I didn't even consider filing separately! Did you still get to claim the mortgage interest and property tax deductions that way? And did you have to do anything special with the marketplace insurance forms?

When filing separately, only the spouse who actually paid the mortgage interest and property taxes can claim those deductions. In our case, we had set up our mortgage so both our names were on it, and we paid from a joint account, so we could document that my wife (the lower earner) paid those expenses. This helped maximize the benefit. For the marketplace insurance forms, it gets a bit complicated. You'll need to allocate the premium and subsidy amounts between spouses. Our tax preparer handled this for us, dividing it based on who was actually covered by the policy. The key benefit was that by filing separately, my wife's income alone (not our combined income) was used to calculate the subsidy repayment for the months before we were married.

The Saver's Credit phases out pretty quickly though. For 2025 filing, married couples filing jointly lose eligibility when their AGI exceeds $73,000. Given their combined income of about $103k, they probably won't qualify.

Oh no, I didn't make any quarterly payments! This is my first time dealing with self-employment. Will the penalty be really bad? And should I start making quarterly payments for this year right away?

The penalty usually isn't too severe - it's basically an interest charge on what you should have paid earlier. There are some safe harbor rules that might help you avoid it, especially if this is your first year with self-employment income or if your W-2 withholding from any other jobs covers at least 90% of your total tax liability. Yes, for 2025 you should plan on making quarterly estimated payments. The due dates are April 15, June 15, September 15, and January 15 (of the following year). You can use Form 1040-ES to calculate and submit these payments. It's much easier to pay a little each quarter than to be hit with a large bill at tax time!

I used HR Block last year for my Schedule C (freelance writing) and it was ok but not great. The interface was a bit confusing for business expenses. This year I switched to TurboTax Self-Employed and found it more intuitive - it asked better questions to help identify deductions I might have missed. It's more expensive but worth it if you have various expenses to deduct.

Would Form 843 work even though the mistake is from a few years ago? And should I hire a different CPA to handle this or try to do it myself?

Yes, Form 843 can still be filed for the tax year in question even though it's from a few years ago. The statute of limitations for filing a claim for refund or abatement is generally three years from the date the return was filed or two years from the date the tax was paid, whichever is later. Since you're just now discovering this issue, you should still be within that timeframe. I would strongly recommend hiring a different tax professional to handle this rather than trying to do it yourself. Look for an Enrolled Agent or CPA who specializes in tax resolution or IRS representation. They'll know exactly how to present your case for maximum chance of success and can handle all communications with the IRS on your behalf. Given the significant amount at stake ($32,000), professional assistance is definitely worth the investment.

This is the real answer. My dad's accountant made a similar mistake and ended up paying the entire bill including penalties because it was 100% their error. Don't just accept this as your problem to fix!

How did you find your tax attorney? I'm in a somewhat similar situation (owe about $30k from business losses) and have been getting bombarded with ads from tax resolution companies that sound super scammy with their "we can settle for pennies on the dollar" promises.

I found our attorney through the state bar association's referral service. I specifically asked for attorneys specializing in tax controversy and resolution. This approach was much better than responding to those "pennies on the dollar" ads, which are usually misleading. The bar association gave me three names, and I interviewed all of them. I asked about their experience with cases similar to ours, their success rate with Offers in Compromise, and their fee structure. Our attorney charged a flat fee for the initial analysis of our situation, then another flat fee for preparing and submitting the Offer in Compromise. This was much more transparent than the percentage-based fees some places charge.

Thanks for mentioning this! Do you know what the income limits are to qualify for these clinics? And do they help with state taxes too or just federal?

Does it matter if they're tracking it separately in a dedicated account? I've heard that can sometimes make a difference with the IRS if the money is clearly segregated.

Keeping the money in a separate account is good practice and helps demonstrate your intent, but unfortunately it doesn't change the fundamental tax treatment. The IRS generally looks at the nature of the transaction when it occurs, not what you intend to do with the proceeds later. Having a separate account does provide a clear paper trail though, which is always helpful if questions ever arise. It shows you weren't trying to hide anything and had a specific purpose for the funds.

This is actually brilliant! My sister did something similar with her kids' "chore money" - she reported it properly as rental income but then put it in 529s for them. The growth being tax-free for education expenses made it really worthwhile.