I've been through this exact situation twice, and unfortunately yes - they will take the entire $6,547 refund. The Treasury Offset Program doesn't do partial offsets for child support debt. It's all or nothing, and since your friend owes more than the refund amount, every penny will go toward that $9,000+ balance. What your friend should expect: A notice in the mail explaining the offset, showing the original refund amount and how much was applied to the child support debt. The remaining balance (around $2,500) will still be owed and could affect future refunds too. My advice? Tell your friend to contact their state child support enforcement agency immediately to set up a payment plan for the remaining balance. This can prevent future refund offsets and help them stay current. Also, they should adjust their tax withholding for next year so they don't end up in the same boat - getting a smaller refund (or owing a bit) is better than giving the government an interest-free loan that gets seized anyway. The medical bills you mentioned are a separate concern, but understanding how these offsets work is definitely smart planning. Child support debt gets priority treatment in the offset program, so it's one of the most aggressive collection mechanisms the government has.

I went through this same situation about 18 months ago, and I can confirm what others are saying - they will take the entire $6,547 refund. The Treasury Offset Program doesn't mess around with partial collections for child support debt. It's frustrating but that's how the system works. One thing I wish someone had told me earlier: your friend should immediately check if they're married and filed jointly. If their spouse isn't responsible for the child support debt, the spouse can file Form 8379 (Injured Spouse Allocation) to potentially get back their portion of the refund. This has to be done relatively quickly though. Also, regarding your medical bills concern - child support debt gets first priority in the offset program, but other types of debt can also trigger offsets. Federal student loans, unpaid taxes, and certain other debts can all result in refund seizures. The key is staying proactive about payment arrangements before you get to the offset stage. Your friend should definitely contact their state child support office right away to discuss payment options for that remaining $2,500+ balance. Most states would rather work with you on a reasonable payment plan than keep seizing refunds year after year.

Can I just say how ridiculous it is that these app companies make taxes so complicated? Why can't Robinhood just withhold the proper tax amount from these bonuses like my employer does with my paychecks? Now I'm probably gonna owe money because of these "free" bonuses.

Great question! I went through this exact same situation last year. The key thing to remember is that Robinhood referral bonuses are treated as miscellaneous income, not investment income or self-employment income. In TurboTax, when you enter your 1099-MISC, make sure to select that this is "other income" rather than business income. The $300 will get reported on Schedule 1, Line 8z of your Form 1040. You won't owe self-employment tax on it, which is a relief! One tip: keep a copy of your 1099-MISC and any documentation about the referral program. The IRS likes to see that you're reporting income consistently with what companies report about you. Since you're filing close to the deadline, double-check that TurboTax is categorizing it correctly before you submit - it should show up as "Other Income" on your tax summary, not as business or self-employment income.

Something nobody mentioned yet - don't forget about the safe harbor provisions! If you pay 100% of last year's tax liability (or 110% if your AGI was over $150,000), you won't face underpayment penalties even if you end up owing more. This has saved me many times when my side income fluctuated unpredictably. I just take my total tax from last year, make sure my regular job withholding plus quarterly payments hit that threshold, and don't worry about the exact calculations until filing time.

One thing I learned the hard way - if your side income is consistent, consider adjusting your W-4 at your main job to have additional withholding taken out each paycheck instead of making separate quarterly payments. I just calculated roughly what my freelance tax would be annually, divided by pay periods, and added that amount to line 4(c) on my W-4. Saves me from having to remember quarterly payment dates and writing separate checks. Plus my employer already withholds state taxes too, so it handles everything in one go.

Has anyone actually filed taxes yet with these new Section 174 rules? What software are you using? I tried entering my split domestic/foreign R&D expenses in TurboTax Business and it doesn't seem to have a way to separate them properly. It's just asking for a total R&D amount without any way to specify 5-year vs 15-year portions.

This is exactly the kind of complex situation where having proper documentation becomes critical. From what I've seen in practice, the IRS is paying close attention to Section 174 compliance, especially with the domestic vs. foreign split. A few practical tips for your situation: First, create a detailed spreadsheet that breaks down each R&D expense by contractor/employee and tracks where the work was physically performed. For your European contractors, get written confirmation of where they were located while working on your project. Second, for the mixed work scenarios others mentioned, request time logs or work location records from contractors when possible. The key is being able to demonstrate a reasonable basis for your allocation. I've found that contemporaneous records (created at the time the work was done) carry much more weight than reconstructed documentation later. Even if you can't get perfect records, document your methodology and the information you relied on to make the split. One more thing - consider having a tax professional review your allocation before filing. The penalties for getting Section 174 wrong can be significant, and this is one area where the upfront cost of professional review often pays for itself in avoided issues down the road.

I was confused by the same thing last year! Just wanted to add that the reason this is all so confusing is that the $5,000 FSA limit hasn't been updated in decades while childcare costs have skyrocketed. It's ridiculous that the tax code hasn't kept up with real costs. For my family, even using both the FSA and the tax credit, we only get tax relief on about a third of what we actually spend on childcare. I wish they'd update these limits to reflect what childcare actually costs in 2025!

This is such a helpful discussion! I'm in a similar boat but with slightly different numbers. I have one child and spent $8,000 on daycare last year. I put the full $5,000 into my dependent care FSA, so I have $3,000 in remaining expenses. From what I'm understanding here, since I only have one qualifying child, my maximum eligible expenses for the Child and Dependent Care Credit would be $3,000. But I need to subtract my $5,000 FSA contribution from that $3,000 limit... which would give me a negative number? Does this mean I can't claim ANY additional expenses for the tax credit since my FSA already exceeded the $3,000 single-child limit? Or am I misunderstanding how this works?