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One thing to consider is that your paycheck might have had other irregular factors that affected withholding. Did you get any bonuses or commission in that paycheck with zero federal tax? Sometimes those can be taxed differently and mess up the calculations. Also, if your pay periods aren't consistent (like if you get paid bi-weekly vs. semi-monthly), that can sometimes cause weird withholding amounts. I'd wait to see what happens with your next normal paycheck before making changes. If it shows zero federal withholding again, then definitely update your W-4 with additional withholding.
From what you described, you need to adjust your W-4 ASAP. With a $72k salary and a non-working spouse, even with two dependents, you'll definitely owe federal taxes. The Child Tax Credit helps but doesn't eliminate your tax liability. I'd recommend adding a fixed dollar amount to line 4(c) on a new W-4. For your income level, probably around $150-200 per paycheck would be appropriate. You could also check the box for "higher tax rates" in step 2 if you want to be extra cautious. The worst thing is to reach April 2025 and suddenly owe thousands in taxes plus potential underpayment penalties.
Don't forget about the Earned Income Credit if your income is within the limits. With two qualifying children and your income level, you might be eligible. The income limits for 2024 are higher than last year. Also, you definitely need to look into the Child Tax Credit. For 2024, it's worth up to $2,000 per qualifying child under 17. Since you had the kids for more nights, you have a strong case to claim this.
Do I still qualify for child tax credits if my income was around $80k total (including the contractor work)? I thought there were phaseouts.
Yes, you should still qualify. The Child Tax Credit begins to phase out at $200,000 for single filers and $400,000 for married filing jointly. With your total income around $80k, you're well below those thresholds, so you should be eligible for the full amount for each qualifying child. The Earned Income Credit has lower income limits, so you'd need to check those specifically based on your filing status and number of qualifying children. But the Child Tax Credit should definitely be available to you based on the income information you've shared.
Just wanted to add something about the contractor income - make sure you're tracking EVERYTHING for next year. I got audited because of my side gig and it was a nightmare. Get a separate credit card for business expenses, take photos of receipts with your phone, and log your mileage with an app. And definitely make quarterlys next year! The penalty isn't usually huge but why pay extra if you don't have to?
What app do you use for mileage? I've been trying to keep track on a notepad but I always forget.
I use MileIQ and it's been a lifesaver. It automatically tracks all your drives and then you just swipe right for business or left for personal. Super easy and creates IRS-ready reports. Some people also like Everlance or Stride. Another tip: set calendar reminders for quarterly tax payments (April 15, June 15, September 15, and January 15). The IRS doesn't send reminders and it's easy to forget, especially that weird June one that's only two months after April!
3 When I was in a similar situation, I asked my preparer to walk me through each deduction and credit they were claiming. If they can't explain in plain English why you qualify for something, that's a huge red flag. A good preparer should be happy to educate you, not just expect blind trust. For what it's worth, some legitimate tax situations CAN result in unusually large refunds (first-time homebuyer credits, education credits, missed stimulus payments, earned income credit if your situation changed, etc). But you deserve to understand exactly where that money is coming from.
17 This is actually great advice. How detailed should their explanation be? My preparer just keeps saying "trust me, I know what I'm doing" without giving specifics.
3 They should be able to point to specific IRS rules or forms that apply to your situation. For instance, if they're claiming business expenses, they should explain which expenses qualify and how they determined the amounts. If they're claiming credits, they should walk you through the eligibility requirements and confirm you meet them. A good preparer will show you where on your tax documents (W-2s, 1099s, etc.) they're getting figures from, and explain any calculations. Vague answers or dismissing your questions with "trust me" is definitely concerning. Tax preparation isn't magic - it follows specific rules that can be explained clearly.
14 You don't need a reason to switch tax preparers! It's YOUR money and YOUR tax liability on the line. A $45k refund does sound suspiciously high unless you had some unusual circumstances this year (sold a business, major life changes, etc.). What tax software or service does she use? I switched from one major company to another last year and noticed a HUGE difference in how they approached deductions.
20 I'm not sure what software she uses, I just know she has her own office with her name on the door. Does the type of software make that big a difference in the final refund amount?
Just an FYI - if you're a non-citizen without a Social Security Number, you'll need to apply for an ITIN (Individual Taxpayer Identification Number) using Form W-7. That becomes your TIN for tax purposes. The process can take several weeks so plan ahead if this applies to you!
Do you know if you can apply for an ITIN online? Or do you have to mail in the physical form? I'm helping my cousin who just moved here and needs to get one.
Unfortunately, you cannot apply for an ITIN completely online. The IRS requires you to either mail in a physical Form W-7 along with original documents (like a passport) or certified copies, or visit an IRS Taxpayer Assistance Center or authorized Acceptance Agent in person. For your cousin, the easiest option might be to find an authorized Acceptance Agent - they can verify the original documents in person so your cousin doesn't have to mail in her actual passport. Many accounting firms and some tax preparation services are authorized agents. The IRS website has a tool to find agents near you.
Just wanted to add that if you're filling out a W-9 for a client or company you're doing freelance work for, that's where they typically ask for your TIN. And yes, for individual contractors, your SSN is your TIN. I got confused about this my first year freelancing lol.
Isaiah Cross
I think everyone's overcomplicating this. The question is simple - did you file Articles of Organization with your state? If yes, you formed an LLC, which means BOIR filing is required. If you never filed anything with the state and are just using a business name, that's a sole proprietorship. Check your state's business entity search portal - just Google "[your state] business entity search" and type in your business name. It will show what type of entity you registered.
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Alice Pierce
ā¢Thanks for this tip! I just looked up my businesses on my state's portal and they're definitely LLCs. I guess I need to do the BOIR filing after all. Do you know if there's any easy way to complete it without hiring someone? I have 3 properties/LLCs so it seems like it could get expensive fast.
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Isaiah Cross
ā¢The BOIR filing isn't too complicated if you're a single-member LLC. You'll need to create an account on FinCEN's BOI E-Filing System, and then provide basic information about yourself as the beneficial owner (name, address, ID number) and your company (legal name, address, formation info). Since you're both the company applicant (person who formed the LLC) and the beneficial owner (person who owns/controls it), it's pretty straightforward. If you have all your formation documents handy, you can probably complete all three filings in 1-2 hours. Much cheaper than paying someone hundreds of dollars per LLC!
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Kiara Greene
Just FYI for everyone - the BOIR deadline for existing companies is January 1, 2025. If your LLCs were created before January 1, 2024, that's your deadline. If they were created during 2024, you have 90 days from formation date. Don't stress too much, but don't wait until the last minute either!
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Evelyn Kelly
ā¢Do you happen to know what the penalties are if you miss the deadline? I have a bunch of single member LLCs and I'm traveling until mid-January.
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Kiara Greene
ā¢The penalties can be pretty severe - civil penalties up to $500 per day for violations, and criminal penalties up to $10,000 and/or imprisonment up to 2 years for willful violations. But I wouldn't stress too much about your mid-January return if you're making a good faith effort to comply. Government agencies rarely begin aggressive enforcement immediately after a new filing requirement. That said, you should probably at least create your FinCEN account before you leave and maybe start gathering the information you'll need.
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