Thanks for mentioning this. I asked her and surprisingly, she says she's never received any notices from the IRS questioning her filing status. Which seems weird to me? Wouldn't they automatically catch that we're married but filing differently?

The IRS system isn't as automated and efficient as people think. They have matching programs that flag obvious discrepancies like reported income not matching W-2s, but filing status verification is more complex and often requires human review. The IRS is severely understaffed and underfunded, so many issues that should be caught slip through. This doesn't mean you're in the clear though - they can still discover it during a random audit or if another issue triggers a review of her returns. The fact that she hasn't received notices yet is actually pretty common, but doesn't mean it won't become a problem later.

This is crucial. If you've been claiming the same dependents on your return while she's also claiming them as HOH, that's definitely going to raise red flags for the IRS.

Oh that's a really good point I hadn't considered! I did have some taxes taken out of my paychecks that year. Do you know if I'd still be able to get that money back even though it's been a few years?

Yes, you can still get that money back! For 2018 returns, you have until April 15, 2022 to file and claim any refund owed to you. After that date, any unclaimed refund becomes property of the Treasury. If you're due a refund, there's actually no penalty for filing late. The penalties only apply when you owe taxes. So this might be a win-win - you comply with the IRS request and potentially get some money back at the same time.

Also worth noting that if you had self-employment income over $400, you're required to file too, even if your total income is below the standard threshold. Made that mistake my first year doing gig work.

Can you explain how tax loss harvesting would work with RSUs? I'm in a similar situation with some underwater tech stocks I could potentially sell, but I wasn't sure if there were special rules for harvesting losses against RSU gains.

Tax loss harvesting works the same with RSU gains as with any other capital gains. If you sell investments at a loss, those losses can offset your capital gains dollar-for-dollar. So if you have $10,000 in capital gains from your RSU sales and sell other investments at a $6,000 loss, you'd only pay taxes on $4,000 of net capital gains. Just be careful of the wash sale rule - don't buy substantially identical securities within 30 days before or after selling at a loss, or you can't claim the loss for tax purposes. This applies across all your accounts, including retirement accounts, so it's easy to accidentally trigger if you're not careful.

This is great advice. My company offers this too and I had no idea until HR mentioned it during a benefits review. Saved me from having to calculate quarterly estimated payments.

Good point about state fees! Also, does anyone know if you can change your mind later? Like if we start as a partnership, can we convert to S Corp next year if we decide that's better?

Yes, you can absolutely change later. Many businesses start as partnerships for simplicity, then convert to S Corps when their profits justify it. The conversion is straightforward - you file Form 8832 to elect to be taxed as a corporation, then Form 2553 to elect S Corp status. Just be aware there are timing requirements. Generally, if you want S Corp status for a particular tax year, you need to file within the first 2.5 months of that year (or within 75 days of forming your business if it's a new entity).

This is what tipped our decision for our handyman business. We needed to buy a lot of equipment the first two years, so we stayed as partnership. Year three we switched to S Corp once we were taking home steady money. Saved about $6k in SE taxes last year alone!

Thank you so much for sharing your expertise! This confirms my suspicions. Would it raise any audit flags if we've submitted Form 4562 for many years and suddenly stop, even though we're still claiming depreciation on the same equipment?

Yes, it could potentially raise questions during a review or audit. Consistency in filing practices is something that the IRS looks at. When a business suddenly changes how they're reporting long-standing deductions, it can trigger closer examination. More importantly, Form 4562 provides the detailed documentation of your depreciation calculations. Without it, in the event of an audit, you'd need to provide alternative, equally detailed records showing how you arrived at the depreciation amounts claimed on your return. Having the form as part of your filed return establishes a clear record of your depreciation methodology.

I tried using the IRS interactive tools for my small business and found them frustratingly limited. They're okay for basic questions but not great for specific form requirements for business scenarios. For something like Form 4562, you'd be better off reading the actual form instructions directly from the IRS website.