As a newcomer to this community, I want to thank everyone for this incredibly detailed discussion! I'm dealing with my first Schedule AI this year after starting a side business alongside my W-2 job, and I was completely overwhelmed by the form. The explanations here about how each period creates its own "snapshot" projection have been game-changing for my understanding. I was making the same mistake as the original poster - thinking I needed to somehow predict my entire year's business income back in January and divide it into equal quarterly payments. What really clicked for me was understanding that the annualized income method is actually protecting taxpayers with variable income. My business had slow revenue in Q1-Q2 but picked up significantly in Q3-Q4. Without Schedule AI, I would have been penalized for not paying 25% of my actual annual tax by March 15th, even though my business barely existed then! The fact that you ended up only $20 off your total tax liability really shows how well the system works when properly applied. It gives me confidence that I can navigate my own Schedule AI calculations correctly. This thread has been more educational than hours of trying to decipher IRS publications - thank you all for sharing your experiences and insights!

As a newcomer to this community, I'm amazed by how helpful this discussion has been! I've been struggling with Schedule AI myself after having irregular income this year - started with steady W-2 employment, then had a period of unemployment, followed by some freelance work that came in chunks. Reading through everyone's explanations, especially the "snapshot" and "time machine" analogies, finally made the annualized income method click for me. I was making the classic mistake of thinking I should have predicted my entire year's income pattern back in January and made proportional payments. What really resonates is how this method actually protects taxpayers rather than penalizes them. My freelance income was heavily weighted toward the end of the year, and without Schedule AI, I would have been expected to pay estimated taxes on income I hadn't even earned yet. The original poster's situation with the November Roth conversion is such a perfect example - you can't be expected to predict and pay for a financial decision you hadn't made yet! The fact that they ended up only $20 off shows the system really does work when you understand it properly. Thank you all for taking the time to explain this so clearly. This thread has been more valuable than any official IRS guidance I've tried to read!

Has anyone used TurboTax to amend their return when they had these weird codes? I'm in a similar situation with code 290 and need to submit an amendment but worried it'll mess things up more.

I went through almost the exact same situation last year! The 290 code combined with your audit being reversed is actually really good news. Here's what likely happened: When you filed your amended return right around the time of the audit, it created a processing conflict in the IRS system. The 290 code you're seeing is the IRS making an adjustment to reconcile your original return with the audit findings (which were then reversed) and your amendment. The fact that you now see code 846 (as you mentioned in your follow-up) means your refund has been approved and is being issued. That date is when the Treasury will send the payment - usually takes 1-3 business days to hit your bank account if you have direct deposit set up. For your stimulus payments, definitely claim the Recovery Rebate Credit on your 2022 return. Since your 2021 return was tied up in processing, you likely didn't receive the payments that were based on that return. The IRS will cross-reference what you've already received and give you credit for any missing amounts. One tip: keep checking your transcript weekly because sometimes additional codes appear that give you more details about processing timelines. After dealing with this mess for over a year, seeing that 846 code must feel amazing!

Quick question - I mailed in my 2022 return last month but haven't heard anything back yet. Is there a way to check if the IRS received it? I didn't e-file because I thought you couldn't do that for prior year returns.

Don't beat yourself up about being late - life happens and you're definitely not the first person to miss a filing deadline during a tough time! The good news is you're still well within that 3-year window to claim your refund. One thing I'd add to the great advice already given: make sure you have all your 2022 documents before you start. You'll need your W-2s, any 1099s, receipts for those medical expenses and charitable donations you mentioned, etc. If you're missing any tax documents from employers or financial institutions, you can request copies or sometimes find them in your online accounts from that year. Also, since you mentioned medical expenses - remember that for 2022, you could only deduct medical expenses that exceeded 7.5% of your adjusted gross income. It's worth calculating whether itemizing will actually give you a bigger deduction than the standard deduction was for 2022 ($12,950 for single filers). You've got this! Getting your finances back on track is a great step forward.

Can someone explain tax credits too? I know they're different from deductions but I don't really understand how they affect the effective tax rate calculation.

This is exactly the kind of confusion that trips up so many people! I made the same mistake when I first started doing my own taxes. The key insight that everyone else has mentioned is that the standard deduction creates a "tax-free zone" at the bottom of your income. Think of it this way: the government is essentially saying "everyone gets their first $13,850 completely tax-free" (for 2025). So when you see those tax brackets showing 10% on income from $0-$11,000, that's actually 10% on *taxable* income from $0-$11,000, not your total income. Your calculations were actually correct mathematically - you just needed to subtract the standard deduction first! This is why tax software and calculators are so helpful, because they automatically account for all these deductions and credits that most people forget about when doing mental math. It's also worth noting that this progressive system means you'll never take home less money by earning more (ignoring very specific edge cases with certain benefits). Every additional dollar you earn will always increase your after-tax income, even if it pushes you into a higher bracket.

Quick heads up - if your business shows a loss, Section 179 might not help you much. You need to have positive business income to offset with the Section 179 deduction. I learned this the hard way last year with my startup. Bought $22k of equipment, took Section 179, but my business had minimal profit. Most of the deduction was wasted! Should've just done regular depreciation so I could use those deductions in future profitable years.

@Tobias - Great question about Section 179! Just to add to the excellent advice already given, make sure you keep detailed records of when you "placed in service" each piece of equipment. The IRS is very specific that the equipment needs to be ready and available for use in your business during the tax year you're claiming the deduction. For your camera gear, this means the date you first used it for a paying client or business purpose, not necessarily when you bought it. If you bought something in December but didn't use it for business until January, it would count for the following tax year. Also, since you mentioned you might buy more equipment - consider your overall business income for the year. As others have pointed out, Section 179 works best when you have sufficient business profit to offset the deduction. If you're planning major purchases, it might be worth running some numbers to see if spreading them across tax years makes more sense than taking everything at once.