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One thing nobody's mentioned yet - you should check if your employer at least withheld the correct federal income tax. Sometimes when they mess up state withholding, they screw up federal too. If they did withhold federal correctly, you might be able to apply some of your federal refund (if you're getting one) toward your state tax bill. Not all states allow this, but worth looking into. Also, make sure you keep all documentation showing your employer didn't withhold properly. If you end up getting hit with penalties, having this paper trail could help you get them reduced.
How would you even check if federal withholding was done correctly? I'm looking at my W-2 and box 2 has federal income tax withheld, but I have no idea if it's the right amount.
You can do a quick check by comparing what was withheld to roughly 12-22% of your income (depending on your tax bracket). But the more accurate way is to run your numbers through a tax calculator or software. Just input your total income, filing status, and deductions - then compare the "federal tax liability" it calculates against what was actually withheld on your W-2. If they're roughly in the same ballpark (within a few hundred dollars), then your federal withholding was probably done correctly. If the withholding is significantly less than your expected liability, then you've got problems on both federal and state levels, which is a much bigger issue.
Has anyone successfully sued their employer for failing to withhold state taxes? My cousin is going through this exact situation and is considering small claims court for the penalties and interest he's being charged.
I looked into this when it happened to me. You probably can sue, but you'd need to prove they were negligent rather than it being a misunderstanding or paperwork error. Did your cousin explicitly fill out state tax withholding forms that were ignored?
He says he definitely filled out all the standard new hire paperwork including state tax forms. He even has copies that he saved. The company apparently just... didn't process them correctly? Or ignored them? Either way they admitted it was their mistake but are refusing to cover any of the penalties.
Has anyone itemized student loan interest? I paid like $4500 in interest last year and im hoping to get something back for that nightmare.
Student loan interest (up to $2,500) is actually an "above-the-line" deduction, not an itemized deduction. That means you can take it even if you claim the standard deduction! It's directly subtracted from your income before calculating your adjusted gross income.
Don't forget energy efficiency improvements to your home! We got solar panels last year and qualified for a 30% tax credit (not a deduction but even better). Also replaced windows and got another credit. Check out Form 5695 for residential energy credits.
Thanks for mentioning this! We actually did install some energy efficient windows as part of moving in. Do you know if that counts if they were installed by the previous owner right before we bought the place? Or does it only count if we paid for the installation ourselves?
Unfortunately, you only get the credit if you paid for the improvements yourself. If the previous owners installed them, they would get the credit on their tax return. However, now that you own the home, any new energy-efficient improvements you make going forward would qualify for you! The credits are pretty substantial - up to 30% for solar and geothermal, and up to $600 for energy-efficient windows (with a $1,200 annual maximum for most improvements). Might be worth considering additional upgrades this year!
Another option that nobody has mentioned yet is to check if your brokerage offers basis reconstruction services. Fidelity helped me with a similar inheritance issue by researching historical prices based on the date of death. You'll need to provide documentation like the death certificate and proof of the trust distribution, but they can often do the calculation for you. There might be a fee, but in my case it was worth it for the peace of mind.
What if my brokerage is a smaller one that doesn't offer those kinds of services? I'm with a regional firm that's not as full-service as Fidelity or Schwab.
If you're with a smaller brokerage, you still have options. Even if they don't offer formal basis reconstruction services, their customer service might still be able to help you identify the share price on the date of death. If that doesn't work, you can also use resources like Yahoo Finance or Morningstar to look up historical prices for most mutual funds. Just search for SSHFX and find the historical price data for your uncle's date of death. Document how you determined the value (take screenshots), and keep that with your tax records.
Have you considered using the alternative valuation date? IRS rules allow the executor to choose either the date of death OR 6 months after for valuation purposes. Might be worth checking which value was lower if youre trying to minimize capital gains taxes when you sell.
DoorDash driver here for 3 years. The tax situation isn't as scary as people make it sound if you're organized. My advice: 1. Get a mileage tracking app RIGHT NOW (I use Stride) 2. Save 25-30% of everything you make 3. Take pictures of all receipts for hot bags, phone mounts, etc 4. Pay quarterly taxes if you make more than a few thousand Also, your car maintenance costs more than you think! That depreciation hits hard after a year or two of delivery driving.
Does the 25-30% include state taxes too or just federal? I'm trying to figure out exactly how much to set aside each week.
That percentage includes both federal and state taxes for most situations. If you're in a high-tax state like California or New York, you might want to bump it up to 30-35%. I'm in a medium-tax state and 28% has covered me completely. The exact amount depends on your overall income level and tax bracket when combined with any other jobs you have.
Do any of you guys use TurboTax for your delivery gig taxes? Or is there a better option for self-employed people? This will be my first year doing DoorDash and I'm worried about messing it up.
I've used both TurboTax Self-Employed and FreeTaxUSA for my delivery gig taxes. TurboTax is more user-friendly and asks specific questions about delivery driving, but it's expensive (around $120-150 for federal and state with self-employment). FreeTaxUSA handles 1099 income well too and costs way less (about $15 for state, federal is free), but you need to know which forms to fill out yourself.
Freya Andersen
Has anyone tried using a tax professional through Upwork or other freelance platforms? I've been considering this approach since you can see reviews, set up video interviews, and often find qualified people at more reasonable rates than local high-cost firms. Just wondering if there are pitfalls I'm not seeing.
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Omar Zaki
ā¢I tried the Upwork approach last year and had mixed results. Found a CPA with great reviews, but she got totally overwhelmed during tax season and communication suffered. Also, verify their credentials independently - not everyone claiming to be a CPA on those platforms actually is. Check your state's CPA license lookup tool.
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Freya Andersen
ā¢Thank you for sharing your experience. That's a really good point about verification - I hadn't considered that credentials might not be properly vetted on freelance platforms. I'll definitely use my state's CPA license lookup tool if I go this route. The communication issue during busy season is concerning too. Maybe I should look for someone who has a smaller client base or specifically mentions their communication protocols during tax season.
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CosmicCrusader
Don't overlook smaller regional accounting firms that have embraced virtual services. After trying both large chains and independent preparers, I found a medium-sized firm based in Tennessee (I'm in California) that specialized in tech workers and property investors. Because they're located in a lower-cost area, their rates were about 30% less than comparable services in my city. The key is finding firms that explicitly market their virtual services and have experience with clients in tech hubs. They're used to handling RSUs, options and other tech compensation while charging more reasonable rates. The one I use even has a secure portal for document sharing and virtual meetings that's much better than just emailing files back and forth.
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Chloe Robinson
ā¢This sounds promising! How did you find them initially? Was it through a referral or did you search online? I'm wondering what search terms would be most effective to find these types of regional firms with virtual services.
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