They might also ask about prior year returns if there's any discrepancy or if you're dealing with multiple tax years. Sometimes they'll verify your employer name from your W-2 or ask about dependents if you claimed any. Pro tip: have a pen ready to write down reference numbers and the rep's name/ID number - you'll need those if you have to call back later. Good luck getting through! 📞

Been through this recently and can confirm what others are saying. They'll definitely ask for your SSN, full name, date of birth, and address from your most recent return. The AGI (Adjusted Gross Income) from your last filing is a big one - they almost always ask for that. If you're married, they might ask about your spouse's info too. Also bring any notices or letters you've received from the IRS if that's what you're calling about. The whole verification usually takes 3-5 minutes once you actually get through to someone. Just stay calm and speak clearly - the reps are generally pretty patient if you need a second to find something in your paperwork.

For what it's worth, I itemized deductions as a dependent last year and it was definitely worth it in my case. Had about $14,000 in medical expenses after a major surgery (which easily cleared the 7.5% AGI threshold) plus some charitable donations. The key thing I learned is that you need to be the one who actually paid the expenses if you want to claim them. So I made sure to pay my medical bills directly from my account rather than having my parents pay them, even though they offered. Made documentation much cleaner for tax purposes.

Katherine, you're definitely on the right track asking about this! As a dependent, you can absolutely file your own return and itemize deductions if it benefits you. Looking at your specific situation: Your $2,800 in medical expenses could be partially deductible since they need to exceed 7.5% of your $18,500 AGI (so about $1,388). That means roughly $1,412 of your medical bills would qualify. Your $500 charitable donation to the university is fully deductible since you made it with your own money. However, those job expenses related to your internship likely aren't deductible anymore due to tax law changes in 2018 - unreimbursed employee expenses were eliminated for most people. So you'd potentially have around $1,912 in itemized deductions ($1,412 medical + $500 charitable). As a dependent, your standard deduction would be $18,900 (your earned income plus $400, but capped at the regular standard deduction). In your case, itemizing probably wouldn't be worth it since your itemized amount is much lower than the standard deduction. The good news is you can still claim these on your own return - they don't go to your parents just because you're a dependent. Just make sure you have good documentation showing you personally paid these expenses!

This discussion has been incredibly helpful! I'm dealing with a similar situation with my freelance business and wanted to share what I learned from my CPA about this exact issue. The key insight that finally made it click for me is that the IRS views prepayment as immediately creating an asset - the "right" to receive services or use property. This right has value from the moment you pay for it, which is why the benefit period starts then rather than when you actually use the service. I had prepaid some web hosting and business software licenses totaling about $4,500 in November 2023 for services running through various dates in 2024. My CPA confirmed that since all the service periods end within 12 months of payment (and within 2024), I can deduct the full amount in 2023. What really helped me organize this was creating a simple tracking sheet with columns for: Payment Date, Service Period Start, Service Period End, 12-Month Rule Date, and "Following Tax Year" End Date. Then I can easily see which prepaid expenses qualify for immediate deduction versus those that need to be capitalized. For anyone still confused about this rule, I'd recommend talking through a few specific examples with a tax professional. Once you see how it applies to your actual business expenses, the concept becomes much clearer than trying to understand it in the abstract.

This entire discussion has been incredibly valuable! As someone who's been struggling with prepaid expense timing for my small business, I finally feel like I understand the 12-month rule properly. The key breakthrough for me was realizing that the "benefit" isn't the actual use of the service, but rather securing the RIGHT to that service at the agreed terms. It's like the difference between having a reservation at a restaurant versus actually eating the meal - the value of the reservation exists from the moment you make it. I've been overly conservative with my prepaid expenses, spreading them across multiple years when I could have been deducting them immediately under the 12-month rule. This could have saved me significant cash flow issues during my startup phase. One practical tip I'd add: I now negotiate payment terms with vendors to maximize the 12-month rule benefits. For example, instead of paying in January for services starting immediately, I sometimes pay in December for the same January start date. This lets me deduct in the earlier tax year while still getting the same services. The tracking spreadsheet idea mentioned earlier is something I'm definitely implementing. Having a clear visual of payment dates, benefit periods, and the 12-month windows will make tax prep so much smoother and help ensure I'm taking advantage of this rule properly going forward. Thanks everyone for sharing your experiences and explanations - this community really helps demystify these complex tax concepts!

Brooklyn, congratulations on taking the initiative to understand your tax transcript! 🎉 Code 806 is absolutely something to be excited about - it represents all the federal income tax that was withheld from your paychecks throughout the year, essentially acting as prepayments toward your tax liability. Since you mentioned being meticulous about your finances, here's a quick way to verify this is correct: take all your W-2 forms and add up the amounts in Box 2 (Federal income tax withheld). If you have any 1099 forms showing federal withholding, add those too. The total should match your Code 806 amount exactly. Regarding your investment income question - yes! Any backup withholding from your investment accounts (typically 24% if there were TIN issues) would also be included in this Code 806 total. You'd see this reflected on your 1099-DIV or 1099-INT forms in the federal tax withheld box. The beautiful thing about Code 806 is that it's a dollar-for-dollar credit against your tax liability. So if you owe $15,000 in taxes but have $12,000 in Code 806 withholdings, you'd only owe the IRS $3,000 more. It's basically the IRS saying "Hey, you already paid us this much throughout the year!" Keep up that attention to detail - understanding these codes will serve you well in managing your tax situation year-round! 📊

Brooklyn, I'm so happy you asked this question! As someone who was completely mystified by tax transcript codes when I first started looking at them, I totally understand that mix of excitement and confusion. 😊 Code 806 is definitely good news - it represents your federal income tax withholding credits, which is essentially all the tax money that was already taken out of your paychecks throughout the year. Think of it as the IRS acknowledging "Hey, you already paid us this much!" Since you mentioned being meticulous about finances, here's what I do to verify everything matches up: I grab all my W-2 forms and add up Box 2 (Federal income tax withheld) from each one. If you have any 1099 forms showing federal withholding (like backup withholding on investments), those get added too. That total should match your Code 806 amount perfectly. For your investment income question - absolutely! Any backup withholding from dividends, interest, or other investment income would be included in this Code 806 total. You'd see this on your 1099 forms in the federal tax withheld section. What I love about understanding Code 806 is that it shows you how much you've already contributed toward your tax bill throughout the year. It's like having a running tab that's been paid down month by month! Keep asking these great questions - understanding your tax situation is such valuable financial knowledge. 💪

This is such a great breakdown of how these strategies actually work! I had no idea about the conservation easement abuse - that sounds like a massive loophole that's way more aggressive than the stock donation strategies. One thing that's become clear from reading everyone's responses is that there's a big difference between legitimate tax planning (like bunching donations or using donor-advised funds properly) and the more questionable schemes like inflated art appraisals or syndicated conservation easements. For those of us with more modest incomes, it sounds like the key takeaway is focusing on the timing strategies - like bunching charitable donations in alternating years to maximize when you can itemize vs. take the standard deduction. That seems like a much safer approach than getting involved in any of these complex schemes that might trigger audits. Thanks everyone for explaining this so clearly! It's frustrating that the tax code allows for such manipulation, but at least now I understand how it actually works.

This has been such an enlightening discussion! As someone who's always been confused about how charitable deductions could possibly be used as money-making strategies, this thread finally made it click for me. The distinction everyone's drawn between legitimate tax planning and aggressive schemes is really important. It sounds like the "making money" aspect comes from avoiding taxes you would have otherwise paid, plus strategies like donating appreciated assets to avoid capital gains taxes entirely. What I find most concerning is how these strategies seem to primarily benefit wealthy individuals who have appreciated assets, can afford to set up private foundations, or can participate in complex schemes like conservation easements. Meanwhile, regular taxpayers are left with basic strategies like bunching donations. I'm definitely going to look into the bunching strategy mentioned by several people here - timing my charitable giving to alternate between itemizing and taking the standard deduction seems like something I could actually implement. It's frustrating that the tax code is so complex that these opportunities aren't more widely known or accessible. Thanks to everyone for sharing their knowledge and real experiences. This has been far more educational than anything I've found through official IRS resources!