22 That's smart! Do you think it would be helpful to highlight the important numbers on each page too, or would that annoy a professional?

11 I'd avoid highlighting since different tax professionals look for different things on each page. The paperclip method works well because it organizes without obscuring any information. If you want to go the extra mile, make a simple cover sheet listing what types of investments you had (stocks, dividends, crypto, etc.) and on which pages they can be found. My tax person said this was extremely helpful and saved them time, which ultimately saved me money since many charge by the hour.

19 Definitely bring the previous year if you had any investment losses! I forgot mine and had to reschedule my appointment. My tax guy needed to check for capital loss carryovers from the previous year to offset some of my gains. Apparently you can carry losses forward for years.

Do you need to make quarterly payments for side hustle income? I heard somewhere that you need to if you'll owe more than $1,000 at tax time, but not sure if that's true.

Yes, that $1,000 threshold is correct. If you expect to owe more than $1,000 in taxes when you file your return, you should make quarterly estimated tax payments to avoid an underpayment penalty. For side hustles, a good rule of thumb is to set aside about 30% of your profit for taxes (covers both income tax and self-employment tax for most people). You can use Form 1040-ES to calculate and pay your quarterly taxes. The due dates are April 15, June 15, September 15, and January 15 of the following year. Better to start paying quarterly now than get hit with a big bill plus penalties!

Thanks for the tip about the separate account! That actually makes a lot of sense. Do you have a recommendation for a good expense tracking app that's simple to use? I'm not the most tech-savvy person tbh.

I use QuickBooks Self-Employed and it's pretty straightforward even for non-tech people. It links to your bank accounts and credit cards, then lets you swipe expenses left or right to categorize them as business or personal. The basic version is like $7/month which is totally worth it for the headache it saves. If you want something free, even the basic version of Mint can work if you create tags for your different side hustles. But honestly, whatever you choose, the most important thing is consistency - spend 5 minutes every few days categorizing transactions while they're fresh in your memory!

From what I understand, there's no statute of limitations on the 6% excess contribution penalty. It continues to apply each year until you either withdraw the excess contribution or use up unused contribution room in a later year (if you start having earned income again). The sooner you fix it, the fewer years you'll pay the penalty. For a 2020 excess contribution that's still in the account, they'd potentially owe the 6% penalty for 2020, 2021, 2022, 2023, and 2024 by now.

Thanks for the info. That's really helpful. So basically they're accumulating a 6% penalty every single year this isn't fixed? That definitely means we need to address this ASAP rather than ignore it. Would they need to file amended returns for all those previous years to pay the penalties, or is there some streamlined process for handling this?

Did you have to create a whole new tax return just to file the 5329? Or is there a way to file just that form by itself? I don't want to redo my entire 2022 return just to add this form.

I just tried this and it says I'm almost perfectly on track for my withholding! According to the estimator, I'll get a small refund of about $120 if nothing changes with my income for the rest of the year. That's honestly a relief. Thanks for the suggestion - this was super helpful and easy to use. I've bookmarked it to check again if my income changes!

That's actually a really bad financial strategy. You could be putting that extra money into a high-yield savings account or investing it throughout the year. Even a basic savings account is paying 3-4% interest right now. Why give up that free money?

I like the partnership idea. We did something similar where we created a family LLC that held various family assets including some promissory notes. By careful allocation of the LLC interests and distribution provisions, we were able to effectively redirect income within the family while maintaining appropriate legal and tax structures.