Thanks for the tip! My dad gets a small social security check ($843/month) but it all goes toward his medications that aren't covered by Medicare. Would that count against the income limit? And yes, I've been keeping all receipts for household expenses since I had a feeling this might come up.

Social Security benefits do count toward the gross income test for dependency, so that's about $10,116 annually. For 2024, the gross income limit for dependents is $4,700, so your father's income is over that threshold. However, there's still a way you might qualify for head of household. Even if your father doesn't meet the gross income test to be your dependent, he might still be considered your "qualifying relative" for head of household purposes if you provide more than half his support and he meets the other tests. This is a special exception specifically for parents. Keep documenting everything - especially showing how his SS income is spent entirely on his medical needs and how you cover everything else.

That's really helpful to know! My mom lives in her own apartment but I pay for everything. I've been filing as single all this time... wonder if I should amend my past returns?

Do you know if I could pay just enough to get under the $10k threshold and then set up a payment plan for the remainder to avoid the lien? Would that work?

Yes, that strategy can work! If you can pay enough to get your balance under $10,000 before you set up the installment agreement, you'll significantly reduce the chances of the IRS filing a lien. In your case, since you owe about $12k, you could pay around $2-3k upfront and then immediately request an installment agreement for the remaining balance. Make sure to get confirmation that the payment has been applied before you request the installment agreement. This approach isn't guaranteed to prevent a lien in all cases, but it follows their general guidelines and works in many situations.

Yes, you can absolutely still request penalty abatement even after receiving a CP504! The First Time Abatement (FTA) program applies regardless of what stage of collections you're in, as long as you meet the criteria: good compliance history (no significant penalties) for the three tax years prior to the year you received penalties. You'll want to call the IRS or include Form 843 with your request. I've seen numerous clients successfully get penalties removed even after receiving CP504 notices. Just make sure to address the underlying tax debt too, either by paying it or setting up an installment agreement.

Oh man, I completely forgot about state taxes! Do you know if the same January 15th deadline applies to state estimated payments too?

Most states align their estimated tax payment deadlines with the federal schedule, so January 15th is likely the deadline for your state as well. However, some states have different rules or thresholds for when estimated payments are required. I'd recommend checking your state's department of revenue website to confirm. Some states are more forgiving with penalties than the IRS, but it's still best to make the payment by the deadline if you need to.

Does the TurboTax estimator account for the safe harbor rules that people mentioned above? Like if you paid 100% of last year's taxes through withholding?

Yes, it does account for the safe harbor rules! When you use the tool, it asks for your previous year's total tax amount alongside your current withholding, so it can calculate whether you're meeting the 100% (or 110% for higher incomes) safe harbor requirement. I found it really helpful because it walks you through all the different scenarios and shows exactly how much you need to pay (if anything) to avoid penalties. Definitely worth checking out if you already use TurboTax.

Do student loans really count as the student providing their own support? I thought since they're loans that need to be paid back later, they wouldn't count for the current tax year?

Yes, student loans absolutely count as support provided by the student for the current tax year, regardless of when they'll be repaid. The IRS looks at who paid the expenses during the tax year, not where the money originally came from. Even if your parents cosigned the loans, as long as you're legally obligated to pay them back, the tuition and expenses paid with those loan funds count as support you provided for yourself. The same applies to scholarship funds - those count as support you provided (not support from your parents), even though the money comes from a third party.

The IRS actually contacted you both about this? How long did it take for them to notice the duplicate dependency claim?

It happened pretty fast! We both filed in February, and by April we each got letters asking for documentation. The duplicate dependency claim triggered an automatic flag in their system. The IRS actually put both of our refunds on hold until the issue was resolved. My parents had to pay back the extra refund they received from claiming me plus a small penalty. The whole process took about 3 months to resolve completely. Definitely not something you want to deal with during finals or job hunting!

Thanks for mentioning state requirements! We're in Michigan - do you know if web design services are subject to sales tax here? And for the business license, would we need one for each partner's home location since we work remotely?

In Michigan, services like web design generally aren't subject to sales tax (they focus more on tangible products), but if you're selling actual digital products like templates or hosting, that could potentially be taxable. Check with Michigan Treasury to be sure. As for business licenses, since you're operating as a partnership, you typically only need one license for the business entity itself, not for each partner. However, if all partners work from different municipalities, you might need to check local regulations for each area. Some cities have different requirements for home-based businesses. Usually registering in the location where your business is primarily managed is sufficient.

Schedule B is for individual returns, not partnership returns, right? I thought partnerships use different schedules with the 1065?