Thanks for bringing this up! I had no idea about the itemizing rule. Does this mean we need to coordinate our filing strategies even if we're doing separate returns? That seems frustrating.

Yes, you do need to coordinate at least on this one aspect. If your ex decides to itemize their deductions, you'll be forced to itemize as well, even if your itemized deductions are less than the standard deduction. This can result in you paying more tax than if you both took the standard deduction. It's one of the downsides of the Married Filing Separately status. That's why it's worth having a brief conversation with your ex about whether either of you plans to itemize, just so you're not caught off guard.

No, you can't claim Head of Household if you're married as of December 31st. You would need to be "considered unmarried" which means either legally separated under a decree or legally divorced. Plus you need a qualifying dependent and to have paid more than half the cost of keeping up your home.

That's a good point about tax-advantaged accounts! But no, these are definitely regular taxable investment accounts they've had for years, not IRAs. The 1099s were issued by their bank and a brokerage firm for normal taxable accounts. I think at this point it's pretty clear the CPA made a mistake. Do you think this kind of oversight indicates my parents should look for a new tax preparer, or is this the kind of mistake anyone might make occasionally?

Based on your confirmation that these are regular taxable accounts, this is definitely an error that shouldn't have happened. While everyone can make an occasional mistake, missing multiple 1099 forms is concerning because it's such a fundamental part of tax preparation. I would suggest having a conversation with the CPA first. Their response will tell you a lot - a good professional will acknowledge the error, fix it promptly at no additional cost, and explain what steps they'll take to prevent similar mistakes in the future. If they're defensive or try to charge for fixing their own mistake, that's a red flag. What makes this particularly troubling is that tax software and even manual checklists that CPAs use are specifically designed to prompt for 1099 income. This suggests either carelessness or possibly that some documents were misplaced during preparation.

That's not how tax reporting works though. Interest income and dividends aren't netted against capital losses on Schedule D. They're entirely separate types of income reported on different lines of the 1040. Capital losses can offset capital gains, but not interest or dividend income.

We probably don't qualify for that one then, since our combined income is still around $78k even with my wife's unpaid leave. But thanks for mentioning it! Are there any other credits or deductions we should look into as new parents?

You might still qualify for the child and dependent care credit I mentioned earlier if you're paying for childcare. Also look into whether you can deduct any medical expenses related to the birth - if your total medical expenses for the year exceed 7.5% of your adjusted gross income, you can deduct the amount over that threshold if you itemize deductions. Some employers also offer dependent care FSAs which let you set aside pre-tax money for childcare expenses. It's too late for 2024, but something to consider for 2025. And start looking into 529 college savings plans - there's no federal tax deduction for contributions, but earnings grow tax-free when used for education expenses.

I used the IRS Free File system last year to claim the child tax credit for my son. It was actually pretty straightforward - it asks clear questions about dependents. If your income is under $73,000, you can use it for free. If you make more, TurboTax or H&R Block might be easier, but they'll charge you for the forms needed to claim child-related credits.

That's weird, my 401k is through Vanguard and they literally just had me check a box saying I qualified under the CARES Act. No documentation required at all. I wonder if different companies have different policies?

Yes, each 401k administrator sets their own verification policies. Fidelity was being extra cautious with my company's plan, but Vanguard and others often just require the checkbox as you mentioned. It varies widely by both the administrator and sometimes even by the specific employer's plan. The actual IRS guidelines only require self-certification, but plan administrators can add their own layer of verification if they choose to. Always best to check directly with your specific plan before proceeding.

Wait seriously? I thought the CARES Act provisions were extended! This completely changes things for me. So there's no special COVID-related withdrawal option for 401ks anymore?

That's mostly correct, but there's a small caveat. While the general CARES Act withdrawal deadline was December 30, 2020, some COVID-related relief provisions were extended through other legislation. However, the specific 401k withdrawal provisions with penalty waivers and extended repayment options did indeed expire.

That's really helpful! I'm in Illinois - do you know if they're pretty good about this kind of thing? I've never filed any kind of complaint before.

Illinois actually has a pretty strong stance on worker misclassification! They have a specific task force called the Illinois Task Force on Misclassification that investigates these exact situations. You can file a complaint through the Illinois Department of Labor. The state takes these issues seriously because misclassification costs them tax revenue and deprives workers of benefits and protections. The complaint process is straightforward - you'll need to provide information about the company, your working arrangement, and copies of any documentation you have (pay stubs, text messages about scheduling, etc). Even without recorded conversations, your description of the working relationship can be enough for them to investigate.

This! When I was a house cleaner, I tracked my mileage between client houses (NOT from home to first job or last job to home, that's commuting), and all my supplies. Reduced my taxable income by almost 40%. Even if you didn't track it at the time, you can reconstruct reasonable estimates with calendar entries, texts arranging jobs, etc.