That's a good point! I should double-check the exact amount on the 1099-NEC they're referencing in the notice against what we have. Is there a way to get a transcript of what was reported to the IRS directly from them?

Yes, you can request a "Wage and Income Transcript" directly from the IRS which will show exactly what was reported to them on your behalf! You can get this online through the IRS website by creating an account at irs.gov/transcripts or by filing Form 4506-T. This is super helpful because it shows the exact amounts that were reported to the IRS by third parties (employers, banks, clients, etc). That way you can see if what you have matches what they have. In my sister's case, her client had submitted a higher amount to the IRS than what was on the copy they gave her.

Omg this happened to me too! Spent weeks trying to figure out why the IRS said I underreported when I knew I included everything. Turned out the payment processor filled both boxes with the same amount, essentially reporting my income twice. Such a headache to fix.

Wait, so I'm already in trouble for not paying quarterly taxes this past year? Will I get penalties? How do I even figure out how much I was supposed to pay each quarter?

Yes, you may face penalties for not making quarterly payments. The IRS calls these "failure to pay estimated tax" penalties. The penalty rate is currently around 3-4% of what you should have paid. To figure out what you should have paid, you generally need to pay either 90% of this year's tax or 100% of last year's tax (110% if your income was over $150,000) divided into four equal payments. For a first-time 1099 earner, this is tricky since you don't have a previous year of self-employment to reference. Moving forward, use Form 1040-ES to calculate your quarterly payments for the new tax year.

Be careful with deducting "every coffee you buy when working." That's not how it works. Regular coffee while you're working at home isn't deductible - that's just personal consumption. You can only deduct meals when you're traveling for business or having a business meeting with a client or potential client, and even then it's only 50% deductible in most cases.

I actually do use TurboTax! Didn't know they had this feature - where exactly do I find it? Is it in the regular app or do I need to sign in on desktop?

It's available in both the desktop and online versions of TurboTax. Sign in to your account, go to "Tax Tools" and look for "Tax Documents and Records." From there, you should see an option for requesting transcripts or viewing past returns. The feature might be called something slightly different depending on which version you're using. Remember though, it won't be completely unredacted, but sometimes shows different information than what's masked in the direct IRS portal. Worth trying before making an in-person appointment.

This is the correct answer! I'm a mortgage underwriter and we specifically need to see the Tax Return Transcript because it shows AGI and filing status, plus the Wage & Income to verify all sources of income. The Account transcript isn't what we're looking for in most cases.

Thank you so much for explaining this! I never considered that my W-4 might need updating with the new 401k contributions. Should I ask my HR department about adjusting my withholding, or is that something I need to figure out on my own?

You should start by using the IRS Tax Withholding Estimator on their website - it will help you figure out what adjustments you need to make. It's pretty user-friendly and walks you through everything step by step. After you know what changes you need, then talk to your HR department. They'll have the forms you need to update your withholding. Just explain that you want to adjust your W-4 because of the 401k contributions and income changes. They deal with this stuff all the time and should be able to help you complete the form correctly.

This is exactly what my financial advisor told me! She said big refunds are basically giving the government an interest-free loan all year. I adjusted my withholding too and have been putting the extra $200/paycheck into a high-yield savings account. By the time tax season came around, I had actually earned interest on that money instead of letting the IRS hold it for free.

But wait - I thought Roth contributions were tax deductible? Are you saying they're not?

You're confusing Roth contributions with traditional retirement contributions. Roth contributions (which is what code AA represents) are made with after-tax money, meaning you pay tax on that income now. The benefit is that when you withdraw the money in retirement, including all the growth, it comes out tax-free. Traditional 401(k) contributions (which would be code D in Box 12) are tax-deductible now, but you pay taxes when you withdraw the money in retirement.

For the AA codes (Roth 401k contributions), the amount is already INCLUDED in your Box 1 wages because Roth contributions are made with after-tax dollars. If you had traditional 401k contributions (which would be code D in Box 12), those would already be EXCLUDED from your Box 1 wages because they're pre-tax. You don't need to make any adjustments either way - the Box 1 amount is already correct.

Thank you! That makes sense. So basically the Box 1 amount is what I should be using for my tax return, and all these codes in Box 12 are just additional information that I don't need to do anything with.