This is terrible advice. My cousin did exactly this for years with his landscaping side gig and got absolutely hammered with back taxes, penalties and interest when they finally caught him. Ended up owing more than triple what he would have if he'd just reported it properly.

That's actually a terrible idea. Intentionally underreporting some income while reporting other income demonstrates knowledge and intent, which can bump you from the "negligence" penalty category (20%) to the "fraud" category (75%). It shows you knew you should report the income but deliberately chose not to report all of it. If you're going to report some, you should report all of it. Partial compliance often looks worse than simple "forgetting" because it proves you knew the rules but chose to break them anyway.

I got through last Thursday but only after calling literally 12 times. Each time it hung up on me but on the 13th try I got in the queue. Then waited 1 hour 47 minutes to speak to someone. The trick seems to be to keep calling back repeatedly and eventually you'll get lucky and get in the queue instead of getting the "we're too busy" message.

Thanks for the tip! I'll try the persistence approach tomorrow morning. 12 attempts sounds painful but I guess it's worth it if it eventually works. Did you select any specific options in the phone menu that seemed to help get you through?

That's interesting - I did start my taxes in TurboTax but then switched to FreeTaxUSA because it was cheaper. I didn't complete or submit anything in TurboTax though, just started inputting some basic info. Could TurboTax have somehow submitted something without me finalizing it??

It's unlikely TurboTax would submit without you finalizing, but not impossible if there was a glitch. Check your TurboTax account to see if there's any record of a submission. Also, if you used the same email for both tax services, check your email carefully for any confirmation messages that might indicate something was filed. Another possibility: if you had a tax preparer do your taxes last year, sometimes they automatically file extensions for all their clients as a courtesy. Maybe someone filed an extension for you without informing you? Worth checking if that could have happened.

The biggest shock for me was realizing that when you're self-employed, you pay BOTH halves of FICA (Social Security and Medicare). As an employee, your employer pays half and you pay half, but self-employed folks pay the whole 15.3%. Then on top of that, you're still paying regular income tax! What helped me was setting aside 30% of every payment I receive for taxes. It sounds high but it's better than being surprised with a huge bill at tax time.

That makes so much sense! No wonder I've been getting hit so hard. I was only setting aside about 15% thinking that would cover it. Guess I need to bump that up to 30%.

Did you have to do anything special to add that explanation letter when e-filing? Or did you just mail it separately?

I e-filed my return and then mailed the explanation letter separately with a cover page that had my name, social security number, and tax year clearly marked. I included a brief note stating it was supplemental documentation for my already-filed return. If you're using FreeTaxUSA like you mentioned, they also have a section where you can add notes or explanations directly in your e-filed return, which might be sufficient without needing to mail anything separately.

The federal threshold for 2023 was actually supposed to be $600, but the IRS delayed implementation and kept it at $20,000 and 200 transactions. But some companies might have already updated their systems for the $600 threshold before the IRS announced the delay.

Thanks for bringing this up! I did check with my parents and they're not claiming me anymore since I've been fully supporting myself since graduation. But that's definitely something I wouldn't have thought about before reading your comment. How do you know whether someone can claim you as a dependent? Is there like an age cutoff or income limit?

There's actually a few tests the IRS uses. For a "qualifying child" dependent, you need to be under 19 (or under 24 if you're a student) and live with your parents for more than half the year. There's also a support test - if you provided more than half of your own financial support during the year, then your parents can't claim you, regardless of age or living situation. Since you mentioned you've been fully supporting yourself, you're definitely not a dependent anymore. It's definitely something that causes confusion that first year of independence! Glad you already sorted it out with your parents.

This is the best advice here. When I was a new grad, I missed out on the American Opportunity Credit my first year because I didn't realize I could claim it for my final semester. That was literally $1,500 down the drain! Also check if your state has additional credits. In California, I got a renter's credit that most of my friends didn't know about.

Thanks for this! I was in school for the spring semester before graduating in May, so I'll definitely look into the American Opportunity Credit. I had no idea there was a difference between credits and deductions until reading these comments. Do software programs like TurboTax automatically check for these credits, or do I need to specifically know to look for them? I'm worried about missing something important now.