Do you know if FreeTaxUSA handles student loan interest deductions well? I heard some of the free services don't guide you through all the deductions you might be eligible for.

FreeTaxUSA definitely handles student loan interest deductions well. They have a specific section for education expenses and loan interest where you can enter your 1098-E information. The software will walk you through exactly what qualifies and how much you can deduct. Most tax software, including FreeTaxUSA, is actually pretty good about guiding you through common deductions. Where the paid versions sometimes have an advantage is with more complex situations like self-employment, rental properties, or unusual investments. For standard deductions like student loan interest, education credits, and basic itemized deductions, the free version works great.

I actually did this last year! I ran my info through both FreeTaxUSA and TurboTax just to compare. The federal refund amount came out exactly the same on both. The only difference was that TurboTax wanted to charge me $89 for exactly the same result I got for free with FreeTaxUSA.

Does filing an extension help if I already got the tax bill? I thought that meant they had already processed my return.

If you've already received a tax bill, that means your return has already been filed and processed, so an extension wouldn't help in that case. Sorry I misunderstood your situation. In that case, your options are mainly setting up a payment plan with the IRS (installment agreement), making an Offer in Compromise if you qualify, or requesting Currently Not Collectible status if you're truly in financial hardship. Definitely contact the IRS to discuss your options before ignoring the bill, as penalties and interest will continue to accrue.

This is solid advice. I did this last December and was able to book about $12k in losses while keeping basically the same crypto portfolio. Just make sure you document everything meticulously because the IRS loves to scrutinize crypto transactions.

This is so true. I work in payroll and we've had employees try to claim exempt when they clearly don't qualify. We're actually required to report suspicious W-4 forms to the IRS. The system has multiple layers of checks and balances!

That's actually a very risky approach. If you intentionally underwithhold throughout the year planning to "catch up" later, you may still face underpayment penalties even if you pay the full amount by tax day. The IRS requires quarterly estimated payments precisely to prevent this strategy. The legal minimum withholding typically requires you to pay either 90% of your current year tax or 100% of your prior year tax (110% if your income is over $150,000) through withholding or quarterly estimated payments throughout the year. Anything less can trigger penalties regardless of whether you eventually pay in full.

Do scholarships count as taxable income? My financial aid letter called everything "scholarships" but some were grants I think.

Scholarships and grants used for qualified education expenses (tuition, fees, books, required supplies) are generally tax-free. However, if you receive scholarships or grants that exceed your qualified education expenses, or if they're used for room, board, or optional expenses, then that portion becomes taxable income. Your 1098-T should break down what was paid for tuition and qualified expenses, but you'll need to determine yourself if any scholarship/grant money went toward non-qualified expenses like housing or meals. FreeTaxUSA will walk you through this calculation when you enter your education information.

I had to switch to the Lifetime Learning Credit last year after using AOTC for 4 years. The Lifetime Learning Credit is definitely not as generous - only 20% of up to $10k in expenses (max $2,000) and it's non-refundable. But it's better than nothing after your AOTC eligibility runs out.

Does the same apply for H&R Block software? I have a similar situation with U.S. Government Securities but I'm using H&R Block instead of TurboTax.

Yes, this applies to H&R Block software too. The process is similar - you'll need to enter the U.S. Government Securities income information at the federal level first, and then when you get to the filing stage, you should see options for which amended returns you want to file. H&R Block's interface is slightly different, but the concept is the same since all tax software starts with federal information and flows to state. Look for a filing selection page toward the end of the amendment process where you can choose to only file the state amendment.

In my experience, if you file the amended state return promptly after discovering the error, many states will waive penalties but might still charge interest from the original due date. I amended my NY state return for U.S. Government Securities income I missed, and they charged interest but waived the penalty since I voluntarily corrected it.