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Something similar happened to me in my first job. You should also check if you're classified as an independent contractor (1099) rather than an employee (W-2). If you're a 1099, they won't withhold ANY taxes and you're responsible for paying quarterly estimated taxes yourself. Your pay stub will give you clues - if you don't see any tax withholdings at all (not even Social Security and Medicare), you might be misclassified.
Thanks, but they are definitely taking out Social Security and Medicare, plus state tax for Michigan. It's just the federal income tax that's missing. I think I must have messed up my W4 somehow. Going to talk to HR tomorrow!
That's good then! Definitely just a W4 issue. When you talk to HR, ask them to calculate how much federal tax you should have paid year-to-date so you can plan ahead for what you'll owe. Also ask about updating your W4 to include extra withholding on Line 4(c) to make up some of the difference over your remaining paychecks.
Don't panic too much! I had the same issue my first year working (also in Michigan). I fixed my W4 halfway through the year and had them take out extra each check to catch up. If your income isn't super high, you might only owe a few hundred dollars at tax time, not thousands. If you're making under $30K as a single person, your tax liability is fairly low because of the standard deduction.
This is misleading advice. Even at lower income levels, federal tax can be significant. Standard deduction for 2025 is projected around $13,850 for single filers, but if OP is making even $35K, they'd still owe about $2,300 in federal tax. That's not a small amount to come up with all at once!
My audit for claiming my niece as a dependent took almost 9 months to resolve last year. The IRS is seriously understaffed and overwhelmed. My advice is to keep checking your transcript on the IRS website - sometimes it updates there before you get any official notice. And whatever you do, keep copies of EVERYTHING you send them.
How do you check your transcript? Is that something on the IRS website?
Yes, you can access your tax transcripts through the IRS website by creating an account at irs.gov/account. Once logged in, you can request various transcript types - the "account transcript" is most useful for tracking audit status as it shows all activity on your account. If you're not tech savvy or have trouble with the online verification, you can also request transcripts by mail using Form 4506-T, but obviously that takes longer to receive.
My sister went through an audit for the same thing and had her case resolved in about 4 months, which was faster than they initially told her. The key is calling the examiner directly if you have their contact info on any of the notices. Don't just sit and wait! Sometimes files get stuck at the bottom of someone's pile.
Has anyone used FreeTaxUSA specifically for this? I find their interface less intuitive than TurboTax and I'm worried about messing up my backdoor Roth reporting.
Thanks so much! That's super helpful. One more question - did you have to do anything special to indicate that you made contributions for two different tax years in the same calendar year? That's the part I'm most worried about messing up.
For contributions to different tax years, you report the contribution for the previous tax year on that year's return (so your 2023 contribution would be on your 2023 return), but all conversions go on the return for the year when they actually happened. If you already filed your 2023 return without reporting the contribution, you'll need to amend it. In FreeTaxUSA, go to the "Amend 2023 Return" option from your account page. Then both conversions will be reported on your 2024 return since they both happened in 2024.
Don't mean to hijack the thread but quick question - if I did a backdoor Roth for the first time this year and have never had a trad IRA before, is it as simple as just reporting the contribution and conversion? I keep hearing about pro-rata rules and I'm freaking out.
You're in the ideal situation for a backdoor Roth! With no existing Traditional IRA balances, you don't have to worry about the pro-rata rule. It is indeed as simple as: 1. Report the nondeductible Traditional IRA contribution 2. Report the conversion to Roth Since you have no pre-tax money in any Traditional IRAs, your conversion will be tax-free (except for any earnings between the contribution and conversion). The pro-rata headaches only come into play when you have existing pre-tax money in Traditional IRAs. Consider yourself lucky!
Your coworker isn't alone. This is a HUGE problem with financial literacy in the US. I teach personal finance at a community college, and the tax refund misconception is one of the first things I address each semester. I've had students argue with me that "the government gives you money back at tax time." When I explain withholding, many are genuinely shocked. I use a simple exercise where students calculate how much more they'd have each month by adjusting their W-4 vs getting a lump sum refund, and the lightbulbs finally go on. Our education system completely fails to teach basic financial concepts like this, and it hurts people financially in so many ways.
Do you have any recommendations for resources to learn this stuff as an adult? I'll admit I never really understood taxes that well and just use TurboTax every year.
For adults looking to build financial literacy, I recommend starting with the IRS's own Tax Withholding Estimator on their website. It helps you understand how adjusting your W-4 affects your take-home pay versus your refund. The Consumer Financial Protection Bureau (CFPB) also has excellent free resources on their website that explain taxes in plain language. Khan Academy has a personal finance section that includes tax basics. For books, "Get a Financial Life" by Beth Kobliner explains taxes and other financial concepts in very accessible terms. The most important thing is finding resources that explain concepts without unnecessary jargon - understanding the principles matters more than memorizing tax code details.
Before I learned how taxes worked, I also thought refunds were basically government money. My friends and I would get excited about refunds and plan how to spend them like it was some kind of bonus. Nobody ever taught us this stuff in school. It wasn't until my first accounting class in college that I finally understood I was just getting my own overpaid money back. I felt pretty stupid, but honestly, the way people talk about refunds ("I got $3,000 back this year!") makes it sound like you're receiving something rather than just getting your own money returned.
Wesley Hallow
One important thing to consider that nobody's mentioned yet - if your cousin had clients who paid him more than $600 in any year, they might have filed 1099s reporting those payments to the IRS. That means the IRS already knows about some of his income, which is why getting ahead of this voluntarily is so important. Also tell him to look into Qualified Business Income deduction which became available in 2018 - it could reduce his taxable income by up to 20% for the self-employment income. That could make a huge difference across multiple years of back taxes.
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Sophia Carson
ā¢That's a really good point about the 1099s. He mostly worked for cash but did have some corporate clients who probably reported payments. For the QBI deduction, would that apply even though he didn't file on time? It seems like a huge benefit to miss out on.
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Wesley Hallow
ā¢The QBI deduction absolutely applies even for late filed returns! The deduction is tied to the tax year, not when you file. Just make sure when you prepare the 2018-2024 returns that you calculate and claim this deduction - it's basically free money that reduces self-employment tax liability by allowing you to deduct up to 20% of qualified business income. As for the 1099 situation, this is actually why I suggested filing everything at once rather than staggering. The IRS computer system will match reported 1099 income with filed returns, and if you file incomplete years while leaving gaps, it can trigger automated notices for the missing years.
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Justin Chang
Speaking from experience, the biggest issue with back taxes is getting overwhelmed and doing nothing. I put off filing for 7 years and the anxiety was worse than the actual process of fixing it. Start with whatever year you have the most complete records for to build confidence. The hardest part is just starting. And honestly tax pros who specialize in back taxes aren't as expensive as you might think - I paid $1200 total for help with 7 years of unfiled returns and it was the best money I ever spent because they found deductions I never would have known about.
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Grace Thomas
ā¢Did you have to pay all the back taxes at once? That's what scares me - I'm in a similar situation and worried I'll owe tens of thousands I don't have.
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