That's a great idea, can't believe I didn't think of that! I was so focused on trying to figure it out myself that I forgot the source could just explain it. Do you think I should also ask them if this will affect my tax return calculation?

Absolutely ask them how it affects your tax return! That's the most important part. Bring specific questions like: "Does this amount need to be reported separately on my tax return?" and "Will this increase or decrease my taxable income?" A good payroll person should be able to tell you exactly where on your tax return this information belongs, if anywhere. Some items on tax forms are just informational and don't actually affect your filing.

TurboTax has similar features but charges extra for everything. I switched to FreeTaxUSA last year and saved a ton. They have good explanations too.

Would it be better to fax the response to the IRS rather than mailing it? I've heard mail can take forever for them to process and faxing might be faster for time-sensitive stuff like this.

Faxing can be faster for the initial response if you're up against the deadline. The IRS does accept faxed responses to CP2000 notices, and it provides immediate transmission. Just be sure to keep the fax confirmation page as proof of timely response. For the amended return itself, you'll still need to mail that through regular channels. But for the initial "I received your notice and I'm working on it" response, faxing can save you some time. Either way, make sure you're sending everything to the correct department and including all reference numbers from the CP2000 notice on your correspondence.

Innocent Spouse Relief probably won't apply here since it's just a case of forgotten income, not deliberate underreporting or fraud. It's more for situations where one spouse hid income or claimed fraudulent deductions without the other spouse's knowledge. This sounds like an honest mistake that both spouses would be responsible for correcting.

Thanks so much for this! Did you end up using a tax professional or just tax software to file all the back taxes? I'm trying to figure out the most cost-effective approach since I'll be filing 4 years at once.

I used tax software for all of them. I bought the previous year versions (most of the major companies sell them) and did one return at a time. It was pretty straightforward since I mostly had W-2 income. For the oldest year, I had some 1099 work that made things a bit more complicated, so I paid a bit extra for the deluxe version that year. Still came out way cheaper than hiring a professional for all four years.

That's a good point. And if you moved between states during these unfiled years, you might need to file part-year resident returns for multiple states which gets complicated fast.

Thanks, that's really good to know! Can I just move my existing savings directly into a Roth IRA? And do banks offer these or do I need to go somewhere special?

You can definitely move your savings into a Roth IRA, but there are annual contribution limits ($6,000 for 2025 if you're under 50). Your regular bank might offer them, but typically people open them with investment companies like Vanguard, Fidelity, or Charles Schwab. The advantage is that in a Roth IRA, you can invest in things that potentially grow much faster than a savings account - like index funds that might return 7-10% annually compared to the 1-2% you'd get from a high-yield savings account. Just remember that while you can withdraw contributions anytime, you generally can't touch the earnings until retirement age without penalties.

Any specific recommendations for good high yield accounts? I hear ads for them all the time but not sure which ones are legit.

I didn't know about first time abatement for state taxes! Do you know which states offer this? I've always filed and paid on time before this year.

Not all states offer it, but quite a few do. California, Illinois, Massachusetts, and New York are some of the larger states that have some version of penalty abatement for first-time issues. Some call it "reasonable cause" relief rather than first-time abatement. The key is to request it explicitly - they almost never offer it automatically. You typically need to have a clean compliance history for the past 3-4 years to qualify. The requirements vary by state, but it's definitely worth asking about when you call to set up your payment plan.

I did this last year. The penalties and interest only apply to the unpaid portion. So if you owe $1000 and pay $700 by the deadline, you'll only be charged penalties on the remaining $300. Definitely better than paying nothing by the deadline!