Thanks for mentioning this! Do you know where I can find a list of state requirements? And does anyone know specifically about Arizona rules?

You can find state requirements on each state's department of revenue website. They usually have a section specifically about minimum filing requirements. For Arizona specifically, you generally need to file if you're required to file a federal return OR if your Arizona gross income is $15,000 or more. But remember, that self-employment federal threshold of $400 would trigger a federal filing requirement, which would then require an Arizona return too. If you're staying under $400 in net self-employment income, you should be okay for both federal and Arizona.

As of 2025, payment apps like PayPal and Venmo are required to report to the IRS if you receive more than $600 in a year through goods and services payments. They'll send you a 1099-K form. But even if you're under that threshold and don't get a form, you're still technically supposed to report all income regardless of the payment method.

Do you know which tax form you'd use to claim that theft loss? And would you need to have filed police reports or anything to back it up?

You'd report theft losses on Form 4684 (Casualties and Thefts) and then carry that information to Schedule A if you're itemizing deductions. But there's a catch - under current tax law, personal theft losses are only deductible if they're attributable to a federally declared disaster. However, if the theft is connected to a business or income-producing property, you might be able to deduct it anyway. Some tax professionals argue that money in investment apps could qualify as income-producing property. For documentation, yes, you'd ideally want police reports, documentation of all your attempts to recover the funds, complaint filings with CFPB and other agencies, and proof that the company is unresponsive or insolvent. Without these, the IRS might reject the theft loss claim.

I actually did this last year! Filed in small claims against one of these apps for $800 they were holding. Won by default because they didn't even show up to court. Getting them to actually PAY was another story, but I eventually got my money back after sending the court judgment to their legal department. Tax-wise, I didn't have to report anything special since it was just my own money being returned to me, not new income. Definitely worth the $75 filing fee in my case.

I definitely don't have any payment plans from previous years. I've always gotten refunds and never owed anything before. I did use TurboTax this year, but I paid for it upfront with my credit card, not from my refund. And you're right, $395 would be crazy expensive for tax software! I paid like $70 for the version I used. The "TREAS" part is what makes me think it's legitimate too, which is even more confusing because I can't figure out why they'd be taking money from me.

Based on what you've shared, I'm leaning toward this being an adjustment to your return then. The timing (several months after filing and receiving your refund) fits the pattern of an IRS review finding a discrepancy. Common triggers include: mismatched income reporting (maybe a 1099 you didn't include), incorrect claiming of credits, or math errors that the initial processing didn't catch. The amount ($395) suggests it could be related to a specific tax credit that was partially reversed. Definitely pursue getting through to the IRS or checking your online account. In the meantime, watch for that notice in the mail - it should arrive within 2 weeks of the charge.

Seconding this! Had something similar happen to me last year and it turned out someone had filed a return using my info. Such a nightmare to fix. Call the IRS Identity Protection Specialized Unit at 800-908-4490 if you suspect this might be the case.

Omg I hadn't even thought about sales tax. Is that separate from income tax? Do you have to register somewhere special for that? This is getting complicated fast...

Yes, sales tax is completely separate from income tax. You report income tax to the federal government (and state if applicable), but sales tax goes to the state and sometimes local tax authorities. You typically need to register for a sales tax permit in your state, and potentially in other states where you have what's called "nexus" (basically a significant business presence or sales volume). The rules for digital products vary dramatically by state - some don't tax digital goods at all, while others tax everything. There are services that can help manage this if you start selling in multiple states, but if you're just starting out, focus on understanding your home state's requirements first.

An LLC is way overkill for someone just selling foot pics online. The liability protection isn't really necessary for digital content sales, and the annual fees and paperwork in some states aren't worth it for a small side hustle. Just my 2 cents.

Would including this statement flag my return for audit? I'm already worried about getting in trouble for this mistake, and I don't want to make things worse by drawing attention.

Including the statement won't increase your audit risk. In fact, it might decrease it. The IRS computer systems will automatically flag the discrepancy between the Box 1 amount reported by your employer ($0) and the higher amount you're reporting. The statement simply explains this discrepancy upfront. Without the statement, you might receive an automated notice asking about the difference, which you'd then need to respond to. With the statement, if your return gets reviewed by an actual person, they'll immediately see the explanation and potentially avoid sending the notice in the first place. It's all about being transparent and proactive, which the IRS generally responds well to.

I work in payroll and this is correct. We can absolutely issue a W-2c to correct these types of issues. The employer is required to provide accurate tax documents. I'd recommend sending a formal written request (email is fine) specifically asking for a W-2c correction due to the W-4 processing error. If they refuse, you can actually report them to the IRS.