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Just wanted to add that there's a special rule for W2 employees that many people don't know about! If your tax is being withheld from regular paychecks, the IRS treats those withholdings as if they were made evenly throughout the year, EVEN IF they weren't. So if you increase your withholding in the last few months of the year to catch up, the IRS treats it as if you had been paying that amount all year. This doesn't work for self-employed people making estimated payments, but for W2 folks, it's a great safety net.
Is this actually true? That would be a huge help for me. I just realized I'm under-withheld for 2023 and was thinking about submitting a new W-4 to increase withholding for the last two months.
Yes, absolutely true! It's one of the less known advantages for W2 employees. The IRS regulations consider withholding to have been paid proportionally throughout the year regardless of when it was actually withheld. So you can absolutely submit a new W-4 now to increase your withholding for the remaining months of 2023, and the IRS will treat it as if you had been paying at that higher rate all year long. This can help you avoid underpayment penalties even if you were under-withheld for most of the year.
Can someone explain the 1040-ES form to me? Is that something everyone needs to file or just self-employed people? My tax situation is changing next year and I'm trying to figure out what forms I'll need.
Form 1040-ES is for making estimated tax payments, not just for self-employed people. You need it if you expect to owe $1,000 or more when you file your tax return AND your withholding/credits won't cover at least 90% of current year tax (or 100%/110% of prior year). Most W2 employees don't need it because their employer withholds enough from their paychecks. But if you have significant income not subject to withholding (investments, rental income, side gigs), you might need to make estimated payments using 1040-ES.
I went through this exact same situation with a small private school I worked for. Here's what happened: they gave me a 1099 but had been withholding taxes. I filed Form SS-8 with the IRS to determine my correct worker status, and Form 8919 with my tax return like someone mentioned above. The IRS ruled I was an employee and my employer got in serious trouble because they had been pocketing the withheld taxes rather than sending them to the IRS! Make sure you keep all your paystubs showing the withholding - that's key evidence. The good news is that the IRS waived all penalties for me since I reported it. The bad news is my employer had to pay significant penalties and back taxes. They actually went out of business a few months later (though they had other financial issues too).
How long did the whole process take from filing the SS-8 to getting a determination? I've heard the IRS is super backed up.
It took about 7 months to get the official determination after filing the SS-8. The IRS is definitely backed up with these cases. The good part was that I didn't have to wait for the determination to file my taxes - I filed Form 8919 with my return and explained the situation. I was able to file my taxes as an employee would (paying only my share of Social Security and Medicare taxes) while the determination was pending. When the official ruling came through, it confirmed I'd filed correctly. If you have solid evidence like paystubs showing withholding, you're in a pretty strong position.
One thing nobody has mentioned - GET A NEW JOB ASAP!!! Any employer pulling this kind of stunt is shady af and probably doing other illegal stuff too. My sister's daycare did the same thing and when the state investigated they found all kinds of violations beyond just the tax fraud.
3 Don't forget energy efficiency tax credits if you made any improvements! I bought a fixer-upper last year and got credits for: - New energy efficient windows ($600 credit) - Heat pump water heater ($2,000 credit) - Added insulation ($1,200 credit) These are straight tax credits, not deductions, so they directly reduce what you owe. Check out Form 5695 - the credits were expanded under the Inflation Reduction Act.
8 Do these credits apply if the improvements were done by the previous owner right before selling? The listing mentioned they installed new energy efficient windows and HVAC a month before I bought the place.
3 Unfortunately, no. The energy efficiency tax credits only apply to improvements you made yourself after purchasing the home. The previous owner would have been eligible to claim those credits on their return, but you can't claim credits for improvements made before you owned the property. If you make your own energy efficient upgrades in the future though, definitely keep all receipts and manufacturer certifications. The credits are quite generous through 2032 under current law!
19 Quick tip for first-time homebuyers: if you withdrew money from an IRA for the down payment, you might qualify for an exception to the early withdrawal penalty (though you'll still pay income tax on the distribution). Up to $10,000 can be withdrawn penalty-free for a first-time home purchase. Check out Form 5329!
11 Is this true for Roth IRAs too? I took out some money from my Roth for closing costs and wasn't sure if I needed to report it.
One thing nobody mentioned yet - make sure you're addressing both federal AND state taxes. Each state has different rules about how far back you need to file and penalties for late filing. I was in a similar situation (4 years unfiled) and got federal sorted out only to get blindsided by my state tax authority, which was actually much more aggressive than the IRS. Check if your state has a voluntary disclosure program too - many do.
That's a really good point I hadn't even considered. I've lived in the same state this whole time, but I should definitely look into their policies. Is there an easy way to find out about state voluntary disclosure programs?
The easiest way is to just google "[your state] tax voluntary disclosure program." Most state tax department websites have a section for this. Some states are surprisingly forgiving if you come forward voluntarily. Be aware that some states have shorter lookback periods than the IRS. For instance, my state only required me to file 3 years back, even though federally I had to do 6 years. Some state programs will waive penalties but not interest on what you owe.
I went through this after 7 years of not filing. Here's what surprised me: for most of those years, I was actually owed refunds! I ended up getting money back for 3 of the 7 years, even after penalties. Since you mentioned having maximum withholding, you might be in a similar situation. I used TurboTax for the more recent years and a CPA for the older, more complicated ones. Cost me about $1200 total for professional help with 4 years, which was worth it for the peace of mind. Don't panic about criminal charges - those are extremely rare and typically only happen in cases of deliberate fraud or extremely high dollar amounts. The IRS mainly wants compliance and their money.
Did you file all 7 years at once or space them out? I heard you should do the most recent ones first.
Ryder Everingham
Just wanted to add another point - while there's no failure-to-file penalty when you're due a refund, there IS a deadline for claiming that refund. You have 3 years from the ORIGINAL due date (not the extension date) to file and claim your refund. So for 2024 taxes, you'd need to file by April 15, 2028, or you forfeit your refund completely. The government keeps your money if you don't file within that window!
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Ella Cofer
ā¢Thanks for this additional info! I definitely will file long before that 3-year deadline hits, but good to know there's an absolute cutoff. Does the same apply for state taxes or does that vary by state?
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Ryder Everingham
ā¢The 3-year refund claim deadline is for federal taxes. State tax deadlines vary by state - some follow the federal 3-year rule, while others have shorter or occasionally longer timeframes. For example, California and New York generally follow the federal 3-year rule, but some states like Montana only give you 2 years to claim a refund. I'd recommend checking your specific state's tax agency website for their rules since it's not standardized across all states.
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Lilly Curtis
Something to consider - even though there's no penalty, waiting to file when you're owed a refund is basically giving the government an interest-free loan. If your refund is substantial (like over $1000), that's money that could be in your account earning interest or paying down debt.
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Leo Simmons
ā¢True, but with the current disaster at the IRS with processing times, you might not get that refund anytime soon anyway. My brother filed in April and just got his refund last week!
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