I'm worried a payment plan wouldn't be affordable given the total amount I owe. With $175k in tax debt, even spread over 6 years, that's almost $2500 a month not including interest. Is there any flexibility on the payment amounts? Did they look at your actual expenses when determining what you could pay?

They absolutely look at your expenses, but they use their own standards for what's "reasonable" which can be frustrating. For example, they have limits on housing costs based on your county. There's also something called a Partial Payment Installment Agreement (PPIA) where you pay what you can afford based on your financial situation, even if it won't fully pay off the debt before the collection statute expires. It's less drastic than an OIC but more flexible than a standard payment plan. In my case, I'm paying $400/month which won't cover the full amount, but it was what the IRS determined I could afford.

This is risky advice. Tax debts have very specific rules for discharge in bankruptcy. The taxes need to be from returns due at least 3 years ago, filed at least 2 years ago, and assessed at least 240 days ago. Plus, fraud or willful evasion makes them non-dischargeable. OP shouldn't count on bankruptcy without consulting a bankruptcy attorney who specializes in tax issues.

Thank you for mentioning this! I wasn't aware that the collection statute gets suspended during OIC consideration. Do you know if the CNC status means they can still put liens on her property? She doesn't own a house, but does have a car that's paid off. And approximately how long does the OIC process usually take from start to finish?

Yes, the IRS can (and often does) file tax liens even when you're in CNC status. The lien protects their interest in your assets even though they're not actively collecting. For a car, they typically won't seize it if it's of modest value and needed for work/medical appointments, but the lien would come into play if she tried to sell it. The OIC process typically takes 6-9 months from submission to decision, sometimes longer if there are complications or if the IRS requests additional information. During this entire time, the collection statute is paused. If the offer is rejected and you appeal, that extends the timeline and suspension even further. This is why it's important to weigh whether an OIC makes sense versus waiting out the collection statute in CNC status, especially if your sister-in-law has limited income or assets that would make collection unlikely anyway.

Did you do the OIC yourself or hire someone? And did you end up having to give up the Netflix? I'm just curious how detailed they get...seems super invasive. Good to know about the payment thing tho.

Thanks for this suggestion. I double-checked and I'm pretty sure I entered everything identically, but I might have missed something. Is there a specific expense category that tends to cause this kind of calculation difference? I'm going to go through line by line again to make sure.

The most common categories that can cause differences are home office deductions and vehicle expenses. Some programs calculate these differently based on how you enter the information. Also check if you're using actual expenses versus standard mileage rate for vehicle costs in both programs the same way. Another thing to look at is retirement plan contributions. If you have a SEP IRA or Solo 401(k), the way these are entered can affect your SE tax calculations differently across programs.

Is there actually an official IRS position on which order to do these calculations? I always thought the tax code was super specific about calculation order.

I do occasional work from home (maybe 1-2 days a month when projects need extra attention). Would that be enough to qualify my home as a "principal place of business"? And if it did qualify, would the deduction be worth the risk of triggering an audit?

Working from home only 1-2 days a month likely wouldn't be enough to qualify your home as a "principal place of business." For this approach to work, your home office would need to be: 1) Used exclusively and regularly for business (a dedicated space), and 2) The primary place where you conduct your business activities, or where you conduct administrative/management activities if you have no other fixed location for those tasks. Regarding audit risk, it's not worth claiming something questionable. The IRS has been increasing scrutiny on home office and travel deductions, especially when the amounts are substantial. Instead, focus on maximizing other legitimate deductions like retirement contributions, health savings accounts, or educational expenses if applicable to your situation.

This is the actual answer. Tax deductions for commuting rarely work out, but employer programs can save you thousands. My company gives us pre-tax transit cards that save me about 30% on subway costs. Ask your HR department!

So true! My 1099-K was about $4,200 higher than my actual product sales because it included both sales tax AND shipping charges. I almost missed this until my tax preparer caught it.

Does anyone know if fees the platform charges get included in the 1099-K? Like if Etsy charges me a 5% transaction fee, is that getting subtracted before the 1099-K amount or do I need to deduct those fees separately too?