You might want to request a Wage and Income Transcript from the IRS for the year they think you claimed the credit. It should show all forms filed under your SSN that year, including a Form 5405 if one was actually filed. If no 5405 appears on your transcript, that's your proof one wasn't filed. Also request your Account Transcript which shows any credits applied. If the credit appears there but no corresponding 5405 on your Wage and Income Transcript, that helps demonstrate the error. Lastly, if you still have your tax return from that year (or can get a Return Transcript), that would show you didn't claim the credit on your actual filed return.

Thanks for these suggestions. I hadn't thought about using the absence of forms as proof! I just checked and I can get my transcripts online through the IRS website. I'll request both the Wage and Income and the Account transcripts to see what they show. I definitely don't have my actual tax return from 2008 anymore, but hopefully the transcripts will be enough to show there's a mismatch between what was filed and what credits were applied.

I did try going to the local IRS office - that's where they gave me the 5405 form and told me to fill it out! Maybe I just got someone who didn't know what they were doing? I think I'll try going back and hopefully get a different representative who might be more helpful like in your case.

Thanks for the extra info! The tax software did have me fill out those schedules, but I wasn't totally clear on what they were for. How do the quarterly estimated payments work? Is there a minimum amount I need to earn before I'm required to make them? And how do I calculate how much to pay?

Generally, you should make estimated tax payments if you expect to owe $1,000 or more when you file your return. The IRS wants you to pay as you earn throughout the year, not just at tax time. To calculate your payments, you have two options: You can pay 100% of last year's tax liability (110% if your income is over $150,000), divided into four equal payments. This is the safest method to avoid underpayment penalties. Or you can estimate your current year's tax and pay it in quarterly installments, which might be more accurate if your income changes significantly. The IRS Form 1040-ES has worksheets to help you calculate this. Payments are due April 15, June 15, September 15, and January 15 of the following year. You can pay online through the IRS Direct Pay system.

Yeah, it's confusing! The threshold was supposed to drop to $600 for 2023, but the IRS delayed it. For 2023 tax returns (what we're filing now in 2024), the threshold is still $20,000 AND 200 transactions. In 2024 (for next year's taxes), it'll be $5,000 with no transaction minimum. Then in 2025, it'll finally go down to $600. But some states have their own lower thresholds, and some platforms might be issuing 1099-Ks at lower amounts anyway just to be safe. Super confusing!

Thanks for sharing your experience! What specific types of grants did your spouse have that were affected by filing status? My wife mentioned something about a state grant but I'm not sure which one exactly.

My wife had a combination of a federal Pell Grant and a state grant that was specifically for lower-income students returning to education. Both had income limits that would have been exceeded if we filed jointly. The state grant (in California) was particularly sensitive to income changes. If your wife has a state grant, that's a huge flag to investigate further because many state grants have strict income requirements that can disappear entirely once you cross a threshold - unlike federal aid which often gradually phases out. I'd recommend having her contact her school's financial aid office directly to ask how joint filing would impact her specific grants. They usually have better information than the general FAFSA helpline.

Yes! The new FAFSA has increased the income protection allowance, meaning more of your income is shielded from aid calculations. For married couples, you get a higher protection amount than single filers. This actually makes filing jointly slightly LESS harmful to aid eligibility than before.

Can you explain more about this S-Corp election thing? At what income level does it actually start making sense from a tax perspective?

The S-Corp election starts making financial sense when your business profit is high enough that the tax savings exceed the additional costs of maintaining an S-Corp. For most small businesses, that's typically around $60,000-$80,000 in annual profit. The primary tax advantage comes from splitting your income between a reasonable salary (which still gets hit with self-employment tax) and distributions (which avoid self-employment tax). But there are additional costs - you'll need payroll processing, more complex tax filings, and possibly higher accountant fees. It's definitely not worth it for businesses with modest profits.

Which state are you in? Some states have crazy high annual LLC fees! California is brutal at $800/year minimum.

11 Do you need to be a student at the college to attend these workshops? I've never thought about checking community colleges for this type of resource.

21 Nope! The small business workshops are open to the community, not just students. That's what makes them such a great resource. They're funded through the college's community education program and some small business grants. Check your local college's "Community Education" or "Continuing Education" section on their website. If they don't have anything listed, also try your local Small Business Development Center (SBDC) which offers similar free workshops.

13 This is such good advice! I used to just toss receipts in a shoebox and it was a disaster come tax time. Is there a specific app you recommend for tracking all this stuff?