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My neighbor is a retired IRS agent and she told me that estimated tax penalties are calculated per QUARTER, not just annually. So if you made one big payment at the end, you could still get hit with penalties for the earlier quarters. There's a special test called the "safe harbor" provision. If you paid either 90% of this year's tax or 100% of last year's tax (110% if your AGI was over $150k) through timely estimated payments, you won't get penalties. Maybe check if you met one of these tests?
This same thing happened to me! Check if your state has residency requirements for tax purposes. I moved mid-year and had to pay estimated taxes to TWO states because of their different rules. The CP30 was because the IRS thought I underpaid federally, but it was actually because I was paying to multiple state tax authorities and messed up the allocation. Call the IRS (good luck lol) and explain. They removed my penalty after I explained and sent proof of my state tax payments showing i was actually in compliance with the quarterly requirements when you look at the whole picture.
Quick tip: even tho you don't owe SE tax, keep track of your expenses from that day! Gas, mileage, any hot bags or stuff you bought for deliveries. If you do more gig work later in the year and go over $400, you can deduct those expenses to lower your taxable income. I learned this the hard way after doing Uber Eats part time!
How do you prove mileage if you get audited? I've been taking pics of my odometer before and after shifts... is that enough?
A mileage log is your best bet. You don't need to take pics of your odometer (though it doesn't hurt), but you should record the date, starting location, ending location, purpose of the trip, and total miles driven. There are free apps that can help track this automatically. The IRS mostly wants to see that you have a consistent record-keeping system, not just estimates after the fact. Even a simple spreadsheet or notebook works as long as you update it regularly. If you claim a ton of miles with zero documentation, that's when audit flags can pop up.
Honest question - with just $38, is it even worth reporting? Like what happens if you just don't? The tax on that would be like what, $4? Would the IRS even care???
While technically all income should be reported, the practical reality is that the IRS is not going to come after you for a few dollars in tax on $38. DoorDash won't issue any tax documents for this amount. That said, it's generally best to develop good tax habits from the start. If this is your only income, you likely wouldn't even need to file. If you have other income requiring you to file anyway, including the $38 is the right thing to do, but realistically, the impact on your tax bill will be minimal and the chances of issues arising from omitting it are extremely low.
I'd strongly consider hiring a professional. I tried doing an OIC myself and got rejected twice before hiring someone. The paperwork seems straightforward but there are a lot of hidden gotchas. For instance, did you know they look at your potential future income, not just current? Or that they'll check if you've transferred any assets in the last 6 years? Or that certain expenses that seem reasonable to us aren't allowed by their standards?
What kind of expenses did they disallow for you? I'm trying to get a sense of how strict they are about the national standards vs. actual expenses.
They disallowed part of my housing expense because it exceeded their local standard for my county, even though I provided actual bills. They also questioned my car payment since it was higher than their transportation standard. They allowed my medical expenses but required documentation for every single claim. The most frustrating part was they calculated my "potential income" based on previous years when I made more, even though my current situation had changed. This is where having a professional really helped - they knew how to document the change in circumstances properly.
One thing nobody has mentioned - make sure your current tax filings are 100% in order before applying for an OIC! I submitted an offer and it got instantly rejected because I missed an estimated tax payment for the current year. The IRS won't even consider your offer unless you're current on all filing and payment requirements for the current year. This includes estimated tax payments if you're still self-employed.
4 I filed 1099-NECs late twice over the years. First time was about 2 weeks late for 3 contractors and never got any penalty. Second time was almost 2 months late for 5 contractors and got hit with a $250 penalty. Based on my experience and talking with other small business owners, they seem to be more lenient if: 1) You're only a little late (under 30 days) 2) You have just a few forms 3) It's your first late filing Since you're only a week late with just two forms, I'd be surprised if they penalize you. But no guarantees - the IRS can be inconsistent.
15 What if the contractors already filed their taxes using the 1099 information I gave them directly? Does that reduce the chance of penalties since the income was properly reported?
4 That's definitely a point in your favor. If the contractors reported the income correctly on their returns, the IRS got the tax revenue they were due. The purpose of the 1099 system is ultimately to ensure income gets reported. However, technically the filing requirement is separate from whether the income was reported correctly. The IRS wants the official forms filed on time regardless. But practically speaking, if there was no tax loss to the government because your contractors properly reported their income, the IRS has less incentive to pursue penalties.
22 For next year, set a reminder in your phone RIGHT NOW for January 10th. That way you'll have plenty of time to get the forms ready. Also, most payroll or accounting software can generate and file these automatically if you've been tracking payments correctly throughout the year. I use QuickBooks and it basically does everything for me - just have to review and approve.
1 Thanks for the tip! Just set reminders in my phone and calendar. Do you know if Wave accounting has this capability too? That's what I'm currently using to track everything.
Rami Samuels
Just adding another perspective - I've used both FreeTaxUSA and TurboTax. FreeTaxUSA is definitely better value for the money, especially for straightforward tax situations with W-2s. However, if you have complex investments, rental properties, or self-employment income, TurboTax might offer more guidance. But you're paying a premium for that hand-holding. FreeTaxUSA has all the same forms, just less fancy packaging.
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Haley Bennett
ā¢Would you recommend FreeTaxUSA for someone with W-2s plus some stock sales? I have 3 W-2s and sold some stocks this year, and I'm trying to decide which software to use.
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Rami Samuels
ā¢FreeTaxUSA handles stock sales just fine. You can enter all your stock transactions manually or import them using a CSV file. I've done both W-2s and basic investment income (dividends and capital gains) without any issues. For multiple W-2s plus some stock sales, I'd definitely recommend saving your money and using FreeTaxUSA instead of TurboTax. The interface for entering capital gains/losses is straightforward, and they provide good explanations of how to report everything correctly.
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Douglas Foster
Dont forget to check if you qualify for the IRS Free File program before paying anything! If your AGI is under $73,000 you can use several services completely free including state filing.
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Nina Chan
ā¢This is good advice, but it's worth noting that FreeTaxUSA federal filing is free regardless of income, unlike TurboTax which limits their free version to very simple returns. You only pay for state filing ($15ish) with FreeTaxUSA.
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