This is so true! I made the same mistake. The "tax relief experts" took my money and then just submitted an installment agreement. When I asked about the "pennies on the dollar" settlement they promised in their ads, they said I "didn't qualify" but only after they had my money. Do these companies ever actually get anyone an Offer in Compromise?

Very few of their clients actually qualify for an Offer in Compromise (the "pennies on the dollar" program). The IRS only approves those when you can prove you have no ability to pay and limited assets. Most people with steady income don't qualify. What these companies do is take advantage of people's fear of the IRS. They charge premium prices for standard services like filing back tax returns and setting up payment plans. The worst part is they often don't even look for legitimate deductions that could reduce the total amount owed. They're focused on processing as many clients as possible, not giving personalized service.

The IRS generally focuses on the last 6 years for unfiled returns, but technically there's no statute of limitations on unfiled tax returns. For practical purposes, most CPAs will recommend filing at least the last 3-6 years to get back into compliance.

How much did you end up paying for your used Prius? I'm looking at some online but the prices seem all over the place. And did you have any issues with passenger ratings on Uber/Lyft because of the smaller car?

I paid $12,800 for a 2017 Prius with about 78,000 miles on it in decent condition. The market has fluctuated a bit since then, but you can still find good deals especially from private sellers. I calculated that the car basically pays for itself over 2-3 years just from the gas savings alone compared to my previous vehicle. For passenger ratings, I actually saw my ratings improve slightly. The Prius has surprisingly good legroom in the back, and passengers often comment positively about the smooth, quiet ride. I've found that keeping the car clean and offering small amenities like charging cables makes a bigger difference to ratings than the vehicle type for most everyday riders. Airport pickups with lots of luggage can occasionally be challenging, but that's fairly rare in my market.

Do you have a source for this? I've been using actual expenses for 2 years now and was planning to switch to standard mileage this year since I'm driving way more now. Am I actually not allowed to switch?

Yes, this is directly from IRS Publication 463 (Travel, Gift, and Car Expenses). The exact text states: "If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use either the standard mileage rate or actual expenses." And further: "If you choose to use actual expenses in the first year, you cannot use the standard mileage rate in a later year." So unfortunately, since you've been using actual expenses for 2 years, you're locked into continuing with that method for this specific vehicle. However, if you get a different vehicle in the future, you could choose the standard mileage rate for that new vehicle. This is why getting good advice before making these decisions is so important.

Wait - I thought 1099-K was just another form of income reporting? Do I need to enter it differently than my 1099-NEC? I was planning to put both under self-employment income.

You do enter both under self-employment income, but the 1099-K works a little differently because it reports your gross transaction amount - meaning it includes the total paid by customers before the app takes their cut and before any expenses. With a 1099-NEC, the amount shown is generally what you actually received. But with 1099-K, you'll need to make sure you're accounting for platform fees, mileage, and other expenses to avoid being taxed on money you didn't actually get to keep. FreeTaxUSA has sections for all these expenses, you just need to make sure you enter them.

FreeTaxUSA doesn't have automatic import for expenses at all - you have to enter everything manually. That's one reason it's cheaper than TurboTax. If you want the automatic import features, you'll need to pay for the premium versions of the bigger tax software products.

I just double-checked my 1099-R and box 2a shows the entire amount as taxable! That's definitely wrong since this was a direct rollover (the money went straight from my 401k provider to the new IRA custodian without me touching it). There was no 60-day window concern since I never received the funds. And looking at box 7 again, it has code "1" which I think means early distribution. That's completely incorrect for a direct rollover. This explains why TurboTax is calculating taxes owed. I'm definitely going to have to contact the plan administrator for a corrected form.

Yep, that confirms the problem. Code "1" means early distribution (generally subject to taxes plus a 10% penalty if you're under 59.5 years old), and having the full amount in box 2a as taxable is definitely incorrect for a direct rollover. You need a corrected 1099-R with code "G" in box 7 and ideally "$0" in box 2a. When you contact the administrator, be very specific about these corrections. Sometimes the customer service reps don't understand the tax implications, so you might need to escalate to their tax department.

How long did it take to get the corrected 1099-R? I'm in the same boat but getting close to the filing deadline.

Is there any exception to this rule? I thought if you use the refinance money for home improvements, you can deduct points immediately?

That's a really helpful tip - I hadn't thought to check my monthly statements! I'll take a look at mine tonight. Thanks!