Thanks for pointing this out! Yes, we are both claiming the credits separately based on our individual self-employment incomes. My wife's income is higher than mine, so her credits are calculating higher too. Do you know if we need any specific documentation to prove we were caring for our kids during those days? I'm worried about potential audit flags since this is making such a big difference in our taxes.

You should definitely keep documentation showing that your children's schools or care facilities were closed during the periods you're claiming. Things like emails from the school about closures, announcements from the daycare, or any formal communications about COVID-related shutdowns. Also maintain a calendar or log showing which days you had to reduce work hours to provide care. Note the days you would normally have worked but couldn't due to childcare responsibilities. And keep records of your normal work schedule pre-COVID to establish your baseline. If possible, document how your business income was affected - comparing earnings or billings from similar periods before the pandemic might help demonstrate the impact. The more documentation you have connecting the care needs to your reduced work hours, the better position you'll be in if questioned.

I had the same experience! TurboTax gave me a much smaller credit than FreeTaxUSA. My accountant explained that some software was more aggressive in their interpretations of the rules while others were more conservative. He recommended documenting everything carefully in case of an audit, regardless of which calculation you go with.

This actually has me worried now. We have a few people who work pretty regularly for us but we've always considered them contractors. Is there a simple test to determine if someone should get a W-2 vs a 1099-NEC?

The IRS looks at three main categories: Behavioral Control (do you control how they work?), Financial Control (do they have opportunity for profit/loss?), and Relationship Type (written contracts, benefits, permanency of relationship). A good rule of thumb is if you control WHEN and HOW someone does their work, provide their tools/equipment, and they work exclusively for you over a long period, they're more likely to be classified as an employee. If they control their own schedule, use their own methods/equipment, and work for multiple clients, they're more likely to properly be classified as a contractor.

I used TaxBandits last year and it was pretty straightforward. The interface is a bit dated but they have good customer service. One tip - they charge per form, so double check your forms before submitting since corrections cost extra.

I did track some miles but honestly not consistently. I remember putting in something like 4,000 miles but I was driving a lot more than that. Probably closer to 18,000 miles for Lyft that year. I think you're right that this might be a big part of the problem.

That would definitely explain a large portion of the deficiency! At 56 cents per mile in 2021, the difference between claiming 4,000 miles versus 18,000 miles is about $7,840 in additional deductions. Depending on your tax bracket, that alone could account for $1,700-$2,700 in tax differences.

This happened to me! I reported all my Uber income but completely missed the Schedule SE part. Ended up with a $7k notice a year later. I recommend getting a tax transcript from the IRS website to see exactly what they have on file versus what you submitted.

Thanks for confirming my suspicion! I used the calculator and it's showing we might be slightly underwithholding overall. Is it better to adjust both our W-4s slightly or just have one of us make a bigger adjustment? Does it matter which approach we take?

Either approach works from a tax perspective - the IRS doesn't care which spouse has the withholding as long as your household total is correct. For simplicity, I'd recommend just having one person make the adjustment - usually the higher earner or whoever has the more stable income. Remember that if your incomes are fairly high, the "married" withholding tables assume that one spouse might not work, so with two similar high incomes, you might need more withholding than the standard tables suggest. The calculator should account for this, but it's always good to recheck your withholdings around June each year to make sure you're on track.

Is this still the best approach with the redesigned W-4? I thought the new form was supposed to fix these issues with the two-earner worksheet?

Should people proactively contact their benefits offices about potential discrepancies, or just wait to see if they get flagged?

Generally, it's better to wait until you're contacted unless you realize you've made a significant error that would affect your eligibility. The verification systems are designed to filter out minor discrepancies, and proactively contacting benefits offices often just creates confusion when there might not be an issue. If you do discover you've made a major reporting error that would affect your eligibility, then yes, you should contact the appropriate office to correct it. But for small differences in how income is categorized or reported, the cross-referencing systems typically have thresholds for what triggers a review.

From what I've read, it includes pretty much all federal benefit programs - Social Security, Medicare, Medicaid, SNAP, Housing assistance, veterans benefits, etc. But the focus is primarily on programs where eligibility is tied to income levels.