Thanks for the reminder about the Jan 31 deadline! I almost forgot about sending the copies to contractors. Do you know if I email them the forms instead of mailing physical copies, is there any specific format requirement? Like does it need to be a password-protected PDF or anything?

If you email the forms, they should be in a secure format since they contain sensitive information like SSNs or EINs. A password-protected PDF is definitely recommended. Some tax software will handle this automatically and send secure links to contractors. You also need to get consent from contractors before sending their tax forms electronically - this can be as simple as an email where they agree to receive their tax forms by email rather than postal mail. Keep those consent emails in your records in case the IRS ever questions your distribution method.

I tried the FIRE system last year and it was such a headache. The interface feels like it's from 1995 and the whole process was confusing. Maybe it's better now but I found the third-party software options way easier to use.

Is this still true if the payroll service issued the W-2 under their own EIN rather than one they set up for me? I never got an EIN because the service said they'd handle everything.

That's an important distinction. If the payroll service is operating as a Professional Employer Organization (PEO) and issued the W-2 under their own EIN, then they're technically the employer of record, not you. In that case, you might not need Schedule H. Check your service agreement carefully and maybe call the service to confirm. Ask specifically if they're acting as a PEO or if they're just processing payments under your name as the employer. If it's the latter and they're using your SSN or an EIN they set up for you, then you still need Schedule H. The documentation from the service should clarify your specific arrangement.

I used TurboTax last year with a similar setup. It actually handles this pretty well! When you indicate you have household employees, it asks if you used a payroll service. Then it specifically guides you through Schedule H and asks for the amounts already paid. The key is to have your year-end summary from your payroll service ready - you'll need the total wages paid and taxes already remitted.

I tried that route last year. It's not as simple as it sounds. Your employer has to be willing to treat you as a contractor rather than an employee, which many won't do because of the legal distinctions. If they're controlling when and how you work, the IRS could still consider you an employee regardless of the LLC. Plus, you lose benefits, unemployment insurance, and have to pay self-employment tax. The tool deductions weren't worth all the downsides for me.

That's really helpful insight. My employer has been pushing back on the idea anyway, saying something about worker classification issues. From what you're describing, it sounds like it might create more problems than it solves. I might just need to negotiate a higher base pay instead to offset these expenses.

California allows them too! I was able to deduct my tools on my state return even though I couldn't on federal. It's not as good as the federal deduction used to be, but at least it's something. Worth checking your state's rules.

How exactly do I read these transcripts? I just downloaded mine and it's full of codes and dates that make absolutely no sense to me. How do I find what year the debt is from?

Tax transcripts can definitely be confusing! Look for transaction codes (TC) like "420" which means an audit adjustment, "300" series codes which are related to additional assessments, or "480" which indicates an adjustment due to examination. The date listed next to these codes shows when the adjustment was made. The cycle date (usually formatted like 20231405) tells you the processing year and week. You'll also want to look for any codes in the "500" series which indicate that collection activity has occurred.

Yep, happened to me too but with student loans. The worst part was that I thought I was current on payments, but apparently one payment hadn't processed correctly months earlier, which snowballed into a "delinquent" status. Always check your credit report too - sometimes these things show up there before you get official notices.

That's really helpful info about the education credits! Would claiming the American Opportunity Tax Credit require any cooperation from my ex-husband, or could I do that independently since I'm paying all the college costs?

You can claim the American Opportunity Tax Credit independently since you're paying the education expenses, even if you can't claim your son as a dependent. You'll need to use Form 8863 to claim the credit. The credit can be worth up to $2,500 per eligible student, which might actually be more valuable than the dependent exemption itself. You'll need to have the 1098-T form from the college showing tuition paid, and keep records of your payments for other qualified expenses like books and required supplies.

This is correct about the FAFSA changes. I work in college financial aid, and the new FAFSA is focusing on the "provider of more financial support" rather than the residency test. Since you're paying 100% of education costs, you'd likely be considered the supporting parent under the new rules.