Thanks for this explanation! I definitely have an outdated understanding of how withholding works now. I don't have any side income, but I did receive a small bonus this year that was probably underwitheld like you mentioned. So to fix this for next year, should I just submit a new W4 with some additional withholding amount in section 4(c)? How do I figure out how much extra to withhold?

Yes, submitting a new W4 with an additional amount in section 4(c) is exactly what you should do. To calculate the amount, take the tax you owed this year, divide by the number of pay periods remaining in the year, and enter that amount. For example, if you owed $1200 and get paid twice a month, you'd enter $50 per paycheck ($1200 ÷ 24). For a more precise calculation, use the IRS Tax Withholding Estimator on their website. It'll walk you through your specific situation and recommend the exact amount to put in section 4(c). Just make sure you have your most recent paystub and tax return handy when you use it.

YES! My company's HR actually sent out an email telling everyone to "update your allowances to 0 or 1" last month. I had to awkwardly explain to them that allowances haven't been a thing since 2019. They seemed genuinely surprised.

Did you have to call and follow up at all or did they just process it without any additional contact from you? I'm in a similar situation but it's been about 3 months with no word.

I didn't have to call or follow up at all. The process just worked itself through their system, though admittedly it took longer than I expected. I had resigned myself to thinking it might be denied, then suddenly got the approval letter. I believe the timeline varies a lot depending on which IRS service center is handling your case and their current backlog. If you've been waiting 3 months, that's still within the normal range based on what I've read. From other people I've talked to, 2-6 months seems to be the typical range.

This is great advice! I did this for my own abatement request and saw a code 271 on my account transcript which showed the adjustment was approved before I ever got the letter. Saved me weeks of wondering!

You don't need to issue a 1099 for personal loans. You just report the interest income you received on Schedule B of your tax return. However, if you loaned money to someone for their business (not personal use like a car), and you charged them interest, then it gets more complicated and you might need to issue a 1099-INT if you're essentially acting as a lender in a business context.

Thank you for explaining! So I just list it on Schedule B along with any other interest income like from my savings account? That seems pretty straightforward.

Thanks for bringing this up! I do have everything in writing, thankfully. We signed a simple loan agreement that I found online, with the interest rate, payment schedule, and both our signatures. Sounds like this will be important if anything goes wrong.

Does the first-time penalty abatement really work? I've heard about it but wasn't sure if it was just a tax myth.

Yes, the first-time penalty abatement absolutely works! It's an official IRS program, not a myth. I successfully got about $430 in penalties waived after I paid late two years ago. The key requirements are: - You've filed all required returns or filed extensions - You have no outstanding tax debts - You haven't had significant penalties in the past 3 tax years The IRS doesn't advertise it much, but when you call and specifically ask for "first-time penalty abatement" they know exactly what you're talking about. Just be polite and explain that your late payment was a one-time issue.

Totally agree. I was late by 3 weeks last year on about $4000 and the penalty+interest came to like $45 total. The peace of mind knowing you're handling it properly is worth way more than the few dollars in penalties.

Thanks for the reassurance! I was definitely stressing more than necessary. I went ahead and paid the $4,500 today and will pay the rest next week as soon as my check clears. Based on everyone's comments, it sounds like I'll owe maybe $40 in penalties/interest which isn't nearly as bad as I feared.

Did they ask for proof of all your expenses? I've heard they make you send bank statements and bills to prove everything on the 433-F form.

They didn't ask for proof upfront, but they did call me to verify some information. After that call, they requested three months of bank statements and copies of my utility bills and rent agreement. I think they only dig deeper if something looks inconsistent or if the amount you owe is substantial. The key is being honest on the form. If you claim expenses that are significantly higher than what the IRS considers reasonable for your area (they have internal guidelines), that will trigger more scrutiny. I stuck to my actual basic expenses and they approved my CNC status without too much back and forth.

Offers in Compromise can definitely work for offset situations, but they take time to process (6-12 months typically). If you want to stop an imminent offset, you should first request a Collection Due Process hearing to get immediate protection while you prepare your OIC. The success of an OIC depends on your financial situation. The IRS uses a specific formula to determine your "reasonable collection potential." If you can prove you'll never be able to pay the full amount before the collection statute expires (typically 10 years), you have a good chance. Form 656 is used for the offer, along with Form 433-A detailing your financial situation.