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.

This is great advice. Last year I had correct federal withholding but the state withholding column on my W-2 was completely wrong. Turns out my employer had been withholding for the wrong state for three months after I moved! Double-check everything, especially if you've had any life changes.

That's painfully accurate! My personal favorite is "Why is the 1040-EZ form 36 pages long? NOTHING about taxes is EZ!

Hahaha that one hits too close to home! I've been sending that exact meme to everyone. My other favorite is the one with the dog sitting in the burning room saying "This is fine" but photoshopped with tax forms all around 😂

YES! I literally learned about quarterly estimated payments from a meme that was like "When you realize April, June, September and January are actually quarterly" with a shocked face. My accountant was impressed I even knew about them for my side gig.

Thank you so much for mentioning the Fresh Start Program. I had no idea that existed. Do you think I should try to figure out which years I actually need to file before contacting them? Or should I just reach out and see what they say I need to do?

I'd recommend getting an understanding of your situation first before contacting them about Fresh Start. Request your tax transcripts for the past 6-10 years - this will show what income information the IRS already has on file for you. That way you'll be prepared for the conversation. As for which years to file, generally focus on the last 6 years as a priority. For years where your income was below the filing threshold (around $12,950 for 2022 as a single filer, but it varies by year and filing status), you might not technically be required to file - but there could be exceptions if you were self-employed or had certain other situations.

This is actually a really good point about refunds! When I finally caught up on my taxes, I was shocked to find out I was owed money for some years. But yeah, I lost out on the older refunds, which still hurts to think about.

Do you know if I could pay just enough to get under the $10k threshold and then set up a payment plan for the remainder to avoid the lien? Would that work?

Yes, that strategy can work! If you can pay enough to get your balance under $10,000 before you set up the installment agreement, you'll significantly reduce the chances of the IRS filing a lien. In your case, since you owe about $12k, you could pay around $2-3k upfront and then immediately request an installment agreement for the remaining balance. Make sure to get confirmation that the payment has been applied before you request the installment agreement. This approach isn't guaranteed to prevent a lien in all cases, but it follows their general guidelines and works in many situations.

Yes, you can absolutely still request penalty abatement even after receiving a CP504! The First Time Abatement (FTA) program applies regardless of what stage of collections you're in, as long as you meet the criteria: good compliance history (no significant penalties) for the three tax years prior to the year you received penalties. You'll want to call the IRS or include Form 843 with your request. I've seen numerous clients successfully get penalties removed even after receiving CP504 notices. Just make sure to address the underlying tax debt too, either by paying it or setting up an installment agreement.

Can you explain more about how you track your mileage? I've been using a paper logbook but it's getting to be a pain. Is there an app you recommend that's IRS-compliant?

I use MileIQ for tracking all my business drives. It runs in the background on my phone and automatically detects when I'm driving. At the end of each trip, I just swipe right for business or left for personal. It creates IRS-compliant reports with timestamps, routes, mileage, and purpose fields. Before that, I tried Everlance and Stride, which are also good options. The key is finding one that's automatic enough that you'll actually use it consistently. The IRS wants to see regular documentation throughout the year, not something you created all at once at tax time. Whatever system you choose, make sure it captures date, starting point, destination, purpose of trip, and miles driven.

That sounds terrifying. Did you have to pay penalties or just the additional tax? I'm wondering how aggressive they are with these vehicle deduction issues.