Would this be complicated for companies to implement in their payroll systems? Seems like it would require significant software updates to track regular hours vs overtime hours differently for income tax purposes but the same for FICA.

It would definitely require payroll software updates, but it's not insurmountably difficult. Most payroll systems already track regular hours vs. overtime hours separately (for wage calculation purposes), so the capability to distinguish between them already exists. The tricky part would be updating the tax calculation logic to apply income tax to only regular hours while still applying FICA to all hours. Most major payroll providers would issue software updates to handle this, but there would certainly be an adjustment period. Smaller companies using more basic payroll systems might face bigger challenges implementing the change correctly.

Great question! Based on current tax law structure, even if overtime became exempt from income tax, it would still count toward the earnings threshold for the Additional Medicare Tax. This is because the Additional Medicare Tax is part of the FICA tax structure, not the income tax system. Since we've established that overtime would still be subject to FICA taxes even if exempt from income tax, the overtime earnings would still count toward that $200k threshold (or $250k for married filing jointly).

What about if someone comes to you with their return already prepared and just wants you to look it over quickly? Is that considered rude or do most preparers not mind that kind of quick review?

For a quick review of an already-prepared return, that's actually one of the trickiest requests. What seems like a "quick glance" to you actually requires me to understand your entire tax situation and verify all the numbers are correct. I'd need to check that you've applied the right credits, deductions, filing status, etc. Most preparers would consider this a paid service because we're taking on liability by giving an opinion. If I tell you "looks good" and there's actually an error I missed in my quick review, I've now given professional advice that could be problematic. The best approach is to ask if they offer a return review service and what they charge - many of us do offer this at a lower rate than full preparation.

That's such a good idea about the cookies or small gift! Makes it more friendly rather than transactional. I wonder though - does it make a difference if the tax person is a close friend vs just an acquaintance? I feel like the closer the relationship, the more awkward it could potentially be.

That's interesting! So with the 14-day rule, could we still deduct all the property taxes and mortgage interest on Schedule A as a second home? Also, does the 14-day rule still apply if you're using a property management company or Airbnb to handle the rentals?

Yes, with the 14-day rule, you can still deduct all eligible property taxes and mortgage interest on Schedule A as a second home, subject to the usual limits like the SALT cap. It's basically treated just like a second home for tax purposes, but you get the bonus of tax-free rental income. The 14-day rule absolutely still applies even if you use a property management company or Airbnb. The rule is based on the number of days rented, not how you manage the rental. So you can use Airbnb or a management company and still qualify for tax-free income as long as the total rental period is 14 days or less per year.

True story - my parents bought in a golf community in Florida last year and the HOA changed their rental rules 3 months later. Now they can't rent for less than 90 days which ruined their whole investment strategy!

Does filing first actually help though? I thought the IRS eventually figures it all out regardless of who files first? How long did it take to get your refund once you contested?

Filing first definitely helps because the e-file system will automatically reject the second return that tries to claim the same dependent with the same SSN. The person who files second will then have to paper file and contest, which puts the burden of proof on them. For me, it took about 4 months to get my refund after I contested the improper claim. The IRS had to review all my documentation proving my child lived with me majority of the year. They eventually ruled in my favor and released my refund, plus they likely assessed penalties on my ex's girlfriend for the improper claim. Not an enjoyable process but worth fighting for if it's your rightful credit!

Whoa, I had no idea the penalties could be that serious! Can the IRS really ban someone from tax credits for a whole decade??

This is super helpful! Question though - my daughter's 1098-T has an amount in Box 5 for scholarships. Do I literally just subtract Box 5 from Box 1 to figure out what expenses I can claim for the education credit?

Yes, that's exactly right. Take the amount in Box 1 (payments received by the school) and subtract the amount in Box 5 (scholarships/grants). The result is your eligible qualified education expenses that you can use for calculating education credits. Just be aware that if Box 5 is larger than Box 1, it means the scholarships/grants exceeded the tuition/fees, and you generally can't claim education credits in that case. Also, don't forget that expenses for books, supplies, and equipment required for courses can be qualified education expenses even if they weren't paid directly to the school (so they wouldn't be included in Box 1).

I used TurboTax last year for this. When it asks who paid, you can select "you" as long as you're claiming the student as a dependent. They don't need the breakdown of where each dollar came from - they just need to know if you (as the taxpayer claiming the dependent) are the one claiming the expenses.