Thanks for the tips! You know, I did receive a year-end bonus of around $2,000 that was taxed differently than my regular paychecks. Could that be part of the issue? Also, I have a high-yield savings account that earned about $800 in interest last year.

Yes, both of those things definitely contributed to your situation! Bonuses are typically withheld at a flat 22% supplemental rate, which might not be enough if you're in a higher tax bracket. And the $800 in interest income has no withholding at all, so you'll owe taxes on that amount when you file. For next year, you have two options to avoid owing: increase your regular withholding by submitting a new W-4 with additional withholding on line 4(c), or make estimated quarterly tax payments for your interest income. For someone in your situation, adding about $30-40 in additional withholding per paycheck would likely cover these extra income sources.

every time i use that irs withholding calculator thing i get different results lol. one time it said i should get an extra $50 taken out each check, then the next time it said i should get like $20 back each check. makes no sense

What about aggressive interpretations of gray areas though? Like if the law isn't super clear about something and you take a position that benefits you tax-wise, but there's a decent chance the IRS would disagree?

That's where the concept of "substantial authority" comes into play. If you're taking a position in a gray area, the question becomes whether you have a reasonable basis for your interpretation. Tax professionals typically look for about a 40% chance of prevailing if challenged to consider there being "substantial authority" for a position. If you're taking an aggressive but supportable position, the key is proper disclosure. By filling out Form 8275 (Disclosure Statement) with your return, you're telling the IRS "here's my position on this gray area" rather than hoping they don't notice. This disclosure protects you from accuracy-related penalties even if the IRS ultimately disagrees with your interpretation. It separates aggressive-but-legitimate planning from attempting to hide something.

Not reporting cash income is pretty clearly fraud, not strategy. The IRS definition of fraud includes "intentional wrongdoing with the specific intent to evade a tax known to be due." If you received income, it's taxable regardless of payment method. Pretty much any tax professional would tell you that deliberately not reporting income crosses the line from strategy into fraud. Legitimate strategy would be looking at whether that income qualifies for any deductions or credits, or considering ways to offset it with business expenses if it's self-employment income.

That's exactly what I'm worried about! Did your accountant give you any pushback when you showed up with your own 8949 already done? And did you tell them ahead of time or just show up with the completed forms?

My accountant was actually relieved when I showed up with the 8949 already completed. I did let her know ahead of time that I was going to handle the crypto portion myself so she wouldn't duplicate the work. She initially was concerned about the accuracy but after reviewing what I provided, she was comfortable using it. We confirmed I was using FIFO (First In, First Out) which is what she had been using all along. The key was making sure I gave her not just the summary figures but the detailed transaction listing so she could verify the work if needed. She ended up charging me her standard rate for the rest of my return without the crypto upcharge.

That's actually a terrible idea for most people. Creating an LLC doesn't change how crypto is taxed - it's reported as pass-through income on your personal return anyway unless you elect corporate taxation. Plus you'd have all the extra compliance costs of maintaining a business entity, separate accounts, etc. Would likely cost MORE in the long run.

Thanks for the clarification! I figured it might be too good to be true. Seems like using specialized crypto tax software and then providing the completed forms to my accountant is the better approach based on all the advice here.

That makes so much sense! So basically, the system might be treating my regular wages as my only income for calculating how much federal tax to take out, but then when I file my taxes, I have to report all the tip income too? If that's right, I'll definitely talk to our payroll person tomorrow. Is there specific wording I should use when I ask them about this?

You've got it exactly right. The system is likely withholding federal income tax as if your regular wages were your only income, but then at tax time, all those tips get added to your total income, pushing you into a higher tax bracket than what was used for your withholding calculations. When you talk to your payroll person, ask them: "Can you please confirm if my federal income tax withholding is being calculated based on my projected annual income including both my hourly wages AND reported tips?" If they say no or seem unsure, you can request that they "please adjust my withholding calculation to account for my total compensation including tips, not just my base wages.

This is what I did too! After years of fighting with our payroll department, I just calculated how much I typically owed ($1,200) and divided by 26 pay periods. I rounded up to $50 extra per paycheck on my W-4 and now I get a small refund each year. Sometimes the simplest solution is best.

Thank you for this tip! I didn't know about the transcript option. Would this show whether our CPA filed an extension for us? That's our biggest concern right now since the deadline has passed.

Yes, your tax transcript would show if an extension was filed on your behalf. When you access your transcript, look for a transaction code 460, which indicates an extension was filed. It should appear with the current tax year date. It will also show if a return was filed (transaction code 150) or if any payments were made. The transcript is basically a complete record of all transactions with the IRS for your tax account, so it's super helpful in situations like yours when you're in the dark about what actions were taken.

I agree with reporting to the state board, but be careful with threatening legal action. I did that with my accountant and it just made everything more complicated. I'd try the certified letter approach first before escalating.