Thank you so much for these specific suggestions! I never thought to check my email archives but I just did a quick search and found at least 15 receipts for art supplies I'd completely forgotten about. Found records of my Procreate purchase, Clip Studio subscription, and even some drawing tablet accessories. Do you think PayPal's reports will show both my income AND my business expenses if I purchased them through PayPal? Or do I need to sort that out separately?

PayPal reports will show all your transactions, but they won't distinguish between personal and business expenses automatically. You'll need to go through and identify which purchases were for your illustration work. Your PayPal 1099 only reports your income received through PayPal, not your expenses. I'd recommend downloading your PayPal transaction history for the full year and sorting it in a spreadsheet. Look for payments to art supply stores, software companies, and other business-related vendors. Flag those as potential deductions, then verify with any email receipts you can find to confirm the purpose of each purchase.

Exactly this! I wasn't just hit with the taxes I owed but also a 25% failure-to-file penalty PLUS interest that kept growing. The IRS is actually pretty reasonable if you file on time and work with them, even if you can't pay right away. It's when you don't file that they get aggressive.

Wait seriously? So even if I only make like $200 from dog walking, I still need to report it? Does that mean I need all those complicated self employment forms too or just report it as extra income somewhere? This is exactly the kind of detail that confuses me.

Yes, you still need to report it, but it's not as complicated as it sounds. You'll need to fill out a Schedule C to report your business income and expenses, but it's pretty straightforward for a simple side gig like dog walking. You won't need to pay the self-employment tax (the Social Security and Medicare portion) if your net profit is under $400, but you'll still include that income on your regular 1040 form and potentially pay income tax on it depending on your overall tax situation. Many tax software programs will walk you through this pretty easily.

What kind of expenses can I actually deduct? I do graphic design from my apartment. Can I deduct part of my rent? Internet? My computer? How do you calculate all that?

Does the first-time penalty abatement apply to ALL penalties or just certain ones? I'm not sure if substantial understatement penalties qualify since they seem more serious than like a late filing penalty.

First-time penalty abatement typically applies to failure-to-file, failure-to-pay, and failure-to-deposit penalties. Unfortunately, accuracy-related penalties like the substantial understatement penalty generally don't qualify for FTA. For substantial understatement penalties, you'll need to focus on reasonable cause arguments instead. This is because these penalties are considered more serious since they relate to the accuracy of what you reported, not just when you filed or paid. Your best bet is still gathering evidence of good faith efforts to comply, any professional advice you relied on, or circumstances that affected your ability to accurately report income.

I hired a tax attorney for a $9,000 penalty issue last year. Cost me about $2,500, but they got the penalty reduced by 75%, so definitely worth it in my case. They knew exactly what documentation to gather and how to present it to the IRS in the most favorable light.

What happens if you pay points but then refinance after a few years? Do you lose the remaining deduction or can you still claim what's left?

If you refinance, any unamortized points from your original loan (points you were deducting over the life of the loan) become deductible in the year you refinance. Essentially, you get to take the remaining deduction all at once. For example, if you paid $3,000 in points on a 30-year loan and refinanced after 5 years, you would have already deducted $500 (5 years' worth). When you refinance, you can deduct the remaining $2,500 in the year of refinancing. Then any points paid on your new refinanced loan would follow the regular rules for deducting points.

That's such a good point! Do you just need to keep your closing statement as proof of these costs? I'm worried about keeping track of everything for that many years.

I actually live alone and don't have any shared accounts with family members. I've never even had a family phone plan - always just had my own individual account. That's what makes this so confusing. There's literally no legitimate reason I should be seeing this charge.

In that case, it definitely sounds like fraud. One other possibility - did you recently buy anything online where you paid through PayPal or another payment service? Sometimes the merchant will process the main payment through the service but charge taxes separately directly to the card.

This is exactly what happened to my sister. Small weird tax charge, then boom - two weeks later her card was maxed out with purchases from electronics stores across the country. Definitely get a new card number ASAP.

Thank you both for the warnings. I just got off the phone with my credit card company and they're sending me a new card with a different number. They're also refunding the charge after I explained the situation. Going to check my credit reports right now.