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Just a reminder that if you're going to amend your 2020 return, make sure the business expenses you're adding are legitimately deductible. The IRS has been increasing scrutiny on Schedule C deductions lately, especially for tax years 2019-2021 because of all the COVID relief programs. Things like home office deductions, vehicle expenses, and meals/entertainment are particular audit triggers if they seem disproportionate to your business income. Not saying don't claim what you're entitled to - just make sure you have good documentation to back it up!
That's a good point! All of these expenses are legitimate photography equipment (new lenses, lighting, a laptop used only for editing) and documented travel to shooting locations. My business income that year was around $36,000 so the $7,800 in additional expenses isn't out of proportion. Do you think that's going to raise any red flags?
Those expenses sound reasonable given your business type and income level. Photography equipment is clearly a necessary business expense, and as long as your travel was primarily for business purposes and you have documentation (like client contracts showing shoots on those dates), you should be fine. The $7,800 compared to $36,000 in income is a perfectly reasonable ratio for a photography business, which typically has higher equipment costs. Just make sure to categorize everything correctly on your Schedule C - put the equipment under "Equipment" not "Supplies" if it's over $2,500 per item and will last more than a year (might need to be depreciated rather than fully expensed, depending on whether you took Section 179 or bonus depreciation).
Has anyone here experienced an adjustment to their refund amount when amending? I filed an amended return for 2020 because I forgot some 1099 income (opposite problem from OP) and the IRS ended up changing the amount I calculated. Just wondering if this is common.
Have you double-checked your withholding status? When you had a baby, did you update your W-4 with your employer? A lot of people don't realize that having a child doesn't automatically change your withholding - you need to submit a new W-4 form to your employer. Also, with the bonus repayment situation, there's a specific way this should be handled for tax purposes. If the bonus was paid in the current tax year and repaid in the same year, the W-2 should simply not include that amount. If it was paid in a previous year and repaid this year, there are special rules under Section 1341 of the tax code.
You know what, I didn't update my W-4 after having the baby! I just assumed the child tax credit would be applied when filing, didn't realize I needed to adjust my withholding throughout the year. The bonus was both paid and repaid in the same tax year (2024), so it sounds like it should have been completely excluded from my W-2 rather than shown as a deduction?
Exactly right! The child tax credit is applied when filing, but updating your W-4 would have reduced your withholding throughout the year, giving you more in each paycheck instead of waiting for a refund. Many people prefer this approach rather than giving the government an interest-free loan. For the bonus that was paid and repaid in the same tax year, yes - it should have been completely excluded from your W-2 as if it never happened. It shouldn't appear as income and then be offset by a deduction. This could definitely be causing part of your tax issue. I'd suggest asking your payroll department specifically about this - whether they excluded the bonus amount completely from your taxable wages or if they included it in income and then added a deduction. The former is correct; the latter could be causing your tax problem.
Don't forget to look at state taxes too! I had a similar issue last year where my federal W-2 was correct but my state withholding was way off. It's worth adding up your state withholding from each paystub separately.
5 Quick question - I'm in a similar situation but my missing W2 is from 2020, not 2021. Am I completely out of luck for fixing this? I think I read somewhere there's a 3-year limit on amendments?
8 You're right about the 3-year limit, but you're still within the window for 2020! The deadline for filing amendments to claim a refund is 3 years from the original due date of the return. For 2020 tax returns, the original filing deadline was May 17, 2021 (it was extended that year due to COVID). That means you have until May 17, 2024 to file an amended return and claim any additional refund. So you should act quickly, but you definitely still have time to file that amendment.
5 Thank you so much for clarifying this! I was worried I'd missed my window completely. I'll get on this amendment right away before the May deadline hits. Really appreciate the help!
23 Does anyone know if the IRS will contact you if they notice a missing W2? I'm asking because I just got a letter saying I underreported income, but I thought I included everything on my 2022 return.
10 Yes, the IRS definitely will send you a notice if they identify underreported income. They run an automated matching program where they compare the income reported on your tax return against what was reported to them by employers, banks, etc. The letter you received is probably a CP2000 Notice, which is not an audit but a proposed adjustment to your tax return based on this information matching.
Pro tip: If you're getting stuck in the TurboTax interface, try switching browsers or using incognito mode. I had this exact same issue where direct deposit and payment plan options weren't showing up. Turns out my browser extensions were interfering with some elements on the page. Switched to Edge (which I never use) and suddenly all payment options appeared!
Really? What browser extensions would cause that? I'm using Chrome with adblock and a few others. Could that be why I'm only seeing credit card options too?
I think it was my ad blocker causing the issue. It was blocking some elements on the TurboTax payment page. I'm not 100% sure which extension was the culprit, but when I tried in Edge with no extensions, everything loaded properly. Another possibility is to try clearing your cache and cookies for the TurboTax site. Sometimes data from previous sessions can cause weird display issues.
Has anyone tried calling TurboTax support directly? I had this problem and called them - turns out there's a glitch in their system that sometimes doesn't display all payment options depending on how you answer previous questions in the tax interview. The rep had me go back and change my answer to the question about "how do you plan to pay your taxes" much earlier in the process, then the direct payment option finally showed up.
Mei Liu
Something critical that hasn't been mentioned yet - you might need to file an FBAR (Report of Foreign Bank and Financial Accounts) if you have any financial interest in foreign accounts that exceed $10,000 at any point during the year. This includes accounts where you're considered to have signature authority. If you're considered to have an interest in your grandfather's business accounts (which sounds possible given your arrangement), you might need to file this form. The penalties for not filing can be really severe - like $10,000+ for non-willful violations.
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Ethan Brown
ā¢Wait, this sounds serious. I don't have signature authority on any accounts in Ecuador, but since I'm sending money and receiving profits, could that count as having a "financial interest"? How would I know if I need to file this FBAR thing?
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Mei Liu
ā¢The definition of "financial interest" can be broad. If you have an arrangement where you're entitled to profits from the business, the IRS might consider you to have a financial interest in the accounts, even without signature authority. The safest approach would be to consult with a tax professional who specializes in international reporting. But generally, if you're investing in a business and receiving returns based on performance, you likely have a financial interest. If the total of all foreign accounts you have an interest in exceeds $10,000 at any point in the year, you'd need to file the FBAR. You might also need to look into Form 8938 (Statement of Specified Foreign Financial Assets) depending on the amounts involved. These are separate from your tax return and have different filing requirements and deadlines.
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Liam O'Sullivan
Curious if anyone knows - would it be better for the grandpa to just label all the money as "gifts" instead of business returns? Wouldn't that avoid all these tax issues?
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Yuki Yamamoto
ā¢That approach could create more problems than it solves. The IRS looks at the substance of transactions, not just what you call them. If there's a pattern of you investing money and then receiving returns that correlate with business performance, relabeling them as "gifts" could be seen as tax evasion. While non-US persons can give gifts to US citizens without triggering gift tax for the recipient, unusual patterns of large gifts might trigger extra scrutiny. If audited, you'd need to prove these were genuine gifts with no expectation of return, which contradicts the investment arrangement described.
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