


Ask the community...
One important tip: when you request the First Time Abatement, be very specific about which penalty you want abated. The IRS might have charged both a late filing penalty AND a late payment penalty. Make sure your request addresses all penalties you were charged. Also, keep records of everything! Document when you called, who you spoke with, and what was said. If you send a letter, use certified mail so you have proof of delivery.
Thanks for this advice! Looking at my notice now, I think there might actually be both types of penalties. Would I be eligible for FTA on both the late filing and late payment penalties? Or just one of them?
You can absolutely request First Time Abatement for both penalties! The FTA can cover failure-to-file, failure-to-pay, and failure-to-deposit penalties. Just make sure to specify in your request that you're asking for abatement of all penalties assessed for that tax year. Many people don't realize that multiple penalties can be covered under a single FTA request, as long as they're all for the same tax period. The important thing is to clearly identify all the penalty types in your request so nothing gets overlooked.
Has anyone used the IRS online account portal to request penalty abatement? I've heard mixed things about whether this is possible or if phone/mail are the only options.
Another approach is to estimate based on your major purchases. I usually focus only on items over $100 purchased online without sales tax. For everything else, I take the safe harbor amount. No state tax auditor is going to come after you for a few dollars difference in use tax, they're looking for people who buy $5,000 artwork or expensive jewelry out of state to avoid taxes.
Does Etsy charge sales tax? I buy a lot of stuff from small creators there and never really paid attention to whether tax was included.
Etsy began automatically collecting and remitting sales tax in most states starting around 2019, but implementation rolled out gradually. For current purchases, they should be collecting the appropriate sales tax based on your delivery address. If you're calculating use tax for previous years, you'd need to check your receipts. Prior to their automated system, it depended on whether the individual seller collected sales tax, which varied widely. Small sellers below certain thresholds weren't always required to collect tax in all states.
Don't forget that use tax isn't just for online purchases. If you physically traveled to another state, bought something, and brought it back to your home state to use, you technically owe use tax on that too if you didn't pay sales tax equal to your home state's rate.
Wait really? So if I went on vacation to Oregon (which has no sales tax) and bought a laptop there, I'd owe use tax in my home state when I got back?
Just adding another perspective - I've used both FreeTaxUSA and TurboTax. FreeTaxUSA is definitely better value for the money, especially for straightforward tax situations with W-2s. However, if you have complex investments, rental properties, or self-employment income, TurboTax might offer more guidance. But you're paying a premium for that hand-holding. FreeTaxUSA has all the same forms, just less fancy packaging.
Would you recommend FreeTaxUSA for someone with W-2s plus some stock sales? I have 3 W-2s and sold some stocks this year, and I'm trying to decide which software to use.
FreeTaxUSA handles stock sales just fine. You can enter all your stock transactions manually or import them using a CSV file. I've done both W-2s and basic investment income (dividends and capital gains) without any issues. For multiple W-2s plus some stock sales, I'd definitely recommend saving your money and using FreeTaxUSA instead of TurboTax. The interface for entering capital gains/losses is straightforward, and they provide good explanations of how to report everything correctly.
Dont forget to check if you qualify for the IRS Free File program before paying anything! If your AGI is under $73,000 you can use several services completely free including state filing.
This is good advice, but it's worth noting that FreeTaxUSA federal filing is free regardless of income, unlike TurboTax which limits their free version to very simple returns. You only pay for state filing ($15ish) with FreeTaxUSA.
4 I filed 1099-NECs late twice over the years. First time was about 2 weeks late for 3 contractors and never got any penalty. Second time was almost 2 months late for 5 contractors and got hit with a $250 penalty. Based on my experience and talking with other small business owners, they seem to be more lenient if: 1) You're only a little late (under 30 days) 2) You have just a few forms 3) It's your first late filing Since you're only a week late with just two forms, I'd be surprised if they penalize you. But no guarantees - the IRS can be inconsistent.
15 What if the contractors already filed their taxes using the 1099 information I gave them directly? Does that reduce the chance of penalties since the income was properly reported?
4 That's definitely a point in your favor. If the contractors reported the income correctly on their returns, the IRS got the tax revenue they were due. The purpose of the 1099 system is ultimately to ensure income gets reported. However, technically the filing requirement is separate from whether the income was reported correctly. The IRS wants the official forms filed on time regardless. But practically speaking, if there was no tax loss to the government because your contractors properly reported their income, the IRS has less incentive to pursue penalties.
22 For next year, set a reminder in your phone RIGHT NOW for January 10th. That way you'll have plenty of time to get the forms ready. Also, most payroll or accounting software can generate and file these automatically if you've been tracking payments correctly throughout the year. I use QuickBooks and it basically does everything for me - just have to review and approve.
1 Thanks for the tip! Just set reminders in my phone and calendar. Do you know if Wave accounting has this capability too? That's what I'm currently using to track everything.
CyberSiren
My neighbor is a retired IRS agent and she told me that estimated tax penalties are calculated per QUARTER, not just annually. So if you made one big payment at the end, you could still get hit with penalties for the earlier quarters. There's a special test called the "safe harbor" provision. If you paid either 90% of this year's tax or 100% of last year's tax (110% if your AGI was over $150k) through timely estimated payments, you won't get penalties. Maybe check if you met one of these tests?
0 coins
Miguel Alvarez
ā¢Is that safe harbor thing calculated for the whole year or for each quarter separately? I always thought I just had to hit 100% of last year's taxes by the end of the year.
0 coins
Zainab Yusuf
This same thing happened to me! Check if your state has residency requirements for tax purposes. I moved mid-year and had to pay estimated taxes to TWO states because of their different rules. The CP30 was because the IRS thought I underpaid federally, but it was actually because I was paying to multiple state tax authorities and messed up the allocation. Call the IRS (good luck lol) and explain. They removed my penalty after I explained and sent proof of my state tax payments showing i was actually in compliance with the quarterly requirements when you look at the whole picture.
0 coins