Should people proactively contact their benefits offices about potential discrepancies, or just wait to see if they get flagged?

Generally, it's better to wait until you're contacted unless you realize you've made a significant error that would affect your eligibility. The verification systems are designed to filter out minor discrepancies, and proactively contacting benefits offices often just creates confusion when there might not be an issue. If you do discover you've made a major reporting error that would affect your eligibility, then yes, you should contact the appropriate office to correct it. But for small differences in how income is categorized or reported, the cross-referencing systems typically have thresholds for what triggers a review.

From what I've read, it includes pretty much all federal benefit programs - Social Security, Medicare, Medicaid, SNAP, Housing assistance, veterans benefits, etc. But the focus is primarily on programs where eligibility is tied to income levels.

Thanks for confirming my suspicion! I used the calculator and it's showing we might be slightly underwithholding overall. Is it better to adjust both our W-4s slightly or just have one of us make a bigger adjustment? Does it matter which approach we take?

Either approach works from a tax perspective - the IRS doesn't care which spouse has the withholding as long as your household total is correct. For simplicity, I'd recommend just having one person make the adjustment - usually the higher earner or whoever has the more stable income. Remember that if your incomes are fairly high, the "married" withholding tables assume that one spouse might not work, so with two similar high incomes, you might need more withholding than the standard tables suggest. The calculator should account for this, but it's always good to recheck your withholdings around June each year to make sure you're on track.

Is this still the best approach with the redesigned W-4? I thought the new form was supposed to fix these issues with the two-earner worksheet?

This is super helpful, thank you! Looking at these factors, I'm definitely more on the hobby side. My financial records are pretty basic, I primarily do it for enjoyment, and the income is small compared to my day job. One more question - if I do decide to formally track this as a hobby on my taxes, should I be keeping receipts for all my bonsai-related purchases even though I can't deduct them? Just in case the IRS ever has questions?

Good question! Yes, I would recommend keeping basic records of both your sales and expenses, even though you can't deduct the expenses for a hobby. This serves two important purposes: First, if the IRS ever questions whether this is truly a hobby, your records can help demonstrate the financial reality of your activity. Second, if you eventually transition to business status, having historical records will be valuable. Also, while you can't deduct hobby expenses against hobby income anymore (thanks to the Tax Cuts and Jobs Act), keeping track of expenses helps you understand the true economics of your activity. Just keep it simple - a basic spreadsheet and a folder for receipts should be sufficient. No need for elaborate bookkeeping if it's truly just a hobby.

Getting a 1099-K means Etsy is reporting that income to the IRS, so you definitely need to report it on your tax return. Starting in 2022, platforms like Etsy are required to issue 1099-Ks for $600+ in sales (used to be $20k). This doesn't automatically make your activity a business, but it does mean the IRS knows about the income. You'd still apply the same hobby vs business tests others mentioned. If it's a hobby, report on Schedule 1 (Other Income). If business, Schedule C.

Thanks for the validation. I've already started asking around for recommendations for next year. Did you find any specific questions that helped you separate the knowledgeable CPAs from those just claiming to understand crypto?

I ask them to explain how they handle specific crypto situations that I know are tricky - like liquidity pool rewards, token airdrops, or NFT transactions. The ones who give vague answers or just say "we can handle any crypto situation" without details are the ones to avoid. The good ones will be honest about what they know and don't know. My current CPA straight up told me he specialized in DeFi and mining operations but wasn't as familiar with NFTs. That honesty was refreshing, and he ended up partnering with an NFT tax specialist for that portion of my return. Transparency about their limitations is a huge green flag.

Eh, I disagree. The CPA did complete part of the work, so paying nothing would be unfair. The $250 partial payment makes sense. And honestly, most CPAs are overwhelmed during tax season - it sounds more like miscommunication than intentional deception.

This is why I just do my own taxes now. I spent $600 on a CPA two years ago only to find a mistake that could have cost me $1200. H&R Block software is like $70 and has handled everything I've thrown at it including rental property and some basic stock trades.

DON'T do this unless you're an actual tax professional with a CAF number. They will ask for your credentials and if you can't provide them, they'll just transfer you back to the regular line and you've wasted your time. They've gotten stricter about this in the last year.

Thanks for the heads up! I didn't realize they were checking credentials now. Guess I'll stick with the regular line and just use the tips from this thread. Definitely don't want to make things worse by trying to game the system.