Small business accountant here - here's a quick clarification that might help: COGS must always be reported separately from other business expenses, even when tiny. The tax consequences can be very different. If you report low/no COGS with significant sales, it's not automatically a red flag IF your business model logically explains the high profit margins. Many legitimate businesses have minimal COGS (digital products, certain services with product components, etc.

I'm in a very similar situation with my small online business! After reading through all these responses, I'm definitely going to start tracking my COGS properly even though the amounts are small. One thing I learned from experience - even if you think your costs are "too small to matter," the IRS really does expect to see COGS reported correctly on Schedule C. I made the mistake of lumping everything into regular business expenses my first year and got a notice asking for clarification. For anyone dealing with minimal documentation like yard sale purchases, I've found that keeping a simple log on my phone works great. I just note the date, general description ("misc household items from garage sale"), and total amount spent. It doesn't have to be perfect, but having something is way better than nothing if questions come up later. Thanks everyone for sharing your experiences - this thread has been super helpful for understanding how to handle this properly!

My cousin paid Optima $4,500 and they literally just filled out forms he could have done himself. The "reduction" they got was just a standard payment plan anyone can request. Total scam imo.

For your $8,200 debt, I'd strongly recommend trying to work directly with the IRS first before paying thousands to a relief company. At that amount, you have several good options: 1. **Installment Agreement**: You can likely get approved for a payment plan online at irs.gov or by filing Form 9465. With debts under $50,000, the process is streamlined. 2. **Offer in Compromise**: If you truly can't pay the full amount due to financial hardship, you can submit Form 656. The IRS will accept less than what you owe if paying the full amount would create economic hardship. 3. **Currently Not Collectible Status**: If your monthly expenses equal or exceed your income, the IRS may temporarily stop collection efforts. The key is understanding your actual financial situation. Most tax relief companies charge $2,000-$5,000 upfront and often just file the same forms you can file yourself. Given that your debt is only $8,200, paying a relief company could easily cost you more than just setting up a payment plan directly. Start by calling the IRS at (800) 829-1040 or using their online payment agreement tool. If you get overwhelmed, consider a Low Income Taxpayer Clinic for free help rather than a expensive commercial service.

Did you check if your employer included any taxable fringe benefits in that amount? Things like personal use of a company car, certain bonuses, or even tuition reimbursement above $5,250 would be added to your Box 1 amount but wouldn't show up in your normal paychecks. Just a thought before you go through all the trouble of getting a corrected W2!

Glad to hear you finally got confirmation from HR about what happened! Adding another employee's bonus to your W2 is definitely a significant error that needed to be corrected. Filing for an extension with Form 4868 is absolutely the right move in this situation. Since you now know the exact nature of the error and have HR's confirmation, you'll be in a much stronger position when you file your actual return with the corrected W-2c. Just remember that while the extension gives you until October 15th to file your return, you still need to pay any estimated taxes owed by the original April deadline. Since your actual income was lower than what's on the incorrect W2, you might not owe anything additional or might even be due a refund. Keep all your documentation from this process - the incorrect W2, your paystubs, and the email confirmation from HR about their error. This will be helpful if the IRS has any questions when you file your actual return. Good luck getting this sorted out!

Another thing to consider is whether your wife has other income. If the caregiver payments are her only income and it's below the standard deduction ($13,850 for 2023 for single filers), she wouldn't owe federal income tax anyway, regardless of whether the income can be excluded. But she'd still need to file if taxes were withheld and she wants to get a refund.

I'm dealing with a very similar situation with my father's caregiver payments. The confusion about W-2 vs 1099 is really common - I think agencies sometimes don't explain the tax implications clearly when you start. One thing that helped me was requesting documentation from the state program about whether it qualifies as a Medicaid Home and Community-Based Services (HCBS) waiver program. If it does, and if your mother-in-law lives in your home, you might qualify for the difficulty of care exclusion under IRS Notice 2014-7. Even if you qualify for the exclusion, you still need to report the W-2 income on your tax return and then exclude it with proper documentation. The IRS will have already received a copy of that W-2 with your wife's SSN, so not reporting it could trigger questions later. I'd definitely recommend having taxes withheld going forward. Even if you end up qualifying for exclusions, it's better to get a refund than to owe money you weren't expecting.

Does anyone use specific tax software that handles AMT calculations well? I tried using TurboTax last year and it seemed to miss some of my mortgage interest deductions against AMT.

One thing that helped me understand this better was creating a spreadsheet to track all my deductions under both regular tax and AMT calculations. For mortgage interest, as others mentioned, it's generally deductible under both systems if you itemize - but make sure you distinguish between acquisition debt (buying/building your home) versus home equity debt, as the rules can differ. The property tax hit under AMT is real and painful. I ended up owing about $3,000 more in AMT partly because I lost my $8,500 property tax deduction. What really caught me off guard was that miscellaneous itemized deductions (like tax prep fees, unreimbursed employee expenses) are also completely eliminated under AMT. One strategy that might help: if you have control over the timing of when you exercise your remaining ISOs, consider spreading them across multiple years to potentially stay below the AMT exemption thresholds. The AMT exemption starts phasing out at higher income levels, so managing your ISO exercises strategically could save you significant money.