My friend tried to catch up on his taxes and ended up owing way more in penalties than actual taxes. Is there any way to avoid that or at least reduce those penalties?

How do you get your IRS transcripts? Do you have to call them or can you get them online?

I think my income might be too high for EIC since I made about $43k at my regular job plus around $12k from deliveries. But TurboTax did guide me through a bunch of expense questions like my phone, insulated bags, and even a portion of my car insurance. I hadn't thought about tracking those things during the year but was able to go back and estimate pretty closely.

Your combined income of $55k might still qualify you for some EIC depending on your filing status. For 2022, the income limit for a single parent with one child was around $43k, but for married filing jointly it was higher. Even if you don't qualify for EIC, those business expense deductions you entered likely made a huge difference! Remember that your taxable income from the delivery work is your gross earnings minus all those business expenses. So if you made $12k but had $5k in legitimate business expenses (including that substantial mileage deduction), you're only paying taxes on $7k of additional income. If you had excess withholding from your W-2 job, that could easily result in a refund.

This is really important! I made the same mistake. Got a refund my first year doing DoorDash because my W-2 job withholding covered everything. Next year I had a $3200 tax bill that completely blindsided me. I use the IRS estimated tax payment system now (Form 1040-ES) and make quarterly payments so I don't get hit with penalties or a huge bill at tax time.

Thanks for this explanation! I definitely have an outdated understanding of how withholding works now. I don't have any side income, but I did receive a small bonus this year that was probably underwitheld like you mentioned. So to fix this for next year, should I just submit a new W4 with some additional withholding amount in section 4(c)? How do I figure out how much extra to withhold?

Yes, submitting a new W4 with an additional amount in section 4(c) is exactly what you should do. To calculate the amount, take the tax you owed this year, divide by the number of pay periods remaining in the year, and enter that amount. For example, if you owed $1200 and get paid twice a month, you'd enter $50 per paycheck ($1200 ÷ 24). For a more precise calculation, use the IRS Tax Withholding Estimator on their website. It'll walk you through your specific situation and recommend the exact amount to put in section 4(c). Just make sure you have your most recent paystub and tax return handy when you use it.

YES! My company's HR actually sent out an email telling everyone to "update your allowances to 0 or 1" last month. I had to awkwardly explain to them that allowances haven't been a thing since 2019. They seemed genuinely surprised.

Did they ask for proof of all your expenses? I've heard they make you send bank statements and bills to prove everything on the 433-F form.

They didn't ask for proof upfront, but they did call me to verify some information. After that call, they requested three months of bank statements and copies of my utility bills and rent agreement. I think they only dig deeper if something looks inconsistent or if the amount you owe is substantial. The key is being honest on the form. If you claim expenses that are significantly higher than what the IRS considers reasonable for your area (they have internal guidelines), that will trigger more scrutiny. I stuck to my actual basic expenses and they approved my CNC status without too much back and forth.

Offers in Compromise can definitely work for offset situations, but they take time to process (6-12 months typically). If you want to stop an imminent offset, you should first request a Collection Due Process hearing to get immediate protection while you prepare your OIC. The success of an OIC depends on your financial situation. The IRS uses a specific formula to determine your "reasonable collection potential." If you can prove you'll never be able to pay the full amount before the collection statute expires (typically 10 years), you have a good chance. Form 656 is used for the offer, along with Form 433-A detailing your financial situation.

Oh wow, I hadn't even considered local taxes! I know I'll be working in Chicago for about a month - does anyone know if they have special local tax requirements? This is getting more complicated than I expected.

Chicago doesn't have a city income tax like some other major cities, so you're safe there. You'll just need to deal with Illinois state income tax for the period you're working in Chicago. However, if your contract takes you to New York City, Philadelphia, San Francisco, or certain cities in Ohio or Michigan (among others), you'll need to account for local income taxes as well. It's definitely worth researching each location before you go. Some cities have very low thresholds - Philadelphia, for instance, starts taxing non-residents from day one of working there.

The fees vary wildly by state. When I registered my LLC in Nevada, Colorado and Texas last year, the initial registration fees were around $150-200 per state. But then many states also have annual report fees or franchise taxes. California is notoriously expensive with their $800 minimum franchise tax regardless of whether you make any money there.