over the year! This makes me feel so much better. We might still adjust our W4 to get a slightly bigger refund next year since we like having that forced savings, but at least now I understand what happened.

I think they mean their W4 withholding at work is set to HOH, not their actual filing status. That's actually a common mistake - people have their withholding set wrong all year and then file with their correct status.

My daughter just has her job income from working at the campus bookstore, no investments or anything fancy. But I'm curious - what counts as "unearned income" exactly? And does scholarship money factor into any of this tax stuff? She got a partial scholarship last year.

Unearned income includes things like interest, dividends, capital gains, rents, royalties, etc. - basically money received from sources other than working a job. It's passive income rather than earned income. As for scholarships, they're generally tax-free if used for qualified education expenses like tuition, fees, books, and required supplies. However, any scholarship money used for room and board, or other non-qualified expenses would be considered taxable income. But this would be considered earned income, not unearned income, so it wouldn't trigger the kiddie tax rules. It would just be added to her regular taxable income.

The federal rules for standard deduction for dependents are the same regardless of what state they're in. But for state taxes, it gets complicated. Some states may require your son to file a return as a part-year resident or non-resident of that state if he earned money there. Most states follow similar dependent rules as federal but there are exceptions. Check both your home state and his college state rules.