Just a warning - don't skip reporting this! I didn't report $230 of excess scholarship income a few years ago because my tax software didn't prompt me to, and I got a letter from the IRS about 8 months later asking for additional tax payment plus a small penalty. Schools report the scholarship amounts to the IRS on form 1098-T, so they can match that against your return.

I had this exact same issue last year! The key is that most tax software doesn't automatically flag excess scholarships as taxable income, even though it should. What worked for me was manually entering it in the "Other Income" section. In most tax programs, look for something like "Other Income" or "Additional Income" - it's usually in the main income section but might be buried under "Less Common Income" or similar. Enter the $156 with a description like "Excess Scholarship" or just "SCH" and it should flow to Schedule 1, Line 8. The important thing is that this excess amount is definitely taxable income that needs to be reported. The IRS gets a copy of your 1098-T from your school, so they'll expect to see that excess amount somewhere on your return if it exists. Don't risk having to deal with correspondence from the IRS later - it's much easier to just add it now!

Has anyone else noticed that the IRS instructions for 1040-ES are ridiculously confusing? They make these calculations way more complicated than necessary. Last year I underpaid by like $200 and got hit with a $73 penalty. This year I'm just adding an extra $500 to whatever calculation I come up with for peace of mind.

I'm a tax preparer and see this confusion with 1040-ES all the time! Here's a simple way to think about it: Line 12 is asking: "What's 90% of the tax you expect to owe this year?" This is one way to avoid penalties. Line 13 is asking: "How much tax will already be paid through withholding or credits?" This gets subtracted from your required payment. The key insight many miss: you're trying to find the MINIMUM you need to pay to avoid penalties. So you compare: - 90% of current year tax (line 12 calculation) - 100% of last year's tax (from your 2024 return, line 24) - $1,000 Use whichever is SMALLEST as your "required annual payment." Then subtract line 13 from that amount and divide by 4 for your quarterly payments. Since you're going from $68k employee to $92k freelancer, using 100% of last year's tax will likely be your best bet - it'll be lower than 90% of this year's higher tax bill. Just make sure you have enough saved for the final balance when you file!

One thing to watch out for that I learned the hard way: if your child's interest income is above $1,150 (for 2023 tax year), it might be subject to the "kiddie tax" which applies your tax rate to their unearned income above that threshold. In my case, my daughter had a larger CD that matured last year with about $2,000 in interest, and I ended up having to pay tax at my higher rate on the amount over the threshold. Just something to keep in mind if your children's CDs are larger!

Just a quick tip from a former bank employee: make sure the SSNs on the 1099-INT forms match your children's Social Security cards exactly. Sometimes banks make errors, especially with children's accounts that might have been set up as custodial accounts. I've seen cases where the parent's SSN accidentally got associated with the child's account, which creates a real headache when tax forms are generated. Might be worth double-checking before you file!

Similar situation here, but I learned you can sometimes work around this if your parents pay the school directly instead of giving you the money first. Does anyone know if that changes anything for the tax credit eligibility?

This is such a common frustration! I went through the exact same thing when my parents paid my law school tuition after I got married. The rules definitely seem backwards - the people who are generous enough to pay get no tax benefit. One thing that helped me understand it better is that the IRS views education credits as a benefit for supporting a dependent's education. Once you're married filing jointly, you're no longer anyone's dependent, so the credit "follows" you as the student. The silver lining is that you and your spouse can likely claim either the American Opportunity Credit (if you're in your first four years of higher education) or the Lifetime Learning Credit (for graduate school). With $12,450 in qualified expenses, you could potentially get up to $2,500 back depending on your income level. I'd definitely recommend the approach that Harmony suggested - calculate what credit you receive and consider sharing that benefit with your in-laws as a way to acknowledge their generosity. It's not a perfect solution, but it helps make the situation feel more fair for everyone involved.

Has anyone here tried using the S-Corp premium reimbursement for dental and vision too? Or just medical? Our part-timer is asking if we'd cover those as well, and I'm not sure if the same rules apply.

One thing to keep in mind that I haven't seen mentioned yet - if you do decide to start reimbursing your part-time employee's health premiums, make sure you establish clear written criteria for eligibility that you apply consistently. The IRS doesn't require you to offer this benefit, but if you do offer it, you need to avoid creating what could be seen as discriminatory practices. For example, you can't just say "owners get reimbursed but employees don't" - that would be problematic. But you could establish criteria like "employees working 20+ hours per week" or "employees with 6+ months tenure" as long as you apply those rules consistently to everyone, including owners who meet the criteria. Also worth noting that any reimbursements to your part-time employee would be taxable income to them (unlike the owner health insurance deduction you get), so factor that into your decision-making process.