I didn't even think about that! Do I need to be making quarterly payments on freelance income going forward? How do I figure out how much to pay?

Yes, if you expect to owe $1,000 or more in taxes at filing time, you should be making quarterly estimated payments. The easiest way to calculate is to take about 30% of your freelance income (that covers both income tax and self-employment tax for most people) and pay that amount quarterly. You can make these payments online through the IRS Direct Pay system or through the EFTPS (Electronic Federal Tax Payment System). There's also Form 1040-ES which has worksheets to calculate a more precise amount if you want to be more accurate. Setting aside money from each freelance payment into a separate savings account specifically for taxes is also a good habit to start.

This is super important! I once amended my federal return but forgot to do my state amendment. Ended up getting a notice with penalties a year later. Each state has different forms for amendments - some call it a "corrected return" instead.

No penalty if the IRS owes YOU money! But your cousin only has 3 years to claim that refund or she loses it forever. So she has until April 2027 to file her 2023 return and get that money back. The IRS is totally happy to keep your refund if you don't ask for it back in time!

She did start college in fall 2023, so this is really good to know. We paid about $3,500 out of pocket after her scholarships. I'll make sure we look into that credit when filing her prior year tax return. Thank you!

That's really good advice. I think I have most of my contribution records in old emails, but should I also request official documentation from my financial institution to be safe?

Absolutely get official documentation if you can. Year-end statements are great because they often summarize annual contributions. Some institutions also provide specific tax forms or contribution confirmations. If they offer any kind of contribution history report, definitely request that. Email confirmations are good supplementary evidence, but official statements directly from the institution carry more weight if there's ever a question. The more documentation you have, the better, especially for older contributions that might be harder to verify years later.

I tried that with Vanguard last year and they refused to change the code. They said their policy is to use code 1 for all early distributions and it's up to the taxpayer to claim any exceptions on their tax return. Super annoying but apparently common practice.

That's really good advice! Would you recommend asking them any specific questions to gauge their knowledge about medical deductions? I wouldn't even know how to tell if they're giving me good answers since I don't know much about this stuff myself.

Ask them specifically about the 7.5% AGI threshold for medical expenses and how they would help determine if you should itemize. A knowledgeable preparer will explain that medical expenses are only deductible for the amount exceeding 7.5% of your adjusted gross income, and they'll want to know if you have other potential deductions that could make itemizing worthwhile. You could also ask what types of medical expenses are deductible that people commonly miss. They should mention things like mileage to medical appointments, lodging while receiving medical care away from home, home modifications for medical purposes, or certain insurance premiums. If they only mention obvious things like doctor bills, they might not have specialized knowledge.

Thats true, my local HR Block has an enrolled agent who specializes in medical deductions. Shes way better than the seasonal people they hire and not much more expensive. I've used her for 3 years now.

Isn't setting up a 501(c) really expensive and complicated though? I heard you need lawyers and stuff.

It's not as bad as people think. For a small organization, filing for 501(c)(3) status using Form 1023-EZ is relatively straightforward if your annual gross receipts are under $50,000. The filing fee is around $275. You don't necessarily need lawyers, though having someone with experience look over your application can help. There are also online services that guide you through the process for a few hundred dollars. The main requirements are having proper bylaws, a board structure, and clear charitable purpose. Once established, annual maintenance is just filing a simple Form 990-N if you stay under the $50,000 threshold.

This is actually what we do for our school's charity auction. People make checks directly to the charity, and we just collect them. Simplifies everything tax-wise.