Thank you so much for explaining this! I had no idea the IRS already knows about the interest income. If they might adjust it automatically, should I still file an amendment or just wait to see if they send me a notice? I'm using TurboTax if that matters.

I would definitely recommend filing the amendment yourself rather than waiting for the IRS to adjust it. When you handle it proactively, you're in control of the process and can verify everything is correct. If the IRS makes an automatic adjustment, they sometimes include penalties and interest that you might avoid by amending quickly. With TurboTax, it's really easy to amend. Just log into your account, look for the option to amend your return, and follow the prompts to add the 1099-INT. The software will fill out Form 1040-X for you and guide you through the process. It's actually much simpler than most people think, and for a small amount like $87, the additional tax will be minimal.

Good point about the withholding! Also, OP, if this is the first time you've earned bank interest over $10 (the reporting threshold), don't feel bad about not knowing. The tax code is ridiculously complicated and nobody teaches this stuff in school.

I tried looking for that option but couldn't find anything specific about overriding for Roth conversions. Do you remember exactly where in FreeTaxUSA that option appears? I've gone through the 1099-R section multiple times but might be missing something.

After you enter the 1099-R information, FreeTaxUSA should ask you follow-up questions about the distribution. Look for a question that asks something like "What type of account did you roll this distribution into?" or "Did you convert this distribution to a Roth IRA?" If you select the Roth conversion option, it should override the code G treatment. If you can't find it, another approach is on the review screen for the 1099-R. There should be a section showing the taxable amount calculated. There's usually a "This is incorrect" link nearby that lets you override the calculated amount. Click that and enter the full distribution amount as taxable.

I had the opposite experience - TaxSlayer confused me on a similar issue but FreeTaxUSA worked fine. Think it depends which screens you navigate thru. Did you try contacting your pension provider? Sometimes they'll issue a corrected 1099-R if you explain the situation.

Are you absolutely sure about this? I've been contributing to an HSA for years and my accountant never mentioned it reduces SE tax. Seems like this would be common advice if true.

Yes, I'm sure. HSA contributions are one of the few "above-the-line" deductions that reduce self-employment income before SE tax is calculated. It's often overlooked because tax software handles it automatically, and many accountants just focus on the income tax benefits. If you look at Schedule 1, HSA contributions are deducted before arriving at your Adjusted Gross Income. Then on Schedule SE, your net earnings from self-employment are calculated using this adjusted figure, which means HSA contributions directly reduce your SE tax base.

How much did it cost you to set up and maintain the S-Corp? I hear there are annual fees and payroll costs that eat into the tax savings. Is there a rule of thumb for when it's worth it?

Setup was about $500 with my state filing fees, then I pay around $1,200/year for payroll processing and my accountant charges an extra $350 for the S-Corp tax return versus Schedule C. So my annual ongoing cost is roughly $1,550. But I'm saving about $4,200 in SE tax, so I'm still ahead by $2,650 each year. The general rule of thumb I've heard is it makes sense when you're consistently making over $60-70K in net profit. The math works out great at higher income levels but gets questionable below $50K profit because of those fixed costs. And there's definitely more paperwork and deadlines to keep track of - quarterly payroll filings, etc. But my accountant handles most of it.

Hmm that's interesting! So how do I know if my situation counts as "regular business" vs just "other income"? I did babysit for them for about 3 weeks but it was just while their regular childcare was unavailable.

It comes down to whether you're in the "trade or business" of babysitting. If this was a one-off situation where you were helping out a family temporarily with no intention of continuing to offer babysitting services to the general public, you could make a case for "other income." But if you advertise your services, do this for multiple families, or plan to continue babysitting regularly, the IRS would likely consider it self-employment. Since you mentioned it was just for a few weeks during a specific situation, it sounds more like "other income" to me, but this is definitely a gray area where reasonable people disagree.

This is terrible advice. Venmo now reports transactions to the IRS if you receive more than $600 in payments for goods and services. Plus not reporting income is literally tax evasion.

Venmo only reports if you have a business account or mark the payments as goods and services. Regular personal payments aren't reported. And let's be real, the IRS isn't coming after babysitters making a few hundred bucks. They want the big fish.

Thanks for all the great advice everyone! So just to make sure I understand: 1) We won't owe capital gains tax on the co-op sale since we've lived there over 2 years and the profit is well under the $500k married exclusion. 2) The gift from my parents and our gift back to them are separate transactions that may require gift tax forms but probably no actual tax. Does that sound right?

Yes, that's exactly right! You won't owe any capital gains tax on the co-op sale because you meet the primary residence requirements and your gain is well below the $500,000 exclusion for married couples. As for the gifts, they're indeed separate transactions. If any single person gives more than $17,000 to another individual in a year, the giver needs to file Form 709 (Gift Tax Return). But this is just for reporting purposes - no actual tax would be due unless someone has already used up their lifetime gift exemption of over $12 million. For example, if your parents are married and gave you $75,000, they could structure it as each giving $17,000 to both you and your wife ($68,000 total) without even needing to file Form 709, with only $7,000 counting against their lifetime exemption.

Do HOA special assessments count toward basis? Our co-op had a major plumbing project and we paid about $8k in special assessments over the years.