Would including this statement flag my return for audit? I'm already worried about getting in trouble for this mistake, and I don't want to make things worse by drawing attention.

Including the statement won't increase your audit risk. In fact, it might decrease it. The IRS computer systems will automatically flag the discrepancy between the Box 1 amount reported by your employer ($0) and the higher amount you're reporting. The statement simply explains this discrepancy upfront. Without the statement, you might receive an automated notice asking about the difference, which you'd then need to respond to. With the statement, if your return gets reviewed by an actual person, they'll immediately see the explanation and potentially avoid sending the notice in the first place. It's all about being transparent and proactive, which the IRS generally responds well to.

I work in payroll and this is correct. We can absolutely issue a W-2c to correct these types of issues. The employer is required to provide accurate tax documents. I'd recommend sending a formal written request (email is fine) specifically asking for a W-2c correction due to the W-4 processing error. If they refuse, you can actually report them to the IRS.

Do you know which tax form you'd use to claim that theft loss? And would you need to have filed police reports or anything to back it up?

You'd report theft losses on Form 4684 (Casualties and Thefts) and then carry that information to Schedule A if you're itemizing deductions. But there's a catch - under current tax law, personal theft losses are only deductible if they're attributable to a federally declared disaster. However, if the theft is connected to a business or income-producing property, you might be able to deduct it anyway. Some tax professionals argue that money in investment apps could qualify as income-producing property. For documentation, yes, you'd ideally want police reports, documentation of all your attempts to recover the funds, complaint filings with CFPB and other agencies, and proof that the company is unresponsive or insolvent. Without these, the IRS might reject the theft loss claim.

I actually did this last year! Filed in small claims against one of these apps for $800 they were holding. Won by default because they didn't even show up to court. Getting them to actually PAY was another story, but I eventually got my money back after sending the court judgment to their legal department. Tax-wise, I didn't have to report anything special since it was just my own money being returned to me, not new income. Definitely worth the $75 filing fee in my case.

Thank you so much for explaining! That really helps ease my mind. One more question - will this form stay on file forever at the bank or is it just a temporary thing for the SSN correction?

We keep W-9 forms on file for the life of your account, but it's just part of your account documentation. It doesn't get sent to the IRS or anything - we only use it if there's ever a question about your tax ID or if we need to issue a 1099 form (which would only happen if you earned significant interest on your account). It's really just paperwork to make sure we have your correct information. Nothing to worry about at all!

Technically that interest is taxable income, but if your total income is below the filing threshold (currently $13,850 for single filers), you don't need to file a tax return at all. Banks only send 1099-INT forms when interest exceeds $10 in a year anyway. With just $2 in interest, you won't receive any tax forms, and there's no need to file just to report that tiny amount if you're otherwise below the filing threshold.

Thanks for the suggestion, but unfortunately it's not that simple in our case. My brother has a multi-car discount policy that would be significantly more expensive if we split it up. Also, his driving record is better than mine, so our total costs would increase by about $780/year if I got my own policy. That's why we've kept this arrangement going. I'm wondering if there's a way to make it work tax-wise without actually changing the policy.

That makes sense about the multi-car discount. In that case, I'd suggest creating a formal agreement between you and your brother. Have him "bill" you for the insurance with a simple invoice each month, and pay him by check or electronic transfer that clearly states "vehicle insurance" in the memo/notes. Keep these records organized. This creates a paper trail showing you're paying for a legitimate business expense. On your Schedule C, you'd list it as "vehicle insurance" under car expenses. Just be aware you can only deduct the percentage used for business - if you use the car 60% for business and 40% personal, you can only deduct 60% of what you pay.

This is the correct answer. The "substance over form" doctrine is exactly what the IRS would apply here. It doesn't matter whose bank account the payment comes from - it matters who is the economic payer. If brother gives cash first, then brother is the economic payer.

Omg I hadn't even thought about sales tax. Is that separate from income tax? Do you have to register somewhere special for that? This is getting complicated fast...

Yes, sales tax is completely separate from income tax. You report income tax to the federal government (and state if applicable), but sales tax goes to the state and sometimes local tax authorities. You typically need to register for a sales tax permit in your state, and potentially in other states where you have what's called "nexus" (basically a significant business presence or sales volume). The rules for digital products vary dramatically by state - some don't tax digital goods at all, while others tax everything. There are services that can help manage this if you start selling in multiple states, but if you're just starting out, focus on understanding your home state's requirements first.

An LLC is way overkill for someone just selling foot pics online. The liability protection isn't really necessary for digital content sales, and the annual fees and paperwork in some states aren't worth it for a small side hustle. Just my 2 cents.