Is there a cutoff for how far back you can claim refunds? I haven't filed for 6 years but had withholding the whole time.

Yes, there is a cutoff - it's 3 years from the original due date of the return. So for example, 2022 tax returns were due April 18, 2023, meaning you have until April 18, 2026 to claim any refund for that year. For 2021 returns, you have until April 15, 2025. Unfortunately for your situation with 6 unfiled years, you've likely lost the ability to claim refunds for the oldest 3 years, but you can still get refunds for the most recent 3 tax years if you're owed them.

This is 100% accurate. I work at a tax resolution firm and we help people with 10+ years of unfiled returns regularly. The IRS is far more reasonable than people think as long as you're making an effort to comply. They're not interested in sending people with regular jobs to prison.

But wouldn't they still have to pay self-employment tax too? Even with $40k net income, shouldn't that be more than $4k total tax between income tax and SE tax?

You're absolutely right about self-employment tax. Even with $40k net income, they would owe about 15.3% in self-employment tax alone, which would be around $6,120. Then they'd still owe some amount of income tax on top of that, even after taking the standard deduction.

That's a great point. For 2023, self-employed individuals could contribute up to $66,000 to a Solo 401(k) if they're under 50. Add in a maxed HSA contribution and some business expenses, and you could bring that taxable income way down legitimately.

I haven't actually tried asking my company about this. Is there a specific way I should approach this conversation with HR? I'm not sure if they have an official policy, but it makes sense that they should help cover these costs since they're not providing an office space.

I'd suggest starting with an email to your manager or HR outlining your home office expenses related to work. Be specific about costs like increased utilities, internet requirements for work, and any furniture or equipment you've purchased to do your job effectively. Frame it as a question about whether the company has an accountable plan or stipend program for remote workers, rather than demanding reimbursement. Many companies have these policies but don't publicize them well. If they don't have a formal policy, this could prompt them to create one, especially if other remote workers have similar needs.

This is really helpful! I'm in California - does anyone know if CA allows home office deductions for W-2 employees? I've been working remote for 2 years and haven't claimed anything because I thought it wasn't allowed anywhere.

Is FreeTaxUSA actually user-friendly? I tried using the IRS free file system directly once and it was a nightmare to navigate. I ended up going back to paying for TurboTax because the interface was better, but I'd love to save some money.

FreeTaxUSA is surprisingly user-friendly! It's not as flashy as TurboTax, but the interface is clean and straightforward. It walks you through each section with simple questions and explanations. You can save and come back to it, and it has a good review system to catch common errors. The best part is they don't do that annoying bait-and-switch that some other "free" services do where they surprise you with fees at the end for slightly more complex returns. Federal is actually free for almost all personal tax situations, and state is a flat $15 fee.

Exactly! Tax evasion charges are for people hiding millions in offshore accounts or completely fabricating businesses, not someone who made a mistake entering their dividend income. Your friend needs to realize the IRS has bigger fish to fry than simple returns with minor errors.

That's a really good point about the income limits! Our household income is around $175,000, so we'd be in the phase-out range. My son's income (even with the tuition benefit counted) is well under the limit. Is there a calculator somewhere that would help us determine exactly how much we'd lose to the phase-out versus him claiming it?

The phase-out calculation reduces your eligible AOTC by a ratio based on how far into the phase-out range you are. Since your household income is $175,000 and the phase-out range for married filing jointly is $160,000-$180,000, you're 75% through the phase-out range ($15,000 of the $20,000 range). That means your maximum AOTC would be reduced by approximately 75%. So instead of the full $2,500 maximum credit, you'd be looking at around $625 remaining. Whereas if your son claims it on his own return, he could get the full $2,500 (assuming the qualified expenses are high enough). Many tax software programs have built-in calculators for this, but you can also use the IRS's Interactive Tax Assistant on their website to get a more precise calculation for your specific situation.

But LLC is less valuable than AOTC, right? AOTC gives you $2,500 for $4,000 in expenses (100% of first $2k, 25% of next $2k) while LLC only gives $2,000 for $10,000 in expenses (20% rate). Plus AOTC is partially refundable.