Oh that's a really good point I hadn't considered. I don't think I have any official appraisal from when I converted it in 2013. Would old real estate listings of comparable properties from that time period work as evidence? Or tax assessments from the county?

Tax assessments can help, but they're often below market value. Comparable property listings from that time period would be better evidence. You could also check with local real estate agents who might have historical sales data for similar properties in your area from that time. Another approach is to work backward from current appraisals and adjust for average appreciation in your area. Some tax professionals can help you create a reasonable valuation model if you have current data and local real estate growth statistics. The key is building a reasonable case for the value if you're ever questioned. Document everything and keep all supporting evidence with your tax records.

That's a great point. In my state, they actually have different rules for how the depreciation recapture is taxed compared to the federal level. I ended up having to amend my state return because I initially just carried over the federal calculations.

Thanks for bringing this up! I'm in Illinois - does anyone know how dividends are treated here? I did a quick search and it seems like IL follows federal treatment but I'm not 100% sure.

Illinois generally follows the federal treatment of dividend income, so the dividends will be part of your federal adjusted gross income that flows to your IL-1040. Illinois has a flat income tax rate (currently 4.95%), so all your income including dividends will be taxed at that same rate regardless of whether they were qualified or ordinary dividends on your federal return. Unlike some states, Illinois doesn't have special treatment or separate schedules just for dividend income, which makes things a bit simpler. Just make sure your federal AGI (which includes your dividends) correctly flows to your state return.

VITA volunteers aren't always trained on investment income though. I tried using them 2 years ago and the volunteer told me they couldn't help with my stock sales, only with W-2 income. Might depend on which location you go to and who's volunteering that day.

I think my income might be too high for EIC since I made about $43k at my regular job plus around $12k from deliveries. But TurboTax did guide me through a bunch of expense questions like my phone, insulated bags, and even a portion of my car insurance. I hadn't thought about tracking those things during the year but was able to go back and estimate pretty closely.

Your combined income of $55k might still qualify you for some EIC depending on your filing status. For 2022, the income limit for a single parent with one child was around $43k, but for married filing jointly it was higher. Even if you don't qualify for EIC, those business expense deductions you entered likely made a huge difference! Remember that your taxable income from the delivery work is your gross earnings minus all those business expenses. So if you made $12k but had $5k in legitimate business expenses (including that substantial mileage deduction), you're only paying taxes on $7k of additional income. If you had excess withholding from your W-2 job, that could easily result in a refund.

This is really important! I made the same mistake. Got a refund my first year doing DoorDash because my W-2 job withholding covered everything. Next year I had a $3200 tax bill that completely blindsided me. I use the IRS estimated tax payment system now (Form 1040-ES) and make quarterly payments so I don't get hit with penalties or a huge bill at tax time.

Thanks for this explanation! I definitely have an outdated understanding of how withholding works now. I don't have any side income, but I did receive a small bonus this year that was probably underwitheld like you mentioned. So to fix this for next year, should I just submit a new W4 with some additional withholding amount in section 4(c)? How do I figure out how much extra to withhold?

Yes, submitting a new W4 with an additional amount in section 4(c) is exactly what you should do. To calculate the amount, take the tax you owed this year, divide by the number of pay periods remaining in the year, and enter that amount. For example, if you owed $1200 and get paid twice a month, you'd enter $50 per paycheck ($1200 ÷ 24). For a more precise calculation, use the IRS Tax Withholding Estimator on their website. It'll walk you through your specific situation and recommend the exact amount to put in section 4(c). Just make sure you have your most recent paystub and tax return handy when you use it.

YES! My company's HR actually sent out an email telling everyone to "update your allowances to 0 or 1" last month. I had to awkwardly explain to them that allowances haven't been a thing since 2019. They seemed genuinely surprised.

Did they ask for proof of all your expenses? I've heard they make you send bank statements and bills to prove everything on the 433-F form.

They didn't ask for proof upfront, but they did call me to verify some information. After that call, they requested three months of bank statements and copies of my utility bills and rent agreement. I think they only dig deeper if something looks inconsistent or if the amount you owe is substantial. The key is being honest on the form. If you claim expenses that are significantly higher than what the IRS considers reasonable for your area (they have internal guidelines), that will trigger more scrutiny. I stuck to my actual basic expenses and they approved my CNC status without too much back and forth.

Offers in Compromise can definitely work for offset situations, but they take time to process (6-12 months typically). If you want to stop an imminent offset, you should first request a Collection Due Process hearing to get immediate protection while you prepare your OIC. The success of an OIC depends on your financial situation. The IRS uses a specific formula to determine your "reasonable collection potential." If you can prove you'll never be able to pay the full amount before the collection statute expires (typically 10 years), you have a good chance. Form 656 is used for the offer, along with Form 433-A detailing your financial situation.