Is this something I could do myself or would I need my CPA to handle it? And do you know how long the process typically takes? I'm worried about interest continuing to build while I wait for a decision.

You can certainly do it yourself using the IRS's Form 656 Booklet which includes instructions, but having your CPA help might increase your chances of success since they understand what the IRS is looking for in terms of documentation and financial hardship proof. The process typically takes 6-12 months for the IRS to evaluate and make a decision. Interest and penalties do continue to accrue during this time, which is a downside. However, if you're approved, those additional amounts would be included in the settlement. If you're rejected, you'd still have the option to set up a payment plan for the full amount. Many people start with a payment plan and then apply for an Offer in Compromise if they realize they truly can't manage the payments.

Don't forget about the Qualified Business Income deduction (Section 199A)! For most freelancers, you can deduct up to 20% of your net business income. Saved me thousands last year.

That's a really good point - I did buy this van new for around $67,000 last year. Maybe I entered the purchase price somewhere I shouldn't have and then the software added depreciation or something on top of it? I'm going to go back and look for that. Maybe it's also accounting for future depreciation in some weird way? Thanks for the suggestion!

You're welcome! Yeah, that's almost certainly what happened. The purchase price should only be entered in the asset/depreciation section, not as a direct expense. The software will then calculate the correct amount you can deduct each year based on depreciation rules. If you bought a $67k van, the software is probably trying to depreciate it plus adding your maintenance costs plus calculating mileage. Triple counting! Once you fix where you entered the purchase price, everything should look more normal.

Is that 65.5 cents still accurate for 2024 taxes? I thought I saw somewhere that the IRS changed the rate again.

Would the IRS actually know when I "discovered" the error though? Like if I file the amendment in a month, couldn't I just say I discovered it then? Not trying to be deceptive, just wondering how they determine when you knew about a mistake.

Technically the IRS doesn't know when you discovered the error unless there's some obvious paper trail (like they sent you a notice about it). However, I always advise being honest because if you ever did face an audit or review, lying about when you discovered an error could significantly compound your problems. In practice, filing an amendment within 1-2 months is generally considered prompt enough that the timing wouldn't be questioned. The IRS is primarily concerned with willful, long-term neglect - like someone discovering an error and waiting a year or more to correct it. Your scenario of waiting a few weeks for your refund before filing the amendment is completely reasonable.

That's surprising, I thought the IRS computer systems would be smart enough to connect an amendment with the original return! Thanks for sharing - definitely reinforces the idea of waiting for the refund first.

Does the IRS Free File Fillable Forms have any income limits? I make around $85k and often get locked out of the "free" options.

The Free File Fillable Forms have no income limits at all - they're available to everyone regardless of income. That's different from the IRS Free File Program partners (like TurboTax Free File, etc.) which typically have a $73,000 income limit. The trade-off is that Fillable Forms provide no guidance or calculations - you're basically just filling in digital versions of the paper forms. You need to know which forms to complete and how to do the calculations yourself. Form 8880 for the Retirement Savings Credit isn't terribly complicated though, especially if you're just claiming for yourself and spouse.

The 2023 income limits are actually a bit higher now: $73,000 for married filing jointly and $36,500 for singles (full phase-out points). But yes, checking if you're truly eligible is important!

But what if you really need that money in the meantime? Not everyone can afford to overpay by 20%. Wouldn't it be better to try to get it right?

That's a totally valid point. It really depends on your financial situation. If cash flow is tight, then absolutely try to be more precise with your estimate. Use your previous year's return as a guide and adjust for any major changes in income or deductions. For those who can swing it though, overpaying provides a stress-free extension. Another approach is to aim for that 90% threshold mentioned earlier - pay enough to cover 90% of your expected tax, which should protect you from the more significant penalties. Either way, the key is making a reasonable effort to estimate correctly based on the information you have at the time.

This is so important! I made this mistake with California taxes and ended up with penalties. Does anyone know a good resource that breaks down the requirements by state?