How would you even check if federal withholding was done correctly? I'm looking at my W-2 and box 2 has federal income tax withheld, but I have no idea if it's the right amount.

You can do a quick check by comparing what was withheld to roughly 12-22% of your income (depending on your tax bracket). But the more accurate way is to run your numbers through a tax calculator or software. Just input your total income, filing status, and deductions - then compare the "federal tax liability" it calculates against what was actually withheld on your W-2. If they're roughly in the same ballpark (within a few hundred dollars), then your federal withholding was probably done correctly. If the withholding is significantly less than your expected liability, then you've got problems on both federal and state levels, which is a much bigger issue.

I looked into this when it happened to me. You probably can sue, but you'd need to prove they were negligent rather than it being a misunderstanding or paperwork error. Did your cousin explicitly fill out state tax withholding forms that were ignored?

He says he definitely filled out all the standard new hire paperwork including state tax forms. He even has copies that he saved. The company apparently just... didn't process them correctly? Or ignored them? Either way they admitted it was their mistake but are refusing to cover any of the penalties.

Does the 25-30% include state taxes too or just federal? I'm trying to figure out exactly how much to set aside each week.

That percentage includes both federal and state taxes for most situations. If you're in a high-tax state like California or New York, you might want to bump it up to 30-35%. I'm in a medium-tax state and 28% has covered me completely. The exact amount depends on your overall income level and tax bracket when combined with any other jobs you have.

I've used both TurboTax Self-Employed and FreeTaxUSA for my delivery gig taxes. TurboTax is more user-friendly and asks specific questions about delivery driving, but it's expensive (around $120-150 for federal and state with self-employment). FreeTaxUSA handles 1099 income well too and costs way less (about $15 for state, federal is free), but you need to know which forms to fill out yourself.

Thanks for the suggestion! I just checked and I'm using the latest version (2024 for tax year 2023), but you might be right about the distribution codes. The 401k to Traditional IRA 1099-R has code "G" in Box 7, but the Traditional to Roth 1099-R has code "2" - does that sound right? Maybe that's where TurboTax is getting confused?

Yes, that actually sounds correct! Code "G" indicates a direct rollover to another qualified plan (your 401k to Traditional IRA), which is non-taxable. Code "2" typically indicates an early distribution, but for IRA to Roth IRA conversions, that's often the code used since technically it's considered a distribution from your Traditional IRA that's then contributed to your Roth. The confusion might be in how you're telling TurboTax about the second transaction. When entering the second 1099-R, make sure you specifically indicate it's a conversion to a Roth IRA rather than just a regular distribution. There should be a specific question or option for this in the interview process. It's easy to miss!

Absolutely right about Form 8606! I did the same kind of conversion last year and initially TurboTax calculated a 10% penalty. I had to go back and specifically indicate it was a Roth conversion to get it to stop applying the penalty. The software doesn't always pick up on this automatically.

Where would I find these centers? Is there a website or something to locate the one nearest to me? This sounds perfect for my budget right now.

You can find your local Small Business Development Center through the SBA website - just search "SBDC near me" and it should pop up. They're usually connected to local colleges or economic development agencies. Most offer free initial consultations where they'll assess your specific needs and then connect you with the right resources. Ask specifically about their accounting workshops - many run monthly QuickBooks or general bookkeeping classes designed for absolute beginners. The SCORE program (also through SBA) can match you with a retired accountant or financial professional who volunteers as a mentor.

$275 monthly seems steep for a startup though... how many transactions do you have? And did you find someone local or use an online service?

The guy is just some local tax preparer - not a CPA or EA as far as I know. He was recommended by a friend who said he "gets great refunds for everyone." Should have been a red flag right there! Do I still use those same forms to report him even if he's not credentialed?

Yes, absolutely use those same forms even though he's not credentialed. The IRS needs to know about all tax preparers who engage in misconduct, regardless of their credentials. Form 14157 is specifically designed to report any tax preparer who violates tax laws or engages in unethical practices. The fact he's known for "getting great refunds for everyone" is definitely concerning and suggests a pattern of improper deductions. Make sure you mention that in your report, as it indicates this may not be an isolated incident. The IRS may look into his other clients' returns if they suspect a pattern of fraudulent activity.

Wait the IRS actually called your brother? I thought they only communicate through mail. Was it legit? I always heard to be super careful about scam calls claiming to be the IRS.