Should she get a formal custody agreement ASAP? Seems like that would help with the tax situation too.

Absolutely. A formal custody agreement would definitely help clarify the situation, both for tax purposes and beyond. It creates an official record of the parenting time split, which is crucial for determining tax benefits. Even with a formal agreement though, remember that the IRS ultimately follows its own rules about who qualifies as the custodial parent for tax purposes. If the agreement specifies that the father can claim the child despite having less than 50% physical custody, the mother would still need to complete Form 8332 to release her claim. Without that form, the IRS will side with whoever meets the physical residence test.

This is a really good point! My brother went through something similar. The mom wouldn't put him on the birth certificate, and he had to legally establish paternity before he could even file for any custody rights or visitation. The tax stuff was completely off the table until that was resolved.

17 The 1099-K threshold changed for 2023 tax year though, right? I thought now they issue them for much smaller amounts, like $600+?

22 You're absolutely right about the threshold change. For tax year 2023, the reporting threshold was supposed to drop to $600 with no minimum transaction count. However, the IRS delayed implementing this lower threshold, so for 2023 taxes, the old $20,000/200 transaction threshold still applies. But for the 2024 tax year (filing in 2025), the threshold is scheduled to be $5,000. The IRS has been gradually phasing in these changes. Always good to check the current year's requirements as they've been adjusting these thresholds recently. Regardless of whether you receive a 1099-K, you still need to report all your income correctly.

11 Unfortunately, if you're not filing Schedule C, you generally can't deduct those fees. The "Other Income" line on Form 1040 is for reporting gross income without associated expenses. This is one reason why it might be worth considering if your side gigs actually constitute a business - even a small one - so you can file Schedule C and deduct legitimate expenses.

Omg I think that's actually what happened. Looking at the letter more carefully, it mentions something about "self-employment tax assessment" and Form SE. The tax place definitely never mentioned anything about that - they just asked for my 1099 and did the return. I definitely don't have mileage records from 7 years ago. I was just a clueless college kid taking delivery orders. Do you think the tax advocate will still be able to help even if I technically do owe this money? The amount they're asking for is seriously impossible for me to pay.

The Tax Advocate Service can absolutely still help even if you legitimately owe the money. They can help you: 1) Verify that the assessment is actually correct and made within the proper timeframe. Just because you might owe self-employment tax doesn't mean their calculation is correct. 2) Set up a payment plan with terms you can actually manage. If the amount is truly beyond your ability to pay, they might even be able to help with an Offer in Compromise to settle for less than the full amount. The most important thing is to respond and work with the IRS rather than ignoring the notice. The penalties and interest will continue to grow, and eventually, they can take more serious collection actions. The fact that you relied on a professional tax preparer who failed to properly address your self-employment tax obligations might help with penalty abatement, which could significantly reduce what you owe.

This is exactly what happened to my brother. His tax preparer included the 1099 income on his return but completely missed the Schedule SE. Four years later, he got hit with a huge bill for the self-employment taxes plus penalties and interest. He ended up having to set up a payment plan for like $80/month for years. The IRS was actually pretty reasonable about the payment terms once he got through to someone.

Do businesses face any penalties for not sending 1099s on time? I have a feeling some of my clients just don't care because there's no consequences.

Yes, there are definitely penalties! They range from $50 to $280 per form depending on how late it is and whether the failure to file was intentional. If a business is more than 30 days late, the penalty is $110 per form. After August 1st, it jumps to $280 per form. For intentional disregard, it's $570 per form. The IRS takes this pretty seriously because 1099 reporting is how they verify income is being properly reported. If enough contractors report issues with a particular business, it can trigger a compliance review. Businesses should care not just because of penalties but because proper 1099 filing is often checked during business tax audits.

I tried that with H&R Block last year but it didn't pull all my 1099s. Apparently some smaller companies file on paper or their electronic submissions don't get processed quickly enough to show up in the system when I'm ready to file. It's helpful but not foolproof.

That's only for Qualifying Child, not Qualifying Relative. A girlfriend can never be a Qualifying Child because she doesn't meet the relationship test - has to be your actual child, sibling, niece/nephew, etc. Non-relatives can only qualify under the Qualifying Relative test, which always has the income limit.