This is a great question and totally understandable confusion! As others have mentioned, the difference between Box 1 and Box 5 is usually due to pre-tax deductions. Since you mentioned this is the first year you've seen this difference, it sounds like you may have started or increased contributions to things like a 401(k), health insurance, or flexible spending account. To verify everything is correct, I'd recommend checking your final paystub from December 2024. Look for any "pre-tax" deductions and add them up - that total should roughly match the $5,800 difference between your boxes. Common culprits are: - Traditional 401(k) contributions (very common if you got a raise and decided to save more) - Health/dental/vision insurance premiums - Flexible Spending Account (FSA) or Health Savings Account (HSA) contributions - Dependent care assistance If the math doesn't add up or you can't find deductions that explain the difference, then it would be worth contacting HR. But in most cases, this difference is completely normal and actually beneficial since those pre-tax deductions reduce your federal income tax liability!

I just wanted to add that this exact scenario happened to me two years ago when I started contributing to an HSA for the first time. The $3,000 annual HSA contribution I made showed up as the difference between Box 1 and Box 5, and I panicked thinking my employer made an error. What helped me understand it was realizing that HSA contributions are "triple tax advantaged" - they reduce your federal income tax (hence lower Box 1), but you still pay Medicare tax on that income (hence it stays in Box 5). Same principle applies to traditional 401(k) contributions and most other pre-tax benefits. If you started any new benefits this year or increased existing contributions, that's almost certainly what you're seeing. The good news is this difference typically means you're saving money on your federal taxes! Just double-check your final paystub to make sure the pre-tax deductions add up to roughly that $5,800 difference.

I'm dealing with this exact same issue! My withholding dropped from about $8,200 last year to just $4,800 this year, even though my salary only went up slightly. I was completely panicked when I noticed it because like you, I haven't changed anything on my W-4. After reading through all these responses, it sounds like this is a widespread problem with the new withholding tables. I used the IRS withholding estimator that someone mentioned, and it's showing I'll likely owe around $2,800 when I file. What's really frustrating is that my employer never sent out any communication about these changes. I only discovered it by accident when I was comparing my year-end tax documents. I'm definitely going to contact HR tomorrow to update my W-4 and probably make an estimated payment to avoid penalties. Thanks everyone for sharing your experiences - at least now I know I'm not the only one dealing with this mess!

This is such a relief to find this thread! I've been losing sleep over this exact issue. My withholding went from about $11,200 last year to only $6,800 this year, and I thought I was going crazy because I know I didn't change anything. What's really concerning me is that I'm already in December, so there aren't many pay periods left to fix this through increased withholding. Based on what everyone is saying about making estimated payments, I think that's probably my best option at this point. Does anyone know if there's a deadline for making estimated tax payments to avoid penalties? And should I be calculating this based on what I owed last year or what I expect to owe this year? I'm worried about getting hit with both a big tax bill AND penalty fees on top of it. I'm also definitely going to check out some of the tools people mentioned here. It sounds like the IRS withholding estimator is a good starting point, but I might need something more detailed given how messed up my situation is right now.

This is incredibly helpful information! As someone dealing with this exact situation for the first time, I'm grateful for all the detailed responses here. One follow-up question - I've seen some conflicting information about whether a foreign-owned single-member LLC with NO activity during the tax year still needs to file Form 5472. My LLC was formed late in the year but had zero income, expenses, or transactions. Do I still need to file both forms even with zero activity? Also, for those who have filed these forms multiple times - is there a good system for keeping track of what needs to be reported on Form 5472 throughout the year? I want to make sure I don't miss any reportable transactions going forward. The penalty amounts mentioned here are definitely motivating me to get this right the first time!

As someone who just went through this process for my foreign-owned SMLLC, I wanted to add a few practical tips that might help: 1) **Double-check your mailing address** - Form 5472 and the pro forma Form 1120 need to go to a specific IRS processing center, not your local IRS office. The address depends on where your LLC is located, so make sure you're using the correct one from the Form 5472 instructions. 2) **Keep detailed records of your mailing** - I sent mine via USPS Priority Mail Express with tracking and signature confirmation. Cost about $30 but gave me peace of mind. The IRS processing centers can be slow to acknowledge receipt, so having proof of delivery is crucial. 3) **Consider filing an extension if you're cutting it close** - You can file Form 7004 to get an automatic 6-month extension for Form 1120 (which extends Form 5472 as well). This buys you time to get everything right rather than rushing and making mistakes. The learning curve is steep, but once you understand the requirements, it becomes more manageable. The key is not letting the complexity intimidate you into missing deadlines - those penalties are no joke!

One thing I haven't seen mentioned yet is the importance of understanding marketplace facilitator laws. If you're selling on platforms like Etsy, Amazon Handmade, or even Facebook Marketplace, many states now require these platforms to collect and remit sales tax on your behalf for sales in their state. This means you DON'T collect sales tax on those transactions - the platform handles it. But you still need to track these sales for income tax purposes and make sure you're not double-collecting tax on marketplace sales while also collecting it on direct sales through your own website. I learned this the hard way when I was collecting sales tax on my Etsy sales AND Etsy was also collecting it. Had to refund a bunch of customers and file amended returns. Most platforms will provide you with annual tax documents showing what taxes they collected on your behalf. The flip side is that if you're selling the same items both through marketplaces AND directly to customers, you need to be super organized about which sales channels require you to handle tax collection versus which ones handle it for you. It's definitely worth setting up your bookkeeping system to track sales by channel from day one.

As a newer artist who just went through this process myself, I wanted to share a few practical steps that helped me get started without feeling completely overwhelmed. First, don't try to tackle everything at once! I made the mistake of researching sales tax rules for every possible state before I even had my first sale. Start with your home state registration - that's your immediate priority since you definitely have nexus there. For tracking early sales, I recommend keeping it simple with a basic spreadsheet that includes: sale date, customer state, sale amount, tax rate applied, and tax collected. You can always upgrade to fancier software later, but this gets you started without monthly subscription costs. One thing that really helped me was joining my state's small business development center (SBDC) workshops. Most are free and they often have sessions specifically about sales tax for small businesses. The instructors can answer state-specific questions that generic online advice can't address. Also, don't be afraid to start small and local while you figure things out. I began by only accepting orders from customers in my state and nearby states where I felt confident about the tax rules. As I got more comfortable with the process, I expanded to other locations. The learning curve is real, but you're asking the right questions now instead of trying to figure it out after problems arise. That puts you ahead of where I was when I started!

I'm currently a senior accounting major who went through this same struggle two years ago! The VITA certification system issues are incredibly frustrating, especially when you're eager to get started. Here's what I learned from my experience: The IRS typically shuts down the Link & Learn system for updates between May and late August, so if you're trying to access it during summer months, that's likely your issue. The system usually comes back online with updated materials for the new tax year in early September. In the meantime, I'd strongly recommend reaching out to your university's accounting department or student organizations. Many schools have established relationships with local VITA sites and can help connect you directly with coordinators who can provide access to training materials and let you know exactly when certification testing will be available. Also, don't underestimate the value of getting involved with a VITA site even before you're certified. Many sites welcome volunteers to help with intake and basic administrative tasks while you're working toward certification. This gives you exposure to the process and helps you build relationships that will be valuable once you do get certified. The experience is absolutely worth the hassle - I've used my VITA volunteer work in every job interview since, and employers are always impressed by the practical tax preparation experience. Hang in there!

As a tax professional who coordinates VITA training at several universities, I want to add some perspective on timing and expectations. The Link & Learn system downtime between May-August is actually beneficial - it gives the IRS time to incorporate new tax law changes and update materials for the upcoming filing season. Here's my recommended timeline for accounting students: - July-August: Research local VITA sites and contact coordinators to express interest - September: Access should be restored to Link & Learn with updated materials - October-November: Complete certification training and testing - December-January: Complete any additional site-specific training - February-April: Active volunteer season One thing I haven't seen mentioned is that many VITA sites prefer volunteers who can commit to the full season rather than just getting certified. When you contact sites, emphasize your commitment to volunteering through April, not just getting the certification. Also, consider pursuing the Advanced certification if you can - it opens up opportunities to prepare more complex returns and often leads to better networking opportunities with local CPAs and tax professionals who supervise VITA sites. The practical experience you'll gain is invaluable. I regularly have accounting firms contact me looking for students with VITA experience because they know these students have real-world tax prep skills, not just textbook knowledge.