Just wanted to add another perspective here - make sure you're also looking at state tax implications! Some states treat 1099-MISC income differently than the federal government does. In my experience helping students with similar situations, the state return sometimes requires the income to be reported in a different section than what you'd expect based on the federal filing. This is especially important if your son goes to school in a different state than where you live or where the internship was located. Also, since his total income was under $12,950 (the standard deduction for single filers in 2024), he likely won't owe any federal income tax at all once you get this sorted out correctly. The key is just making sure that 1099-MISC Box 3 income gets reported as "Other Income" rather than self-employment income subject to Schedule C.

For state-specific guidance on 1099-MISC reporting, I'd recommend checking the state tax agency websites directly. Most states have detailed guides about how they treat different types of income, and many have specific sections for students or internship income. You can also look up "nonresident state tax filing requirements" if the internship was in a different state. Some states have reciprocity agreements that might simplify things, while others require separate filings. The good news is that most states follow federal guidelines for distinguishing between self-employment income and other income, so once you get the federal return correct, the state return usually follows the same logic. If you're still having trouble navigating the state rules, consider reaching out to the state tax agency directly - they're often more accessible than the IRS and can give you specific guidance about how your son's situation should be handled in that particular state.

I had a very similar issue with my online bank last year where they initially told me no 1099-INT would be issued despite earning well over the $10 threshold. What finally worked was escalating through their formal complaint process rather than just calling customer service. I sent a written message through their secure portal specifically referencing IRC Section 6049 (the tax code requiring 1099-INT forms for interest over $10) and mentioned that failure to issue required tax documents could be a compliance violation. Within 48 hours, I had a call from their compliance department apologizing for the "system error" and confirming my 1099-INT would be generated. The key was being specific about the legal requirement and putting it in writing through their official channels. Customer service reps often don't have the authority or knowledge to override system flags, but compliance departments take these issues very seriously. Even if you end up reporting the income without the form (which you absolutely should do), it's worth pursuing this so the bank fixes their system and you have proper documentation. Plus, other customers with the same bank probably have the same issue and don't even realize it.

I work in bank compliance and can shed some light on this issue. What you're experiencing is unfortunately more common than it should be, especially with newer online banks that may have gaps in their tax reporting systems. The $10 threshold for 1099-INT is absolutely mandatory under IRC Section 6049, and there's no exception for online banks or any other type of financial institution. Your bank is either making a system error or has incorrectly categorized your account in some way. Here are the most common causes I've seen: 1) Account was mistakenly flagged as a business account (different reporting rules), 2) System glitch where high-yield savings accounts aren't properly included in year-end tax document generation, 3) Incorrect TIN/SSN on file, or 4) Interest payments crossing calendar year boundaries causing confusion in their system. My recommendation: Contact their compliance department directly (not customer service) and reference both the dollar amount ($387+) and IRC Section 6049. Most banks have dedicated tax document departments that can manually generate forms when systems fail. If they continue to refuse, file a complaint with their primary federal regulator - you can find this information on the FDIC website. In the meantime, absolutely report this income on Schedule B using your bank statements as documentation. The IRS will not penalize you for reporting income that exceeds what third parties submit.

Stupid question maybe, but could your client just efile Form 8822 to update their address with the IRS so any future correspondence goes to you instead? That way if there is a notice about mismatched payments you'll see it right away and can respond quickly.

This is exactly the kind of mess that makes household employee taxes so frustrating to deal with! I've seen this scenario play out multiple times with different payroll companies, not just ADP. The approach everyone's suggesting about documenting on Schedule 3 with a detailed statement is correct, but I'd add one more critical step: make sure you keep detailed records of ALL correspondence with ADP about this issue. Save emails, take notes during phone calls with dates and representative names, and request everything in writing. I had a similar case last year where the client got an IRS notice 18 months later questioning the tax credits. Having that paper trail was essential to quickly resolve the issue. The IRS agent was able to match up the payments once we provided ADP's documentation showing the specific dates and amounts. Also, consider filing the return with the explanation statement attached, but then immediately follow up with a cover letter sent separately to the same processing center. Sometimes the attached statements get separated during processing, so having a duplicate explanation can prevent delays. One last tip - if your client has any estimated tax payments due for the current year, you might want to slightly overpay to create a small buffer in case there are any reconciliation issues with the household employee taxes.

One thing nobody has mentioned yet - make sure you're tracking utilities separately if possible! I installed separate meters for electric and gas in my rental portion, which makes it super clear what's deductible. If you don't have separate meters, you need a reasonable method to allocate those costs. Also, be careful about claiming home office deductions if you're already allocating part of your home as rental property. You can't double-dip and claim the same square footage as both rental property and home office.

This is such a helpful thread! I'm dealing with a similar situation but with a twist - I converted my garage into a studio apartment that I rent out. It shares the main house's electrical panel and water heater, but has its own entrance and bathroom. One thing I learned from my tax preparer is to be really careful about improvements vs. repairs when allocating expenses. The water heater replacement you mentioned would typically be considered an improvement and needs to be depreciated over time rather than deducted all at once. But if it was just a repair (like fixing a broken component), then you could deduct your allocated percentage immediately. Also, don't forget to consider whether your local zoning allows rental use - the IRS sometimes looks at this during audits to verify legitimate business purpose. And keep detailed records of everything! I use a simple spreadsheet to track all expenses with photos and receipts. It's been a lifesaver for staying organized. The mini-split system you installed exclusively for the rental area is definitely 100% deductible (though as a capital improvement, it would be depreciated). That's the nice thing about expenses that clearly benefit only the rental portion!

I'm going through the exact same situation and this thread has been incredibly helpful! Filed my return on February 18th through TurboTax, got the "accepted" confirmation, but my transcript has been showing "verification of non-file" for over a month now. I was expecting about $2,100 back. After reading everyone's experiences, I'm realizing this is way more common than I thought this year. The explanation about processing delays and manual reviews makes a lot more sense than my initial fear that my return just disappeared into the ether. I'm definitely going to check my Wage and Income transcript tomorrow to see if there are any discrepancies. I have W-2s from two different jobs plus some 1099-INT forms, so there's definitely potential for mismatches that I wouldn't have thought to look for. The suggestions about taxr.ai and Claimyr are really interesting - I've never heard of services like these before but they seem like they could be lifesavers when you're stuck in this kind of limbo. Has anyone noticed if there are certain types of returns or situations that seem to get flagged for these delays more often? I'm trying to figure out if there's something specific about my situation that might have triggered this. Thanks to everyone for sharing their experiences - it's such a relief to know I'm not alone in this!

I'm dealing with this exact same issue right now and finding this thread has been such a lifesaver! Filed on February 20th through TaxAct, got the "accepted" status, but my transcript has been showing "verification of non-file" for weeks. I was expecting around $2,400 back for some much-needed car repairs. What's really frustrating is that this is my first time experiencing this - I've been filing electronically for years and usually have my refund within 2-3 weeks. The uncertainty is honestly the worst part because you just don't know if it's a normal delay or if there's actually a problem that needs fixing. After reading through everyone's experiences here, I'm feeling much more optimistic. It sounds like this is unfortunately pretty common this year, and most people are eventually getting their returns processed. I'm definitely going to check my Wage and Income transcript tomorrow to see if there are any mismatches - I have a W-2 from my main job plus some 1099-DIV forms from investments, so there's potential for discrepancies I wouldn't have thought to look for. The suggestions about taxr.ai for document analysis and Claimyr for actually getting through to the IRS are really helpful. Has anyone noticed if returns filed later in February seem to be having more issues, or is this affecting people regardless of when they filed? Just trying to figure out if timing played a role in getting stuck in this processing limbo. Thanks to everyone for sharing - it's such a relief to know this isn't just happening to me!