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I'm a high school economics teacher and I dedicated two full class periods to teaching students how taxes actually work because it's criminal how little practical knowledge they're given. Made them all calculate taxes on sample incomes and they were shocked at how progressive tax brackets actually work. The best explanation I found was: "If tax brackets are 10% on the first $10k and 15% on income between $10k-$50k, and you make $20k, you pay 10% on the first $10k ($1,000) and 15% on the next $10k ($1,500) for a total of $2,500, not 15% on the full $20k." Simple explanations go a long way.
Can you share any other examples you use? I have a teen who's starting their first job and I want to teach them right from the start.
I use a tax bucket analogy with actual buckets in class. Each bucket represents a tax bracket with its rate written on it. We pour "income water" into the first bucket until it's full, then overflow into the next bucket with a higher rate, and so on. It's very visual and helps them see that only the dollars in each specific bucket get taxed at that rate. For a teen with their first job, I'd focus on explaining the W-4 form and how to calculate their likely tax burden based on their expected annual income. Also explain FICA taxes (Social Security and Medicare), which are flat taxes, versus income tax which is progressive. Most teens are surprised to learn they might not owe any federal income tax if they make under the standard deduction amount, but they'll still see FICA taxes taken out.
I didn't understand the difference between marginal and effective tax rates until my 30s, and I have a college degree! I was literally turning down overtime because I thought it would "push me into a higher bracket" and somehow result in less money. What's worse is my dad, who I thought was financially savvy, reinforced this misconception. "Be careful with raises," he'd say, "sometimes you end up with less money after taxes." Now I try to explain to friends using percentages. If you make $100k and your tax bill is $15k, your effective tax rate is 15%, even though your marginal (highest) rate might be 24%. People seem to understand that better.
You're not alone! I refused a raise for the same reason when I was younger. Such a mistake. I wonder how many people are making career decisions based on tax misconceptions?
3 Just as a heads up, writing a "kind letter" asking the IRS to remove the lien because you've been a good taxpayer isn't going to work. The IRS doesn't have the authority to just forgive tax debt because someone new bought the property. They're bound by specific regulations. Your options are basically: 1. Pay off the lien (probably not feasible at $240k) 2. Apply for a Certificate of Discharge (as others mentioned) 3. Try to negotiate an Offer in Compromise with the IRS (unlikely in your specific situation) 4. Sell the property subject to the lien (which will dramatically reduce what you can get for it
9 Could they also try to get the IRS to subordinate their lien instead of a full discharge? I've heard this can sometimes be easier to get approved if you're planning renovations that will increase the property value.
3 Yes, subordination is another option, particularly if you're planning significant renovations. With subordination, the IRS doesn't remove their lien but agrees to take a secondary position behind another lender. This could allow you to get renovation financing or a new mortgage on the property. For this to work, you'd need to demonstrate that the improvements will increase the property value enough that it ultimately benefits the IRS's position as well. Form 14134 is used for subordination requests. Like with discharge applications, documentation of your renovation plans and projected value increase will be critical.
10 My brother went through this exact situation! The key thing that worked for him was clearly documenting the property's condition with detailed photos and repair estimates. He was able to show that the "as-is" value of the property was much lower than the after-repair value, which helped with the discharge application. Also, definitely work with a tax attorney who specializes in IRS liens rather than trying to handle this yourself. My brother tried the DIY approach first and wasted 3 months before getting professional help. The specialist knew exactly how to structure the application and what supporting documentation would be most compelling.
1 That's really helpful, thanks! Did your brother end up paying anything to the IRS to get the discharge, or were they able to get it completely removed because of the property condition? I'm trying to figure out what this might end up costing me beyond attorney fees.
Does anyone know if the Wage and Income Transcript shows state tax info too? Or is it just federal? I created my account and can see all my federal stuff but nothing for state taxes.
Adding to what the other person said - some states automatically get the federal info and will flag discrepancies if your state return doesn't match what the IRS has. That's how I got caught missing a small 1099 last year. The feds didn't catch it but my state did!
Just a heads up to everyone - make sure you're actually on the real IRS website when setting up ID.me. My brother thought he was creating an account but it was some phishing site. Go directly to IRS.gov and navigate from there rather than clicking links in emails or search results.
This happened to my mom too! She got an email claiming to be from "IRS online services" with a link to "set up your account" and it was totally fake. Always go directly to irs.gov!
Exactly! The official way is to go to IRS.gov and look for "Sign into your Online Account" - anything else might be sketchy. My brother was lucky his credit card company flagged the charges that showed up after he entered his info on the fake site.
Just want to add something important - if you do need to amend because of this Intuit W2 Box 13 error, make sure you use Form 8606 correctly if you had non-deductible IRA contributions. I initially filed with fully deductible IRA contributions, but with the retirement plan box now checked, I could only partially deduct them based on my income. The rest needed to be reported as non-deductible on Form 8606. This is important for your future distributions so you don't get taxed twice on those contributions. This mistake by Intuit is causing so many headaches for people. I wonder if they're going to compensate anyone for the extra tax preparation costs.
Do you know if TurboTax handles this correctly if you need to amend? I used them for my original filing and now need to amend because of this Box 13 issue.
TurboTax does handle this correctly in an amended return, but you need to make sure you enter everything properly. When you start the amendment process, it will ask what's changing. Make sure you select that you're changing information related to IRA contributions. Then when you get to the W2 section, update the box 13 information to show "Retirement plan" is checked. The software should recalculate your IRA deduction and automatically generate Form 8606 for any non-deductible portion. Double-check all the numbers before filing to make sure it caught everything correctly.
Has anybody gotten clarification on whether intuit is paying for the cost of amendments? I had to hire a tax professional to fix my return because of this and it cost me $225 that I definitely wasn't planning to spend. Seems like they should be responsible for their mistake.
Giovanni Moretti
From my experience working with tax issues, you should definitely file a complete and accurate return even if you've already paid some bills. What you received were probably automated notices based on partial information. When you file your complete return, make sure you include a statement explaining that you've already made payments in response to IRS notices. List the notice numbers, dates, and payment amounts. This helps the IRS properly credit your account. Also, keep in mind that for 2021 returns filed in 2025, you're still eligible for any refund due until April 15, 2025 (the three-year statute of limitations for refunds). So if you overpaid, you can still get that money back.
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Carmen Flores
ā¢Thanks for this advice! Should I attach copies of the notices and payment confirmations to my return? And would it be better to file electronically or mail a paper return in my situation?
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Giovanni Moretti
ā¢You don't need to attach copies of the notices to your return, but do keep them for your records. Instead, include a brief statement referencing the notice numbers and payment amounts on a separate sheet if filing by paper, or in the comments section if filing electronically. For your situation, electronic filing is generally better because it processes faster and you'll get confirmation of receipt. However, if your return is very late (which 2021 would be in 2025), some tax software may not support e-filing for prior years, so you might have to mail it. If mailing, definitely use certified mail with return receipt so you have proof of filing.
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Fatima Al-Farsi
One thing nobody mentioned - if you get a refund from your 2021 return after all this, the IRS probably won't pay you interest on it since the late filing was your responsibility. But if you end up owing more, they'll definitely charge interest on the unpaid amount from the original due date. The IRS is generally reasonable about honest mistakes, but they're very strict about deadlines and required filings. I learned this the hard way when I missed filing for 2 years during a rough patch in my life.
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Dylan Cooper
ā¢Actually, the IRS does pay interest on refunds that are issued more than 45 days after the return is filed, even for late-filed returns. The interest rate changes quarterly. It's not a lot, but it's something. I filed my 2019 taxes super late and still got interest on my refund.
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