Thanks for this advice! I just started downloading all my bank statements. I'm realizing I had way more little side jobs than I remembered. Should I be separating the income by different clients/sources or just lumping all 1099 work together when I get organized?

For organization purposes, it's good to separate income by different clients, especially if you received actual 1099 forms from them. This makes verification easier if the IRS has questions. When you actually file though, all your self-employment income will be reported on Schedule C (Profit or Loss from Business). You'll list the total income there, but keeping records of which client paid what is important for your own documentation. If you earned more than $600 from any single client, they should have issued you a 1099, and the IRS will be expecting to see that income reported on your return. The more organized you are by client source now, the easier it will be to match everything up when filing.

Be really careful with tax relief companies. Most of them charge thousands upfront and just do what you could do yourself by calling the IRS directly. They advertise "pennies on the dollar" settlements (called Offers in Compromise) but most people don't qualify for those. For unfiled returns, you're much better off working with a local EA or CPA who charges a reasonable hourly rate rather than a tax relief company charging huge fees.

Thanks for this suggestion! I hadn't considered FreeTaxUSA. What's the difference in features compared to TurboTax? Is it as user-friendly for first-timers?

FreeTaxUSA has all the same forms and capabilities for small business owners, but the interface is slightly less polished than TurboTax. Still very user-friendly though - it asks you all the same questions to find deductions and walks you through Schedule C step by step. The big difference is price - usually under $20 for state filing compared to TurboTax's $120+ for self-employed. The federal filing with FreeTaxUSA is completely free, even with business income. It doesn't have the fancy import features for certain banks, but if you're organized with your numbers, it works perfectly.

Do you pay for the Self-Employed version of TurboTax or can you get by with the cheaper options? I'm in a similar situation and trying to decide which version to buy.

Did you do it all yourself or use a tax service? I've been having taxes withheld from my paychecks so I'm hoping that helps my situation. How long did the whole process take from when you started catching up until you had everything resolved?

I started with a free consultation with a tax resolution firm, but their fees were outrageous ($3,000+), so I ended up doing it myself with regular tax software. I just went year by year. Since you've had withholding, that will definitely help - you might not owe as much as you fear. The whole process took about 3 months from when I started gathering documents until everything was filed and my payment plan was set up. The most time-consuming part was tracking down old W-2s and 1099s from previous employers. If you're missing any forms, you can request wage transcripts from the IRS that show what was reported under your SSN for each year. The actual filing part went pretty quickly once I had all the documents.

100% agree. Those companies often charge thousands for what amounts to filling out an installment agreement form (which you can do yourself online) and maybe making a few phone calls. They make it sound like they have special relationships with the IRS or can get "pennies on the dollar" deals, but that's rarely the case.

Do you know if this credit is refundable? Like if I don't owe any taxes, would I still get that $500 as part of my refund?

The Credit for Other Dependents is non-refundable, which means it can reduce your tax liability down to zero, but you won't get any excess amount as a refund. So if you only owed $300 in taxes, you'd only benefit from $300 of the potential $500 credit. However, having your aunt as a dependent might make you eligible for Head of Household filing status if you qualify, which has better tax rates and a higher standard deduction than filing as Single. That could potentially save you more than the $500 credit itself.

Food stamps/SNAP benefits aren't considered taxable income, so they don't count toward the gross income limit for dependents. They do count as support, but not as income for the income test. So your mother-in-law can still qualify as your dependent as long as her actual taxable income is under the limit (which is around $4,850 for 2024) and you provide more than half her total support.

This is such a good point that I didn't consider! I'll definitely call the state tax department directly tomorrow and ask about this. Do you think I should mention this to my auditor first, or just go directly to the taxpayer assistance division? Also, when you said they just needed you to "verify some details" - what kind of information did they ask for? I want to make sure I'm prepared before I call.

I would contact the taxpayer assistance division first, then let your auditor know what they said. Sometimes auditors are limited in what assistance they can provide, while the taxpayer help division is specifically there to solve these kinds of issues. For verification, they asked me to confirm my social security number, the employer's name (which they had on file), and the approximate total income I had reported from that employer. They also asked for my current address to update their records. Some states may ask for additional identity verification like your date of birth or information from your most recent tax return. Having a copy of your 2016 tax return handy would be helpful even if you don't have the W-2.

Most states follow a 3-year statute of limitations similar to the IRS, BUT there are important exceptions. If they suspect substantial underreporting of income (usually 25%+), many states can go back 6+ years. And if they suspect fraud, there's typically no time limit at all. Some states also have different rules - California and a few others have 4-year standard limits, and certain tax situations can extend deadlines.