This is super helpful, thanks! Quick question - how much is considered a "larger amount" that might trigger more scrutiny? Are we talking $10k, $50k, $100k+?

There's no fixed threshold, but generally speaking, the Criminal Investigation division typically focuses on cases involving substantially higher amounts - usually $100k+ in unpaid taxes. That said, smaller amounts can still trigger criminal investigation if other aggravating factors are present (like a clear pattern of evasion, hiding assets, or lying to investigators). The IRS has limited resources for criminal prosecution, so they tend to focus on cases that are either very substantial in dollar amount or have clear evidence of fraudulent intent. For most people with moderate tax debts who are making efforts to comply, the focus is on collection rather than prosecution.

Yeah this is true. From what I read, it was like a pattern over multiple tax years with substantial income. I think that's the big difference between that case and just owing money that you're paying through an installment plan.

Did filing jointly affect how your husband claimed his business expenses at all? That's one thing I'm worried about - if somehow his carpentry deductions would be limited if we file together.

Not at all! He claimed exactly the same business expenses either way. The Schedule C for his business worked exactly the same whether we filed jointly or separately. All his tools, materials, vehicle expenses, studio rent, insurance - everything was deductible exactly the same way. The only difference was that when we filed jointly, all those business deductions helped offset our combined income, plus we qualified for additional credits that saved us thousands. If we had filed separately, I would have gotten some credits for the kids, but not as much as when we combined everything, and we would have lost some credits entirely.

Self-employment tax is calculated the same way regardless of filing status. It's always 15.3% of net business profit (12.4% for Social Security up to the wage limit and 2.9% for Medicare on all profit). Filing jointly doesn't change this amount. What filing jointly DOES help with is the income tax portion, where you get better rates and more credits. So while the SE tax stays the same, your overall tax burden is usually lower when filing jointly because of how everything else is calculated more favorably.

Thanks for explaining that! I guess we were confusing the SE tax with regular income tax. Makes sense that the 15.3% stays the same regardless. Good to know the filing status mainly affects the income tax portion.

Which state are you in? I'm in California and wondering if I need to handle this differently for state taxes.

I'm in Massachusetts, which generally follows federal treatment but has a few differences for reporting. In California, they mostly follow the federal treatment for excess contribution withdrawals, but you should still report the distribution on your CA return. The main thing is to make sure the state knows the nature of the withdrawal (correcting an excess contribution) so it's not mistakenly treated as an early distribution subject to penalties. The tax software should handle this correctly if you input the 1099-R information properly, but it's worth double-checking the state section specifically.

You should definitely get credit for the withholding! Check your 1040 - the withholding from your 1099-R should be included in the total federal income tax withheld on line 25d. Sounds like something else in your return might have been causing you to owe.

I'm confused about the home office deduction. I've been working fully remote since 2021 but my employer doesn't require it. Can I still claim my spare bedroom that I use as an office?

Unfortunately, if you're a W-2 employee (even if fully remote), the home office deduction typically isn't available to you anymore. This was suspended by the Tax Cuts and Jobs Act through 2025 for employees. The home office deduction is generally only available if you're self-employed or an independent contractor. If you have a side gig that you run from home in addition to your regular job, you might be able to claim the deduction for that portion of your work, but not for your primary employment.

That's probably for the landlord to complete, not you as the tenant. Some cities in California have rental registry programs where landlords have to register their rental properties and provide information about rent amounts, but those aren't tax forms for renters.

Good point about the state return! If I amend my federal return for this 1099 income, do I need to wait until the IRS processes that amendment before filing the state amendment? Or should I do both at the same time?

You should check your specific state's requirements as they vary. Most states want you to wait until the federal amendment is completed and accepted by the IRS before filing a state amendment. This is because they'll want you to include a copy of your federal acceptance letter or transcript showing the changes. Some states have a specific timeframe (like 60 or 90 days) after your federal amendment is finalized to submit your state amendment. Missing this deadline can result in penalties, so definitely check your state tax agency's website for their specific process.

It depends on who controlled the work. If the family directed exactly how and when care was provided, it might be household employment. If OP was more independent in providing care on their own terms, it's likely self-employment. The distinction matters because household employees don't pay self-employment tax, but employers should pay their share of FICA taxes.