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What does it mean on the docket record when it says "assessed deficiency" on my tax return?
I've been going through some tax court cases for research (trying to learn from others' experiences), and I've run into this phrase several times on docket records: "assessed deficiency." I'm a bit confused what this actually means in practice. Does this indicate the IRS thinks someone underpaid? Is this something I should be concerned about seeing on my own tax records? I'm asking because I received a letter from the IRS about my 2023 return that mentions a "potential deficiency" and I want to understand what I'm dealing with here. The amount they're questioning is around $3,800 related to some side business income I reported. I'm not sure if this is the same thing as what I'm seeing in these court cases or something different. Any help understanding what this terminology actually means would be much appreciated!
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When will the 2023 Form 940 FUTA tax be released? Still only seeing the 2022 version and a new form comes out yearly
I've been checking the IRS website for the updated 2023 Form 940 FUTA tax form, but they still only have the 2022 version available. Usually there's a new version each year, and I'm getting a bit anxious since I like to submit mine before the end of December. Getting this filed early helps make sure my payment clears within this tax year, which makes my cash accounting so much simpler. Anyone know when they're planning to release the 2023 form? Or is anyone else in the same boat waiting for it to drop? I've been checking their site almost daily and starting to get concerned about the delay.
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Just as a heads up for everyone - I just checked the IRS website again and they've now posted a banner saying the 2023 Form 940 FUTA will be officially released on November 17. Seems like they're a bit behind schedule compared to previous years, but at least there's a firm date now. For those wanting to file early for cash accounting purposes, that still gives you about 6 weeks to get it submitted and have the payment clear this calendar year. Much better than waiting until January and having to deal with it during the W-2/1099 rush!
Do you know if there are any major changes to the 2023 version? I heard something about some states changing their credit reduction status but wasn't sure if that would affect the actual form layout.
Based on the draft version, the core form layout is practically identical to 2022. The main differences are in Schedule A where they updated which states have FUTA credit reductions. California has been added to the reduction list this year, and I believe Connecticut's reduction percentage has changed. If you don't have employees in those states, the form will be essentially the same as last year for you.
Can anyone recommend good tax software that handles Form 940 FUTA well? I've been using QuickBooks but their tax forms are sometimes delayed in updating too, so I'm looking for alternatives that might be more responsive when new forms like the 2023 version are released.
I switched from QuickBooks to Gusto last year and they're much faster with form updates. Their payroll system automatically calculates your FUTA liability throughout the year and they usually have the new forms implemented within days of IRS releases. Little more expensive but worth it for the peace of mind.
First time investing in stocks - do I need Form 1116 for a $3 foreign tax credit?
So I'm totally new to investing and just started buying some stocks this year. I've got a small amount in foreign stocks through my broker who handles most of the details for me. Looking at my tax documents, it shows I paid about $2.94 in foreign taxes (I know, laughably small). When I run the numbers, it looks like I could get around $3 back if I file Form 1116 for the foreign tax credit. Here's my dilemma - I'm using TurboTax and they want me to upgrade to their $89 premium package just to file the 1116 form. Is it worth paying $89 to get a $3 tax credit? Should I just skip it this year since the amount is so tiny? Or is this something I should always file regardless of the amount so I establish a pattern for future years when my foreign investments might be larger? I'm new to all this tax stuff with investments and don't want to mess anything up, but also don't want to waste money on software upgrades for such a tiny return.
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FWIW, I've been investing internationally for 7 years now. For small amounts like yours, I just take the credit directly on Schedule 3 without Form 1116. But I always keep track of the total in my records so that once it gets significant (like over $100) I start filing Form 1116. Another option - if you use a cheaper tax software like FreeTaxUSA, they include Form 1116 in their basic package which is much less expensive than TurboTax's premium tier.
Thanks for the suggestion about FreeTaxUSA! Do they handle everything else TurboTax does? I'm already halfway through my return on TurboTax but maybe I should switch for next year. And is there any downside to skipping Form 1116 when the amount is under the threshold?
FreeTaxUSA handles all the same forms as TurboTax for federal filing at a fraction of the cost. Their interface isn't quite as polished but it gets the job done. Their deluxe version is only about $7 and includes priority support and audit assistance. State returns are extra though. There's no real downside to skipping Form 1116 when you're under the threshold. The only limitation is you can't carry forward unused foreign tax credits, but with just $3, that's not an issue for you. If your foreign investments grow significantly in future years, then you'll want to start using Form 1116.
Just to add another perspective - I wouldn't pay $89 for a $3 credit, that's just throwing money away. But don't just "ignore" the foreign tax either. Enter it directly on Schedule 3 like others have said. Also, look at Credit Karma Tax (now Cash App Taxes) - it's completely free and supports Form 1116 if you need it in the future.
Is Cash App Taxes actually reliable? I've heard mixed things. Anyone used it for investment stuff? Seems sketchy to trust a free app with complicated tax situations...
Head of Household Filing help! Don't want to mess up reporting my child's income
Ok so I'm filling out my tax return for 2025 and I'm claiming Head of Household status because I have my daughter living with me. She's 9 and obviously doesn't work, but TurboTax is asking me to enter income for each dependent. If this is for my child I'm suppose to put $0 right? Just making sure because the IRS doesn't play around and the last thing I need is some kind of audit because I entered something wrong. Does anyone know for sure? This is my first year filing as HOH after my divorce finalized and I really don't wanna screw this up.
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One thing to watch out for with Head of Household - make sure you're actually unmarried on the last day of the tax year! I made this mistake. My divorce wasn't finalized until January 2025, and I tried filing HOH for 2024 taxes. Got a nasty letter from the IRS saying I had to amend and file as Married Filing Separately. Cost me an extra $2,300 in taxes!
Thank you for bringing this up! My divorce was finalized in May 2024 so I should be good for the 2025 filing. But that's definitely something important I didn't think about. Did the IRS charge you any penalties or just make you pay the difference?
They only made me pay the difference in taxes between HOH and Married Filing Separately, plus a small amount of interest since I paid after the filing deadline. No penalties since they determined it was an honest mistake rather than deliberate evasion. The IRS actually has a "considered unmarried" provision that might apply in some situations even if you're technically still married on December 31st, but my situation didn't qualify. If your spouse didn't live in your home for the last 6 months of the year, you might still qualify for HOH even if not technically divorced yet.
Just be super careful with Head of Household! My brother claimed HOH for years without issue, then got audited and had to pay back $11,400! The problem? His girlfriend and her kid lived with him but weren't actually his qualifying relatives under IRS rules. Just because someone lives with you doesn't make them a qualifying dependent.
Absolutely right. The rules for "qualifying person" for HOH are really specific. For a child to qualify, they generally need to be your son, daughter, stepchild, foster child, brother, sister, or a descendant of one of these (like a grandchild or niece/nephew). Just having a child live with you isn't enough unless you're related by blood, marriage, or adoption in most cases.
How to properly claim Business Meal expenses and maximize deductions as a sole proprietor
I've recently registered my small sole proprietorship and I'm trying to figure out the whole business expense thing, especially when it comes to meal expenses. First off, if I go out to eat with someone and we talk about business, how exactly is that classified? Is it automatically a business expense if most of the conversation is business-related? Or are there specific rules about what qualifies? Also, I'm wondering if it makes sense to purchase or upgrade business equipment to offset some of my profits. For example, if I've made about $6,500 in profits and I decide to buy some equipment for my business that costs $1,300, how would that actually benefit me tax-wise? Would it mean I'd only owe taxes on $5,200 instead of the full $6,500? Sorry for all the questions – I'm new to this whole business ownership thing and want to make sure I'm handling my taxes correctly. Thanks in advance!
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Don't forget that business meal deductions changed in recent years! For 2025, business meals are still 50% deductible in most cases, but there was that temporary 100% deduction for restaurant meals during 2021-2022 that went away. Also, make sure you're tracking mileage if you drive to these business meals! That's another deduction many sole props forget about. I use an app to track all my business drives automatically.
Thanks for mentioning the mileage deduction! Do you know if I should be tracking mileage for all business-related driving? And what app do you use to track it?
Yes, you should absolutely track mileage for all business-related driving - going to client meetings, picking up supplies, driving to business meals, etc. Just remember that commuting to a regular workplace isn't deductible. I use MileIQ for tracking, but there are several good options like Everlance and Hurdlr too. Most of these apps automatically detect when you're driving and let you swipe to categorize trips as business or personal. Super simple and creates the documentation you need for tax time.
For business meals, my accountant told me to always write on the back of the receipt WHO i met with and WHAT business we discussed. Been doing this for 10 years and never had an audit problem. Also, don't try to claim every meal as "business" - that's asking for trouble. The IRS knows that not every lunch is a business expense lol.
That receipt tip is gold! Do you just write directly on the physical receipt or do you scan it first and add notes digitally?
Ben Cooper
One important distinction that hasn't been mentioned: a Tax Court docket record showing "assessed deficiency" means the case has progressed to actual litigation. This happens after you receive a Notice of Deficiency (90-day letter) and then file a petition with the Tax Court to challenge it. If you're just seeing a "potential deficiency" notice, you're still in the administrative process, not the litigation phase. You can often resolve this without going to Tax Court by responding with appropriate documentation.
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Gael Robinson
AuthorSo does that mean if I can't resolve the "potential deficiency" with documentation, my case will end up on a docket record too? At what point does it move from administrative to legal proceedings?
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Ben Cooper
The progression typically works like this: First you get the initial inquiry (CP2000 or similar), then if unresolved, you receive a Statutory Notice of Deficiency (90-day letter). Only after receiving that 90-day letter and then filing a petition with the Tax Court would your case appear on a docket. You have significant opportunities to resolve the issue before reaching the Tax Court stage. Many deficiency issues are resolved during the correspondence audit phase or through the IRS Appeals office. Tax Court is usually the last resort when you and the IRS fundamentally disagree about your tax liability and can't reach a settlement.
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Naila Gordon
Does anyone know how to check if there's an "assessed deficiency" on your account before you get any notices? I'm paranoid now and want to make sure there's nothing lurking in my IRS records that I don't know about.
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Cynthia Love
You can create an account on the IRS website (irs.gov) and view your tax account transcript. It'll show any assessments, payments, and adjustments to your account. I check mine regularly since I had an issue a couple years ago.
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