Thanks for this list! The letter mentions error code 1040-SC3-745 which apparently relates to Line 10 on Schedule 3 (Excess Social Security and tier 1 RRTA tax withheld). I don't even remember entering anything there so I'm super confused. Could this happen if I had multiple W-2s and the software calculated something wrong there?

Yes, that's exactly what probably happened! Error code 1040-SC3-745 is specifically for excess Social Security withholding issues. This typically occurs when you had multiple employers during the year and collectively they withheld more than the maximum Social Security tax allowed. The 2024 Social Security wage base limit is $168,600, meaning that's the maximum amount subject to Social Security tax. If your combined wages from multiple jobs exceeded this limit, you're entitled to a credit for the excess withholding - but the calculation needs to be precise. The tax software should have calculated this correctly if you entered all W-2s accurately. Double-check that you entered the Social Security wages (Box 3) and Social Security tax withheld (Box 4) exactly as they appear on each W-2.

The rejection letter phone numbers are just as useless as the main IRS line. I called the "dedicated" number on my rejection letter 23 times last month and never got through. Just endless "due to high call volume" messages and disconnects.

Does anyone know if this would be different if I was selling things regularly? Like I sell my old electronics every year when I upgrade. Does that make it a "business" for tax purposes?

The distinction between hobby/personal sales and a business depends on several factors, not just frequency. The IRS looks at whether you're trying to make a profit, how much time you spend, how you conduct the activity, and if you depend on the income. If you're just selling your own used personal items (even if you do it yearly), that's generally not a business. You're just recouping some value from your personal property, especially if you're typically selling at a loss compared to what you paid. However, if you start buying items specifically to resell at a profit, that crosses into business territory.

I got a letter from the IRS last year about "unreported income" from a 1099-K. It wasn't a full audit, but I had to explain that it was from selling personal items at a loss. They accepted my explanation after I provided some documentation, but it was still stressful.

Thanks for mentioning this! I'm in Washington state so we don't have state income tax - would that make the sales tax deduction more valuable for me compared to someone in a state with income tax?

Yes, that makes a big difference! Since Washington has no state income tax, the sales tax deduction becomes much more valuable for you. Residents of states without income tax (like Washington, Florida, Texas, etc.) almost always benefit more from deducting sales tax. In your case, since you mentioned being a new homeowner with renovations and furniture purchases, you might actually be closer to making itemizing worthwhile than you think. Your property taxes alone could be substantial, and when combined with mortgage interest and your higher-than-average sales tax from major purchases, you might cross the threshold where itemizing beats the standard deduction.

This is oversimplified advice. It completely depends on your state's tax situation and individual circumstances. I have a modest mortgage but live in NJ with crazy property taxes, and itemizing saves me over $2000 compared to the standard deduction. Everyone's situation is different.

What about the Robinhood stuff? I heard investment income makes things more complicated?

The Robinhood with only $1 in earnings would be reported on a 1099-B and possibly a 1099-DIV, but it's extremely simple to incorporate. Most tax software and preparers just input the numbers directly from these forms. It literally adds maybe 5 minutes to the preparation process. Investment income only becomes significantly complicated when you have multiple transactions throughout the year, complex basis calculations, or substantial amounts that might trigger additional taxes like NIIT (Net Investment Income Tax). A single stock with minimal earnings wouldn't justify any meaningful price increase.

Does FreeTaxUSA handle the EV tax credit stuff properly? I'm buying a Tesla next month and worried about screwing that up.

OMG I think you just solved it! I just checked our W-2s and his does show "Single" for the withholding rate even though we've been married for 3 years! That explains why we went from refund to owing when I added his income. Do we need to file a new W-4 with his employer to fix this for next year?

Yes, you'll need to submit a new W-4 to his employer right away to correct this for the current tax year. Make sure you select "Married filing jointly" on the form and consider if you need additional withholding in section 4(c) to cover any potential shortfall. For this year's taxes, unfortunately you'll still need to pay what you owe based on the incorrect withholding. But fixing the W-4 now will prevent the same problem next year. Also, double-check both your W-4s annually - employers sometimes make mistakes or don't update their systems properly.

Last year I calculated both ways and filing jointly saved us about $2,300 because of the tax credits we would have lost filing separately. Definitely worth running both calculations!