Omg I didn't even think about workers comp! Do I calculate that the same way as the other payroll taxes? Is there a standard percentage for bakery workers?

You don't calculate workers comp the same way as payroll taxes. You'll need to contact an insurance provider who offers workers compensation insurance in Illinois. They'll assign classification codes based on the type of work (bakers might be code 9083) and give you a rate per $100 of payroll for each classification. The rates for bakery workers vary widely by state, but in Illinois, you might expect something around $1.50-$3.00 per $100 in payroll, depending on your claims history and other factors. So if you have $10,000 in monthly payroll, you might pay $150-$300 monthly for coverage.

I second this. I messed up some calculations and classified contractors incorrectly. Ended up with huge fines. A payroll service would have been so much cheaper!

Thank you so much! This is exactly what I needed to know. I'll go back and look for that option. Do you remember if it asks for any specific information about the foreign contractor?

It will ask for their name and I believe their country, but not much else. You won't need their tax ID number or anything like that. Just make sure you have good records of the payments in case of an audit - invoice, proof of payment, contract, etc. The key is documenting that the work was legitimate and for your business.

Actually, it depends on the tax treaty status with the specific country. Some countries require withholding regardless of where the work is performed. India (where OP's contractor is located) has specific provisions in its tax treaty with the US.

Does FreeTaxUSA handle other complex situations well? I've got multiple W-2s, 1099s, and some investment income. Been hesitant to switch from H&R Block despite these issues.

In my experience, FreeTaxUSA handles complex returns surprisingly well. I have W-2 income, several 1099-NECs from freelance work, investment income from multiple brokerages, and even some foreign income. It walked me through everything clearly and let me review the actual forms before filing. The biggest difference I noticed is that FreeTaxUSA seems to calculate things more accurately when you have multiple income sources. The Schedule 3 excess Social Security tax was calculated correctly, and it even caught a credit H&R Block missed the year before. The interface isn't as pretty as H&R Block, but the calculations seem more reliable, especially for situations like yours with multiple income sources.

I got an adjustment letter about 6 weeks after filing. They reduced my refund by the exact amount that was incorrectly claimed as excess Social Security tax on Schedule 3, line 15. The letter was pretty clear about what they changed and why. Return was processed normally after that, just with the smaller refund amount.

Does this include prescription medications too? My daughter's rare condition requires specialty meds that cost us almost $400/month even with insurance. We've been using GoFundMe money to help cover that.

Absolutely! Prescription medications are definitely included as qualifying medical expenses. The $400/month you're spending on your daughter's specialty medications counts toward that 7.5% threshold. Also make sure to track any special medical equipment, therapy devices, or home modifications related to her condition. Even things like special air filters if they're prescribed for her condition can qualify. It all adds up, especially with rare conditions where insurance often doesn't cover everything.

The separate account idea is really smart. Did you guys use a special type of account or just a regular savings account? I'm helping my cousin with something similar and we've been mixing the fundraised money with regular funds which is getting confusing for tracking purposes.

Thanks so much for confirming the SECURE 2.0 Act timing. I was hoping there might be some retroactive relief, but that didn't seem likely. We've already taken the missed distribution now and I'm working on the waiver request letter. Do you know if I should mail the Form 5329 and letter separately from our regular tax return, or include it all together?

If you haven't filed your 2022 return yet, include the completed Form 5329 (with "RC WAIVER" written at the top) and your letter with your tax return. If you've already filed your 2022 return, then submit an amended return (Form 1040-X) with the Form 5329 and waiver letter attached. Make sure your letter clearly states that the missed RMD has now been distributed and reported as income for the year it was distributed (likely 2023). The IRS just wants to see that you've corrected the mistake and are taking responsibility. In my 30+ years working with tax issues, I've rarely seen them deny a first-time waiver request when the taxpayer has taken corrective action.

This is good advice! I work for a financial institution (can't say which one) and we help clients with missed RMDs all the time. We have template letters that have been successful with the IRS. Most custodians want to help because it's in everyone's best interest to resolve these issues smoothly.