21 When we missed reporting a 1099R a few years ago, our CP2000 came in November for a return filed in March. The frustrating part was they added interest from the original due date even though they took 8 months to tell us about the problem! Just be prepared for that possibility.

Based on my experience helping clients with similar situations, I'd strongly recommend filing the amended return (Form 1040-X) rather than waiting for the CP2000. Here's why: The IRS typically sends CP2000 notices 6-12 months after filing, but the interest clock starts ticking from the original due date (April 15th). So even if they don't contact your parents until October, they'll still charge interest going back to April. With a $5,800 unreported distribution, assuming they're in a 22% tax bracket, that's roughly $1,276 in additional tax plus interest and potential penalties. Filing proactively shows good faith and gives you the best chance at penalty abatement. The amended return process is straightforward - just file Form 1040-X with the corrected information and pay the additional tax. Include a brief explanation that it was an inadvertent omission. Your parents' age and clean filing history will work in their favor if any penalties are assessed. This approach will give your parents peace of mind and likely save money compared to waiting for the IRS to catch it.

Something nobody's mentioned yet - make sure you look into First Time Penalty Abatement! If you had a good filing history before these missed years (or if this is your first time filing), you can often get penalties waived for the first year you missed. This saved me over $2,400 when I was catching up on unfiled returns. Also, for your small business, make sure you have documentation for expenses. Even if you're missing some receipts, bank and credit card statements can usually suffice. For the years where the business wasn't profitable, those losses might be able to offset other income. Don't let shame keep you from getting help. I put off fixing my tax situation for years because I was embarrassed, and it only made things worse. The relief of finally getting current with the IRS was worth everything!

I want to add another perspective here as someone who went through this exact situation. The anxiety you're feeling is completely normal - I literally couldn't sleep for weeks when I finally faced my unfiled returns situation. One thing that really helped me was to break this down into smaller, manageable steps rather than trying to tackle everything at once. First, gather all your financial documents for each year (bank statements, 1099s, business records). Then organize them by year. The IRS actually has a really helpful "Get Transcript" tool on their website where you can see what income documents they already have on file for you. Since you mentioned having a small business that barely broke even, you'll likely be filing Schedule C forms. Make sure you track ALL business expenses - office supplies, business meals, mileage, equipment depreciation, etc. These deductions can really add up and might even result in refunds for some years. Also, don't underestimate the psychological relief of just starting the process. Once I filed my first return, even though I still had several more to go, I felt so much better knowing I was moving in the right direction. The IRS is actually much more reasonable to work with when you're proactive about fixing the situation rather than avoiding it. You've got this! Taking the first step by acknowledging the problem and asking for help here shows you're ready to get this resolved.

Just my two cents as someone who went through this exact situation last year - increasing withholding on your existing W4 is MUCH easier than switching to MFS for withholding purposes. When I switched to MFS on my W4 but filed jointly, it created confusion with our HR department and they kept asking questions. Plus the MFS withholding tables sometimes withhold TOO much depending on how your incomes compare to each other. My husband and I ended up with a huge refund which was nice but also meant we had less money throughout the year.

I went through almost the exact same situation a few years ago and can definitely relate to the stress! Just to add some reassurance - the distinction between your W-4 withholding status and your actual filing status is really important to understand, and several people have explained it well here. One thing that helped me was to think of the W-4 as just instructions to your payroll department about how much tax to take out of each paycheck. It has zero impact on what filing status you actually choose when you file your return in April. So you could absolutely set your W-4 to "Married Filing Separately" to increase withholding, but then file "Married Filing Jointly" next year and your Roth IRA contributions would be perfectly fine. That said, I'd echo what others have mentioned about just increasing your withholding amount instead of changing your status on the W-4. It's cleaner and gives you more precise control. The IRS withholding calculator tends to be conservative (better to overwithhold than underwithhold), so don't be surprised if that $350 biweekly seems high - you can always adjust it down later in the year if needed. Also definitely look into that penalty safe harbor rule that was mentioned. At your income level, as long as you pay in 110% of last year's total tax through withholding, you won't face any underpayment penalties even if you end up owing again.

Same here! My as of date has been stuck for weeks while I see others moving forward. It's so frustrating not knowing what's happening. I've been checking my transcript daily but nothing changes. Really hope we get some movement soon 🤞

I'm in the exact same situation! My as of date hasn't budged while others in my weekly cycle got the 2/24 update. From what I've researched, it usually means one of a few things: either there's a minor hold/review on your return, you're in a different processing batch, or sometimes the system just processes accounts at different speeds even within the same cycle. The frustrating part is not knowing which one it is! I've been trying to stay patient but it's tough when you see others moving forward. Hopefully we'll see some movement in the next update cycle 🤞

Quick question - how long do amended returns typically take to process? I'm in a similar boat (forgot a W2) and worried about timeline.

Pro tip: Make sure you keep detailed records of WHEN you discovered the error and when you took steps to correct it. The IRS is more lenient with honest mistakes that you voluntarily correct promptly. Document everything.