Thank you for bringing this up! We haven't updated our W-4s in years, and I didn't realize the form had changed. Do you know if it's too late to adjust withholding for this year to make any difference for the upcoming April tax bill? Or would this only help for next year?

It's probably too late to make much difference for this year's April tax bill since there are only a few pay periods left in December. However, I strongly recommend updating your W-4s now so you don't face the same issue next year. The new W-4 form is completely different from the old one. Instead of claiming allowances, you now need to account for multiple jobs either by checking a box in Step 2 or using the online IRS Tax Withholding Estimator. Given your income level, you might also need to add an additional dollar amount to be withheld from each paycheck in Step 4(c). Focus on your 401k contributions for this year's tax bill, and get your withholding right for next year.

Great point about RMDs! My parents got hit hard with those once they turned 72 (now it's 73). Their tax bill went up by thousands even though their actual spending didn't change at all. And the penalties for not taking them are brutal - 25% of the amount you should have withdrawn!

10 What's the threshold for when you need to start making those quarterly payments? My wife's photography business is just getting started and probably won't make much profit the first year.

5 Generally, you need to make estimated tax payments if you expect to owe $1,000 or more in taxes when you file your return. For a new business, it can be tricky to estimate, but it's based on the profit (income minus expenses), not just the total income. Since your wife is just starting out, you might not need to worry about this the first year if she's investing in equipment and has more startup expenses than income. But it's definitely something to keep in mind as the business grows. The IRS website has a worksheet to help figure out if you need to make these payments.

16 Do you need a business license before you can start deducting business expenses? My wife has been taking photography jobs but hasn't formally registered anything yet.

I hadn't considered Xero! How does it handle multiple income streams from different companies? And did you find the transition process difficult?

Xero handles multiple income streams really well. You can set up different tracking categories for each carrier you work with, making it easy to see which companies are generating the most revenue for you. This has actually helped me focus my efforts on the most profitable relationships. The transition wasn't bad at all. They have import tools that can bring over your data from QuickBooks or even spreadsheets. Took me about a weekend to get everything set up and learn the basics. Their support team was helpful when I had questions about some of the more specific features. The mobile app has been a game-changer for me - way better than what I had before.

Do you have a template you could share? I'm just starting out and trying to keep costs low while still being organized enough for taxes.

That's a good point! I'll go through line by line on my 1040 again. When you had this situation, was your excess SS tax shown separately anywhere on the final 1040 form, or was it just included in a larger total? I'm having trouble tracing where exactly the $9,500 should have been applied.

The excess SS tax won't appear as a separate line on Form 1040 itself. It starts on Schedule 3, Line 11, then gets included in the total on Schedule 3, Line 15. That total then transfers to Form 1040, Line 31 as "other payments and refundable credits." Line 31 then gets added with your withholding and other payments to create Line 33 "total payments." So to trace it, check Schedule 3 first to confirm the excess SS tax is on Line 11, then follow the totals to make sure they correctly transfer to Form 1040. If Line 33 of your 1040 doesn't include the excess SS amount, that's when you know there's an error that needs amending.

Good point about self-employment complicating things. I had this exact issue last year with a mix of W-2 and 1099 work. The tax software completely messed up my excess SS calculations. Ended up having to manually work through the calculations using the worksheet in Publication 505.

Which state are you in? I'm in NJ and now I'm worried about this.

I'm in Massachusetts. Each state has their own rules - I believe in NJ you can deduct gambling losses but only against gambling winnings, similar to federal. But always check with your state's department of revenue to be certain, as these rules change occasionally, especially with the expansion of legal online betting. Massachusetts doesn't allow gambling loss deductions at all on the state return, which means you pay state tax on all your winnings regardless of losses. Several other states have similar limitations.

Thanks for bringing this up! I haven't received any W-2G forms yet, but I did have a few big wins that were well over $600. Do you know if the betting sites report this information to the IRS directly? I'm wondering if they'll know about my winnings even if I don't report them (though I plan to report everything properly).

Yes, the betting platforms do report those large winnings to the IRS using your SSN, so the IRS will know about them regardless of whether you receive a W-2G or not. The platforms are required to report certain large wins, and some will automatically withhold taxes on major payouts. If you don't report winnings that were reported to the IRS, you'll almost certainly get a notice from them later. That's why it's crucial to keep good records of both wins AND losses throughout the year, so you can properly document everything if needed.