Is this still true if the payroll service issued the W-2 under their own EIN rather than one they set up for me? I never got an EIN because the service said they'd handle everything.

That's an important distinction. If the payroll service is operating as a Professional Employer Organization (PEO) and issued the W-2 under their own EIN, then they're technically the employer of record, not you. In that case, you might not need Schedule H. Check your service agreement carefully and maybe call the service to confirm. Ask specifically if they're acting as a PEO or if they're just processing payments under your name as the employer. If it's the latter and they're using your SSN or an EIN they set up for you, then you still need Schedule H. The documentation from the service should clarify your specific arrangement.

I used TurboTax last year with a similar setup. It actually handles this pretty well! When you indicate you have household employees, it asks if you used a payroll service. Then it specifically guides you through Schedule H and asks for the amounts already paid. The key is to have your year-end summary from your payroll service ready - you'll need the total wages paid and taxes already remitted.

Because the IRS doesn't know whether your distribution is contributions, conversions, or earnings without you telling them. That's what Form 8606 does - it helps you calculate and show which part of your distribution is taxable. Without it, they'd have to assume the worst (that it's all earnings).

I haven't received any letters yet. I've claimed both kids for the past 3 years, so it's not a new situation. Their mom and I have a formal agreement about who claims which child each year, so there shouldn't be any conflict there. Should I still be checking for mail from the IRS, or would they have contacted me by now if that was the issue?

If you've claimed the same children for multiple years without issues, it's less likely to be a verification problem. However, the IRS sometimes sends letters requesting information 4-6 weeks after filing, so it could still arrive. Mail from the IRS can also sometimes look like regular mail or get lost, so it's always good to check carefully. But honestly, at this point it sounds more like normal processing delays rather than an information request problem. The IRS processing times really have been significantly longer this year for returns with dependents.

The PATH Act is still in effect, but since the original poster filed on March 5th, that wouldn't be causing their delay. The PATH Act prevents the IRS from issuing refunds before mid-February for returns claiming EITC or the Additional Child Tax Credit, but once we're past that date, it shouldn't be a factor anymore.

Thanks for clarifying! I wasn't sure if they had extended those delays or if it was still just the mid-February cutoff. Makes sense that it wouldn't affect March filers.

We actually checked their credit report last week and there's nothing on it about tax liens. Does that mean the debt might be too old to collect? They haven't had any credit cards or loans during this period either, so the report is basically empty.

That's actually a potentially good sign. The IRS stopped putting tax liens on credit reports for the most part after 2018, but if this debt was active and being pursued aggressively before then, you might have expected to see something. The empty credit report aligns with their "off the grid" lifestyle, which ironically might have worked in their favor regarding the statute of limitations. However, this is still not conclusive evidence - they need to get their tax transcripts to know for certain what debts might still be collectible.

This isn't entirely accurate. If they haven't filed returns for those years, they won't meet the "return filed at least 2 years ago" requirement. The IRS also sometimes files "Substitute for Returns" which don't count as taxpayer-filed returns for bankruptcy purposes. They would need to file proper returns first.

You're absolutely right about the return filing requirement - I should have been more clear. If your friend hasn't filed returns for those tax years, they would need to file them first and then wait two years before the taxes would be eligible for discharge in bankruptcy. The Substitute for Return point is also important. If the IRS filed these on your friend's behalf, they don't count toward making the tax dischargeable - your friend would need to file their own returns to replace these.

Is there any protection for whistleblowers in cases like this? I'm worried the owner would know exactly who reported him.

The IRS treats whistleblower reports as confidential and won't disclose your identity during their investigation. That said, if you're in a small business where you're the only one who knows certain details, the owner might figure it out anyway. That's why I suggested documenting your concerns in an email first and looking for another job before filing. This creates both a paper trail showing you tried to address it internally and gives you an exit strategy. The Form 3949-A can be filed anonymously if you want, though providing your contact info can help if they need clarification on anything.

Form SS-8 (Determination of Worker Status) can be filed by either the worker or the business, but in practice, it's usually filed by workers who believe they've been misclassified. As a manager without ownership, I wouldn't recommend you file these on behalf of others. If workers file SS-8 forms and the IRS determines they were misclassified, the business will need to pay both the employer and employee portions of FICA taxes (the employees can file Form 8919 to only pay their portion of FICA instead of self-employment tax).