I checked with HR specifically about the filing status and they confirmed it shows HOH in the system. But the tax exempt thing is interesting - I hadn't thought of that! I'll definitely ask if something got checked wrong during the transition. Thanks for the Form 843 tip. I'm definitely keeping copies of all my emails with HR and the responses from the payroll companies as documentation. Did you need any specific documentation from your employer when you filed that form?

For the Form 843, I included copies of my W-4 showing the correct information, emails with HR where they acknowledged the error, and a short statement explaining the situation. The key is proving it was the employer's error, not yours. The most helpful document was a letter from my HR department acknowledging the mistake in their system. If your employer is cooperative, ask for something similar - a simple statement confirming there was a system error in the payroll transition that affected your withholding despite your W-4 being filled out correctly. That carries a lot of weight with the IRS.

The Earned Income Credit suggestion is good, but be careful - at $59k for HOH, you're probably over the income limit unless your dependent is qualifying for the child tax credit. For 2024 taxes (filing in 2025), the EITC income limit for HOH with one qualifying child is around $53k.

Thank you! I hadn't thought about making estimated payments directly - that's a great idea to handle this myself rather than relying on the employer fix. I'm going to check out the IRS calculator today to see exactly where I stand. And yeah, I'm probably just over the limit for EITC based on what the other commenter said, but I should still get the child tax credit which will help. My daughter is 12 so she definitely qualifies.

Thanks so much for confirming the SECURE 2.0 Act timing. I was hoping there might be some retroactive relief, but that didn't seem likely. We've already taken the missed distribution now and I'm working on the waiver request letter. Do you know if I should mail the Form 5329 and letter separately from our regular tax return, or include it all together?

If you haven't filed your 2022 return yet, include the completed Form 5329 (with "RC WAIVER" written at the top) and your letter with your tax return. If you've already filed your 2022 return, then submit an amended return (Form 1040-X) with the Form 5329 and waiver letter attached. Make sure your letter clearly states that the missed RMD has now been distributed and reported as income for the year it was distributed (likely 2023). The IRS just wants to see that you've corrected the mistake and are taking responsibility. In my 30+ years working with tax issues, I've rarely seen them deny a first-time waiver request when the taxpayer has taken corrective action.

This is good advice! I work for a financial institution (can't say which one) and we help clients with missed RMDs all the time. We have template letters that have been successful with the IRS. Most custodians want to help because it's in everyone's best interest to resolve these issues smoothly.

Can they expand the examination even if you only respond to what they asked for? I've heard horror stories about audits expanding to multiple years after they started looking at just one thing.

Yes, they can potentially expand the examination even if you only respond to what they asked for, but it's much less likely. They typically expand examinations when they find significant discrepancies that suggest similar issues might exist in other years, or if documents you provide reference other potentially problematic items. That said, correspondence examinations (the mail-in kind) rarely expand to full audits or multiple years unless they uncover major issues. The IRS has limited resources and generally focuses on the specific items they initially identified. If you maintain good records and legitimately claimed the deductions in question, even if your documentation isn't perfect, you'll usually be fine.

Thank you! This is super helpful. I'm actually missing receipts for about $1,200 worth of equipment purchases, but I definitely have the credit card statements. I wasn't sure if that would be enough on its own. For the donations, most were to my local animal shelter and a couple larger national organizations. I'll reach out to them ASAP for proper documentation. Do you know if the acknowledgment emails would work as a backup if I can't get the formal letters in time?

Credit card statements are a good start, but try to supplement them with additional evidence of what was purchased and its business purpose. If you have order confirmations, product manuals, photos of the equipment in use for your business, or even detailed notes you made about the purchases, include those as well. Acknowledgment emails can work as acceptable documentation if they contain all the required information: the organization's name, date of donation, amount donated, and a statement that no goods or services were provided in exchange (or their value if you did receive something). If your emails have all this information, they can serve as primary documentation. If they're missing some elements, include them as supporting evidence along with your request for formal letters.

That's interesting - I've heard about this S Corp approach before. At what income level does it generally make sense to make that switch? I'm currently making around $85,000 in profit annually.

The general rule of thumb I've heard from tax professionals is that S Corp election starts making sense financially when your net profit is consistently above $60,000-80,000. At your $85,000 profit level, it could definitely be worth exploring. The main consideration is balancing the additional costs (more complex tax filing, payroll processing, etc.) against the self-employment tax savings. You also need to pay yourself a "reasonable salary" which the IRS expects to be in line with industry standards for your role. The remaining profit can then be taken as distributions without self-employment tax.

This! I made this mistake my first year and ended up with a $550 penalty. Now I use the IRS Form 1040-ES worksheet to calculate my quarterly payments.

Thank you for mentioning this! I just double-checked the 2021 W-2 and you're right - Box 1 does NOT include the repaid amount. It's separate from the W-2 entirely. My husband actually wrote them a check for the repayment since he had already left the company. That's why we need to handle this through the claim of right provision. Seems like Schedule 3, Line 13b is the consensus from everyone here.

That makes perfect sense then. Since the repayment was made directly and not through payroll deduction on the new job, you'll definitely need to use the claim of right provision. Schedule 3, Line 13b with "IRC 1341" notation is exactly right. Just be sure to keep documentation of the repayment (like a copy of the check and any correspondence) in case the IRS ever has questions. They don't require you to submit this documentation with your return, but you should keep it for your records.

There's no minimum threshold for claiming a credit under IRC 1341, but there is a threshold that determines which method you can use. If the repayment was $3,000 or less, you can only take it as an itemized deduction (which may not help if you take the standard deduction). For repayments over $3,000 (like the OP's situation), you can choose either the deduction or the credit approach, whichever benefits you more. So for your $800 repayment, unfortunately you would only be able to claim it as an itemized deduction on Schedule A, which wouldn't help if you're taking the standard deduction.