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Another thing to consider is that if you don't amend and the IRS notices the discrepancy (which they probably will since they get copies of those forms), they might send you a CP2000 notice. That's basically them saying "hey we think you underreported income" and they'll calculate what they think you owe. Usually their calculation doesn't include all the deductions you might be entitled to, so you often end up owing more than if you had just amended yourself. Plus, depending on timing, there could be penalties and interest.
Does the CP2000 notice count as an audit? I'm always terrified of anything that might trigger the IRS to look more deeply at my returns.
No, a CP2000 notice isn't technically an audit. It's classified as an "automated adjustment" where their computer systems have detected a mismatch between income reported to them versus what's on your return. It doesn't involve the detailed examination of your entire tax situation that a true audit would include. That said, how you respond to a CP2000 could potentially lead to further review if there are significant issues or discrepancies in your explanation.
Another option is using Free File Fillable Forms if you're comfortable with the tax forms. It's free and you can file your 1040-X electronically now. I had to amend last year cause I forgot a 1099 from a side gig and it wasn't nearly as painful as I expected!
is there a benefit to e-filing the amendment vs mailing it in? I thought amendments had to be on paper
Pro tip: Call the taxpayer advocate service instead of the main IRS line if you get confusing notices. They're usually much easier to reach and can often explain what's going on with your account better than the regular agents. Their number is 877-777-4778.
Do they handle all types of tax issues or just specific problems? I've got multiple notices I need help with.
The Taxpayer Advocate Service (TAS) is designed primarily for situations where you've tried normal IRS channels without success or are experiencing significant hardship. They don't handle routine questions about notices. For multiple notices, you're better off contacting the specific numbers listed on each notice first. TAS is more of a last resort when you're stuck in the system or facing serious consequences like wage garnishment or bank levies.
Just to add to what others have said - check the amounts carefully. I got a CP12 last year and almost ignored it thinking it was just confirming my refund, but it was actually saying I owed another $437 because they disallowed one of my education credits. The important number was at the very bottom of the second page!
Did you end up having to pay it? Or can you contest their decision?
Everyone's focusing on the HSA part, but don't forget to look into the Child Tax Credit too since you're claiming the child as a dependent. That can be worth up to $2,000 per qualifying child for 2023, which helps offset some of these costs. Also, check if your state has additional tax benefits for new parents.
Thanks for bringing up the Child Tax Credit - I hadn't even thought about that! Do you know if there are income limits for claiming it? And are there any other tax benefits I should look into as a new parent?
Yes, there are income limits for the full Child Tax Credit. For 2023, the credit begins to phase out at $200,000 for single filers and heads of household. If you earn more than that, the credit amount reduces by $50 for each $1,000 above the threshold. As for other benefits, definitely look into the Dependent Care Credit if you're paying for childcare so you can work. Also, check if your employer offers a Dependent Care FSA, which lets you set aside pre-tax money for childcare expenses. North Carolina may have additional state-level credits or deductions for dependents, so check your state tax forms too.
Make sure to keep every medical receipt related to the birth, not just the main hospital bill! My accountant told me things like prenatal vitamins, pregnancy classes, lactation consultants, and post-birth check-ups all count as medical expenses. Might help you reach that 7.5% AGI threshold for medical deductions.
Do formula and diapers count as medical expenses too? I've been spending a fortune on those.
One thing nobody's mentioned yet - consider Wyoming if privacy is important to you. Delaware requires more disclosure of ownership information than Wyoming does, which might be relevant depending on your reasons for setting up a US LLC. For my digital marketing business, I went with Wyoming because: 1. No state income tax 2. Low annual fees 3. Strong privacy protections 4. No requirement to list members in public filings The 30% federal withholding only applies to certain types of income. For my consulting services to US clients, I've been able to reduce withholding through the tax treaty with my country.
How does the privacy actually help though? Don't you still have to disclose ownership to the IRS and on bank account applications?
You're right that privacy doesn't extend to the IRS or banks - those disclosures are mandatory for tax compliance and anti-money laundering regulations. The privacy benefit is more about public records. In Wyoming, your name doesn't appear in the publicly searchable business registry, while Delaware requires more disclosure in their public filings. This can be important if you're concerned about competitors easily connecting you to your business, or if you have privacy concerns about having your name publicly linked to your business activities. Some of my clients prefer not knowing my other business relationships, and Wyoming's privacy helps maintain those boundaries.
Does anyone know if we need to file Form 5472 as a foreign-owned single-member LLC in Wyoming? I've been getting conflicting information. Some say it's required even for disregarded entities, others say it's only if you elect corporate taxation.
Yes, you absolutely must file Form 5472 if you're a foreign-owned single-member LLC, regardless of which state you're in or your tax election status. This requirement was added in 2017 and it's a big deal - the penalty for not filing is $25,000! Even if your LLC is a "disregarded entity" for tax purposes, it's treated as a corporation SOLELY for the purpose of Form 5472 filing requirements. This catches a lot of foreign owners by surprise.
Amina Toure
Just a heads up - if you made over $400 in self-employment income, you definitely need to file. Don't ignore it like I did my first year doing surveys and side gigs! I ended up having to file three years of back taxes and pay penalties. For record keeping, what worked for me was creating a free account on Wave (it's accounting software). I just entered all my survey payments as they came in. For surveys, you're basically a contractor, so they don't send you tax forms unless you make over $600 from a single company. As for the referral bonuses, yes, those count as taxable income too. The small amount your mom sends doesn't count if they're truly gifts and not payment for services. One thing I learned is that you can deduct 50% of your self-employment tax on your return, which helps a bit!
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Oliver Weber
ā¢Is Wave better than just using a spreadsheet? I'm doing rideshare and food delivery and trying to track everything but getting overwhelmed.
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Amina Toure
ā¢I find Wave much better than spreadsheets for a few reasons. It automatically creates the right categories for taxes, connects to your bank account to import transactions (so you don't have to manually enter everything), and generates reports you can use for tax filing. The learning curve is pretty minimal compared to spreadsheets where you have to create your own formulas and categories. Plus, it's specifically designed for small businesses and self-employed people, so it knows what information you need for taxes. The basic version is free, which is all I need for my side gig income tracking.
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FireflyDreams
Something nobody mentioned yet - if this is your first year filing, you might qualify for free tax preparation help through VITA (Volunteer Income Tax Assistance). They help people who make under $57,000 fill out their tax returns for free. Look up "VITA site near me" and you can find locations. They have trained volunteers who can help with your exact situation. Much less stressful than trying to figure it all out yourself!
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Ava Williams
ā¢That sounds really helpful! Do they help with the self-employment forms too? I've heard those are more complicated than regular W-2 employment.
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Natasha Kuznetsova
ā¢I tried VITA last year and they refused to help with my Schedule C for rideshare driving. Said it was "out of scope" for their volunteers. Maybe it varies by location though.
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