That's so reassuring to hear from someone who went through the exact same thing! I'm definitely feeling less panicked now. Can I ask - when you filed the 1040-X, did you have to mail it in or were you able to file it electronically? And roughly how long did it take to get your additional refund processed? I'm trying to set expectations for how long this whole process might take from start to finish.

You have to mail in the 1040-X - unfortunately the IRS still doesn't allow electronic filing for amended returns, which is pretty frustrating in 2025! I sent mine via certified mail just to have proof it was received. The processing time was longer than I hoped - it took about 12 weeks to get my additional refund. The IRS website says amended returns can take up to 16 weeks to process, so mine was actually on the faster side. You can check the status online using their "Where's My Amended Return" tool once they receive it. Pro tip: make copies of everything before you mail it, and consider sending it certified mail so you have tracking. The peace of mind is worth the extra few dollars!

I'm new here but dealing with this exact same situation! I've been in California for the past 4 years and just realized I might have been making this mistake too. From what I'm reading, it sounds like the math is pretty straightforward - if your total state/local taxes paid minus any refunds still puts you over the $10k SALT cap, then the refund shouldn't be taxable. I'm going to dig through my old returns this weekend to see if I qualify for amendments. Regarding processing times, I've heard mixed things about IRS amended return processing. Some people say 16-20 weeks, others have gotten theirs faster. Might depend on how backed up they are. For the tax tools vs. professional review question - I'm probably going to try the DIY approach first since the calculations seem fairly clear-cut, but if I find anything complicated I'll have my CPA double-check before filing. The potential refund amount will probably determine how much professional help I'm willing to pay for!

I filed amended returns for 2021 and 2022 about 4 months ago and just received my refunds last week, so the processing time was right around 16 weeks for me. Not super fast, but not terrible either. I went the DIY route after using one of the analysis tools mentioned here to double-check my calculations. The math really is straightforward once you understand the concept - if your net state/local taxes (after refunds) exceeded $10k, then you got no federal benefit from the "excess" that later became your refund. One tip: make sure to include a brief explanation letter with your Form 1040-X explaining that you're correcting the taxable portion of state tax refunds due to the SALT cap limitation. I think it helps the IRS processor understand what you're doing rather than just seeing random numbers changed. The refund amounts weren't huge in my case (about $300-400 per year), but it was definitely worth the time to file the amendments. Plus now I know not to make the same mistake going forward!

@Lindsey Fry Really appreciate you sharing your professional insights! This has been such a confusing area for me personally. I m'in New Jersey and between state income taxes and property taxes, I m'definitely hitting that $10k SALT cap every year. Looking back at my returns, I think I ve'been making this exact mistake since 2018 when the cap took effect. One question for you as a tax professional - when you re'preparing amendments for this issue, do you typically see the IRS request additional documentation, or do they generally accept the corrected calculations at face value? I m'a bit nervous about potentially triggering any additional scrutiny, especially since I d'be filing amendments for multiple years. Also, for someone in my situation where the math seems straightforward clearly (over the SALT cap ,)would you recommend using one of those analysis tools mentioned earlier in the thread, or is it worth paying a professional just to be safe? I m'trying to balance the potential refund amount against the cost of professional preparation.

@Lindsey Fry Thanks for the professional perspective! I m'just getting started on researching this issue and your breakdown is really helpful. I m'in Massachusetts and have been itemizing for years due to high property taxes plus state income taxes. Looking at my rough calculations, I m'definitely hitting the $10k SALT cap each year, but I ve'been dutifully reporting my state refunds as fully taxable income without questioning it. A couple of follow-up questions from a newcomer to this topic: When you mentioned gathering prior "year tax returns, are" you referring to the returns from the year I paid the taxes, or the year I received the refund? I want to make sure I m'looking at the right documents when I start this analysis. Also, is there a specific line or form where I should be looking to find my total state and local tax payments for each year? I assume it would be on Schedule A, but I want to make sure I m'capturing everything correctly when I do my calculations. This community has been so helpful - I had no idea this was even an issue until I started reading through this discussion!

Thanks so much everyone for the detailed explanations! This clarifies everything. I now understand that FUTA is completely separate from Medicare and income tax withholding. I checked my records and found I've paid about $630 in FUTA so far this year, so that's what I'll enter in the YTD field. Really appreciate all the help, especially the explanation about the $7,000 wage base per employee. That's going to save me a lot of money since two of my employees are well past that threshold already!

Each employee gets their own $7,000 FUTA wage base for the calendar year, regardless of when they start or if they replace someone else. So yes, if someone quits mid-year and you hire a replacement, the new employee starts fresh with their own $7,000 base. There's no transfer or carryover between employees. This actually works in your favor since you'll pay FUTA on less total wages if you have turnover during the year.

This is excellent advice about setting up separate accounts! I'm just getting started with QuickBooks and made exactly this mistake - everything was going into one big "Payroll Taxes" bucket. It's been a nightmare trying to figure out how much I've actually paid for each type of tax when I need to file forms. Quick question though - when you say QuickBooks Payroll calculates FUTA automatically, does that include stopping the calculation once each employee hits the $7,000 wage base? I want to make sure I'm not overpaying if the system doesn't automatically recognize that threshold.

Yes, QuickBooks Payroll automatically stops calculating FUTA once each employee reaches the $7,000 wage base for the calendar year. It tracks this individually for each employee, so you don't have to worry about overpaying. However, I'd still recommend spot-checking the calculations periodically, especially if you have employees who work irregular hours or receive bonuses that might push them over the threshold unexpectedly. One thing to watch out for is if you're manually entering payroll data (like the original poster mentioned doing with historical data) - in that case, you'll need to make sure you're correctly applying the wage base limits yourself since QB won't automatically know where each employee stood wage-wise when you're backfilling data.

Thanks for this advice! Do you think it's better to use a dedicated business credit card for all these purchases or is it okay to use a personal card and just keep the receipts marked as business expenses?

Definitely get a dedicated business credit card if possible. It makes everything so much cleaner for record-keeping and shows a clear separation between personal and business expenses, which the IRS likes to see. If you need to use a personal card occasionally, that's fine as long as you keep detailed records, but try to minimize mixing personal and business expenses. It makes tax time much easier and provides better protection if you're ever audited. The separate card statements also give you another layer of documentation beyond just the receipts.

The home office deduction scares me - I've always heard it's a red flag for audits. Is that still true or is that old advice?

That's actually outdated advice! The home office deduction isn't really an audit red flag anymore, especially with the simplified method the IRS introduced. You can deduct $5 per square foot up to 300 square feet (max $1,500) without having to track actual expenses. The key is just making sure the space is used exclusively for business - even if it's just a corner of a room with a desk where you do all your contracting paperwork, estimates, and business reading. Just document it well and you should be fine. As a contractor, having a dedicated space for business administration is pretty normal and expected.

@Mateo Gonzalez That s'a really important point about checking if your pension plan actually allows direct rollovers! I hadn t'even thought to verify that - I was just assuming it would be an option. The PBGC protection limits are another crucial consideration, especially given @CosmosCaptain s'concerns about company stability. Your experience saving $60,000 in immediate taxes really puts this in perspective. That s'a massive difference that would be hard to make up even with good investment returns over time. I m'curious - when you called your plan administrator, did they try to talk you out of the rollover or were they pretty straightforward about the process? The timing aspect is something that s'been weighing on me too. There s'definitely a balance between taking enough time to make an informed decision and not waiting so long that external factors like (company financial troubles complicate) things. Better to have the money safely in your control sooner rather than later, especially in uncertain times. Thanks for sharing your real numbers - it really helps to see the actual dollar impact rather than just theoretical tax scenarios!

@Luca Ricci Thank you for sharing such detailed firsthand experience! Your timeline of 18 days is really helpful to know - I was wondering how long the actual transfer process takes. It sounds like there s'definitely some coordination required between the pension administrator and IRA custodian. Your point about the company s'subsequent financial troubles really validates the concerns that @CosmosCaptain mentioned. It s'one thing to worry about company stability in theory, but hearing about actual stock drops and layoffs after someone made their decision really drives home how important it is to get the money out while you can. I m'particularly interested in your mention of getting written confirmation from both sides about the process. Did you run into any miscommunications or conflicting information between your pension administrator and Fidelity during the rollover? I m'trying to anticipate potential hiccups so I can address them proactively. The RMD rules at 73 are definitely something I need to research more. I assume that just means you have to start taking minimum distributions at that point, but the money continues to grow tax-deferred until then?

@Luca Ricci @Emma Johnson I went through a similar rollover process with Vanguard last year, and I can confirm that getting written confirmation from both sides is absolutely critical. In my case, there was actually a miscommunication where my pension administrator initially prepared the paperwork for a 60-day indirect rollover instead of a direct trustee-to-trustee transfer. If I hadn t caught'that error, I would have faced the 20% mandatory withholding. The key is making sure both parties are using the exact same language - direct rollover "vs trustee-to-trustee" transfer "vs indirect" rollover "- because" they all have different tax implications. I literally had both my pension administrator and Vanguard on a three-way call to confirm the process step-by-step before we initiated anything. Regarding the RMD rules Emma asked about - yes, you re correct'that you must start taking required minimum distributions at age 73, but the calculation is based on your account balance and IRS life expectancy tables. The good news is that you only have to withdraw the minimum amount each year - the rest continues growing tax-deferred. Many people actually find that the RMD amounts are manageable and fit well into their retirement income planning. The peace of mind factor that Luca mentioned really can t be'overstated. Having control over your own retirement funds versus trusting a potentially unstable company is worth so much more than any minor tax optimization you might miss.