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OP, I worked as a tax professional for 12 years, and I can tell you with certainty: file that 2018 return! The volunteer preparers are confusing two different concepts: 1. The IRS typically has 3 years to AUDIT a return after filing 2. The IRS has 10 years to COLLECT tax debt after assessment But neither of these timelines even START until you actually file! By not filing, you're leaving yourself vulnerable indefinitely. Additionally, penalties and interest continue to accrue on unfiled returns where tax is owed.
Thanks for the clear explanation! This makes a lot more sense than what the volunteers told me. Do you know if filing the 2018 return now will hurt my OIC chances for 2017? Like, will adding more debt make them less likely to approve it?
Filing your 2018 return now won't hurt your OIC chances - in fact, it's absolutely required. When you submit an OIC, the IRS will check that you're in compliance with all filing requirements before they even consider your offer. As for the additional debt potentially affecting your offer amount, it could be factored into your "reasonable collection potential" calculation. However, this is much better than having your OIC rejected outright due to non-compliance. The IRS looks at your overall ability to pay, so while the total debt matters, your financial situation is the primary factor in determining an acceptable offer amount.
I'm confused about something - isn't there a deadline to claim refunds too? Like if OP was owed money instead of owing, wouldn't there be a 3-year limit to claim that refund?
Just an important note: if you're adjusting your withholding to have less taken out, make sure you're setting aside that extra money somewhere! I did this last year thinking "I'll just pay what I owe in April" but then spent the extra money and got hit with a $3800 tax bill I wasn't prepared for. Either build up savings throughout the year or make estimated quarterly payments to avoid a nasty surprise.
You can make estimated quarterly tax payments using Form 1040-ES. The easiest way is to use the IRS Direct Pay system on their website - just select "estimated tax payment" as the reason. You don't need to create an account, and you can pay directly from your bank account. The due dates are typically April 15, June 15, September 15, and January 15 (of the following year), though they can shift slightly if those dates fall on weekends or holidays.
Has anyone actually gotten in trouble with the IRS for adjusting their withholding too much? Im thinking of claiming 3 dependents even tho i dont have any just to get more money in my checks but worried about penalties??
This is definitely not recommended. The W-4 form contains a clear statement that you sign under penalty of perjury. Intentionally claiming dependents you don't have could be considered tax fraud. Instead, use the proper methods on the W-4 form to adjust your withholding. The "Additional withholding" line in Step 4(c) allows you to specify a negative amount that reduces your withholding without falsely claiming dependents. Much safer approach!
Double-check your pay stub to see if they're withholding for benefits you didn't sign up for. When I started my job, they automatically enrolled me in all their optional insurance plans (dental, vision, life, disability) PLUS the highest 401k contribution. My first paycheck was tiny! Had to go to HR to fix it all.
Oh that's a good point I didn't even consider! I did sign up for health insurance and the 401k match program, but there might be other stuff I didn't catch. I'll definitely check this on my next stub and talk to HR if anything looks fishy. Is there a standard percentage I should expect to see for all deductions combined? It just seems like a huge chunk of my paycheck is disappearing.
There's no standard percentage since it really depends on your specific benefits and choices. Health insurance can be anywhere from $50 to $500+ per paycheck depending on the plan and if you're covering family members. 401k could be 3-15% of your income depending on what you selected. Look at your pay stub line by line - the withholding amounts should be clearly labeled. Pay special attention to anything marked as "optional" or any insurance codes you don't recognize. Sometimes there are benefit programs you can opt out of if you don't need them.
Something that throws a lot of people off is that your first couple paychecks often have higher withholding percentages! The payroll system calculates as if you'll earn that same amount for the whole year, so if you start mid-year, it's withholding at a higher rate than necessary. It usually evens out after 2-3 pay periods.
This is exactly what happened to me! First paycheck was super low, but by the third one things normalized. Payroll systems are weird.
This is really helpful to know - I didn't realize the withholding would adjust over time. I'll keep an eye on my next couple of paychecks before panicking more. Thanks for explaining this!
One thing nobody's mentioned - keep track of ALL YOUR EXPENSES that might be tax-related! I learned this the hard way. If you're a regular W-2 employee (like at a store or restaurant) it's pretty simple, but if you do ANY side work or freelancing, keep receipts for EVERYTHING related to that work. Apps, supplies, mileage, part of your phone bill, internet, etc. Also, if you're in school, keep records of tuition and books! There are education credits that can save you $$.
When I was 20 I thought getting a big tax refund was awesome... until my econ professor explained I was just giving the govt an interest-free loan all year lol. If u get a huge refund, consider adjusting ur W-4 withholding so u get more $$ in each paycheck instead of waiting for a refund. Its YOUR money!
This is actually really bad advice. Most ppl aren't disciplined enough to save that extra money each paycheck. Getting a refund is forced savings for a lot of people. If your getting the money in small amounts each check, lots of ppl just spend it without noticing. I purposely have extra withheld so I get a big refund every year. Use it to pay down debt or take a vacation. Different strategy works for different folks.
Omar Farouk
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.
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Omar Farouk
ā¢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.
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Omar Farouk
ā¢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.
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Omar Farouk
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.
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Omar Farouk
ā¢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?
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