That's a really good point about the 7.5% threshold! Does that calculation happen before or after the HSA distributions are considered? I always get confused about the order of operations for these deductions.

The 7.5% AGI threshold applies to your total qualified medical expenses after you've already removed any expenses paid with tax-free distributions like HSAs. So the proper order is: 1) Add up all qualified medical expenses including Medicare premiums from SSA-1099, 2) Subtract any portion paid with HSA funds or otherwise reimbursed, 3) Calculate 7.5% of your AGI, 4) Subtract that 7.5% threshold amount from your adjusted medical expenses. What remains is your deductible medical expense amount for Schedule A.

In my experience, TurboTax correctly identifies the IRMAA surcharges as deductible medical expenses when you enter the SSA-1099 information. They show up separately in the medical expenses worksheet. FreeTaxUSA required me to manually add these as additional medical expenses - they weren't automatically pulled from the SSA-1099 form.

Does this mean the information my friend got last year might be outdated? He was told something about a "50% ECI test" by his previous advisor. Is that still a thing or has it changed with these new regulations you mentioned?

The good news is that the "50% ECI test" is still part of the regulations, but how it's applied and documented has evolved. Under current rules, the partnership can provide a certification that less than 50% of the gain would be effectively connected income, which may reduce withholding obligations. However, the certification process is more formalized now, with specific timing requirements (must be certified within 30 days before the transfer) and there are stricter penalties for improper certifications. The partnership needs to provide this in writing, and the documentation standards are higher than before. Also, publicly traded partnerships have different rules entirely under the current regulations. So while the basic concept remains, the implementation details have definitely changed.

Yes, unfortunately you do have to look through to the lower-tier partnerships in a tiered structure. This is one of the most complex aspects of Section 1446f compliance. The "look-through" rule requires examining each lower-tier partnership to determine if they have assets that would generate effectively connected income. Each tier needs to be analyzed separately, and the proportionate share of ECI assets needs to be calculated. This is why many sophisticated partnerships provide certifications to their partners - it's nearly impossible for a partner to make this determination without information from the partnership itself.

If the first employer messed up, can the employee file some kind of complaint with a labor board or something? Or is this purely a tax issue between the employee and the tax authorities?

This is primarily a tax issue between you and the tax authorities. While the employer should have withheld correctly, the actual tax liability ultimately falls on the employee. Labor boards typically don't get involved in tax withholding disputes unless there's evidence of widespread and willful mishandling of employee withholdings. Your best bet would be to contact your state's department of revenue or taxation, as they might have procedures for reporting employers who fail to properly withhold local taxes. Some jurisdictions will contact the employer directly and may waive your penalties if they determine the employer was at fault.

Reciprocity agreements are super helpful! They typically exist between neighboring states or cities to prevent double taxation for commuters. You should definitely check if there's an agreement between your home city and the city where your husband's employers are located.

1 You're right, the letter is specifically asking about my business travel expenses ($4,200) and home office deduction ($2,800). Does that mean they're accepting the other deductions without question? Should I just focus on these two categories?

19 Yes, focus on just those two categories they're specifically questioning. The IRS typically doesn't expand an audit unless they find serious issues with the items they initially selected. The travel expenses will need more substantiation since they have stricter requirements - try to find emails about the conferences, calendar entries, photos from the events, or even statements from clients or colleagues confirming your attendance. For the home office, measurements of the space, photos, and a statement explaining how it was used exclusively for business purposes will help. Also look for utility bills, internet bills, or other expenses that support your use of that space as an office. Remember that your records don't have to be perfect - you just need to show reasonable evidence that these were legitimate business expenses.

3 When I went through an audit 2 years ago, they charged me the additional tax plus interest from the original due date. They didn't add accuracy-related penalties because they determined I made a good faith effort and had some backup documentation (even though incomplete). If they think you were negligent or deliberately claimed false deductions, that's when the 20% accuracy penalty kicks in.

So if I'm just a regular person making videos, I should leave the business name blank even if I have a channel name? What about if I'm using a DBA ("doing business as") for my content?

If you're just a regular person making videos, yes, leave the business name field blank. Your channel name isn't relevant for tax purposes unless you've formally registered it as a business name. For a DBA situation, it gets a bit more complicated. If you've officially registered your DBA with your state or county, you can put that in the "Business name/disregarded entity name" field. But if you haven't formally registered it and just use it informally as your brand, many tax professionals recommend leaving that field blank and just using your legal name. The most important thing is that your name and SSN match what the IRS has on file.

This is good advice. How can you check what address the IRS currently has on file for you without calling them though?