Thank you! How much should I be setting aside for those quarterly payments? Is it just a percentage of what I make each quarter?

A good rule of thumb is to set aside about 30% of your profit for taxes. This should cover both income tax and self-employment tax for most people. But it does depend on your tax bracket and what other income you have. The payments are supposed to be based on your projected annual income, not just what you made that quarter. The IRS wants relatively even payments, not payments that fluctuate wildly from quarter to quarter. You can use Form 1040-ES to calculate the recommended amount, or many tax software programs can help you estimate this after you file this year's return.

This is super helpful info - I didn't even think about the mortgage aspect. I'm going to start gathering those bank statements now to show the deposits. Did you have to get anything special from your clients or was the paper trail enough?

The paper trail was enough in my case - bank statements showing the deposits plus my QuickBooks reports that matched those deposits. For the larger clients, I also had copies of the contracts showing the agreed payment amounts. No need to get anything special from the clients themselves. The lender just wanted to verify that the income was legitimate and consistent.

9 I think your tax preparer might have been wrong. I had the same situation and called the IRS directly (using that Claimyr service someone mentioned) and they told me the preparer was incorrect. The advance payments need to be reconciled on the return of whoever is claiming the children as dependents, regardless of who received the payments. You might have unnecessarily complicated your taxes.

16 You might be right. After reading all these responses, I looked into it more and it seems like my preparer may have been overly cautious or mistaken. According to IRS Publication 1054 (which I just looked up), the person claiming the qualifying child should report the advance payments. Looking back at our returns, we may have done it wrong and I'm going to ask about filing an amended return. Thanks for bringing this up - sometimes even paid preparers make mistakes with unusual situations.

17 I used TurboTax last year for this exact scenario. It actually handles it pretty well - there's a specific section where it asks if you or your spouse received advance Child Tax Credit payments. It then asks you to enter the amount from Form 6419 regardless of whose name is on the form, as long as you're claiming those children as dependents. It was surprisingly straightforward!

I tried that but I'm confused about which numbers to enter exactly. The form has so many different sections and I'm worried about double-reporting income or missing something. Does anyone have a simple guide for which boxes from the TD Ameritrade form correspond to which fields in TurboTax?

Look for the summary section on your TD Ameritrade 1099 that specifically mentions Section 1256 contracts. You'll need the "Profit or (Loss)" amount, which will be further divided into the 60% long-term and 40% short-term split. In TurboTax desktop, go to Federal → Income → Investment Income → Futures and 1256 Contracts. There will be fields specifically for entering these amounts. Make sure you're looking at the right tax year's form, and don't include any amounts that might have been reported elsewhere (like regular capital gains). TD Ameritrade usually provides good summaries at the beginning of each section that make it clear what goes where.

100% agree! I've used TurboTax for 7 years and every year it's like learning a new software. The desktop version is even worse - completely different workflow than the online version. I switched to FreeTaxUSA this year and it was way more straightforward with investment reporting, including Section 1256 contracts.

Thanks for the FreeTaxUSA suggestion, I might check that out next year. Did it handle the 60/40 split for Section 1256 contracts correctly? That's always been the trickiest part for me, making sure the long-term/short-term treatment is applied properly.

Thank you for this explanation! I think this is exactly what happened - we each used our own accounts thinking TurboTax would somehow combine them. So if we amend, should we just use my wife's account since her return was already accepted?

Yes, since your wife's return was already accepted, you should use her TurboTax account to prepare the amended return. You'll log into her account, locate her accepted return, and then select the option to amend it. When amending, you'll need to add all your income information, deductions, and credits to create a complete joint return. Make sure you have all your tax documents ready, including your W-2s, 1099s, and anything else relevant to your tax situation. TurboTax will guide you through the amendment process, but just remember you're essentially creating a new joint return that includes both of your information.

This! My husband and I accidentally filed separately last year and were about to amend until we realized we'd actually save about $1800 by staying with separate returns due to his income-based student loan situation. Definitely worth checking both scenarios.

I didn't even know tax court mediation was an option! How do you request it? Is there a specific form or process? And does it delay your actual court date if you try mediation first?

You can request mediation by contacting the IRS attorney assigned to your case. There's a form (can't remember the number offhand) that you submit to formally request it. Usually, they're pretty open to mediation because it saves them time and resources too. It typically doesn't delay your court date significantly because they'll schedule mediation well before your hearing. If mediation fails, your court case proceeds as planned. In my experience, the IRS attorney will reach out to you before your court date anyway to discuss possible settlement, so you might as well be proactive and suggest mediation yourself.

This is such good advice. My friend lost her case not because she was wrong, but because she couldn't find the right documents during the hearing and came across as unprepared. The judge even commented on it in his ruling.

Yeah, presentation makes a huge difference. Another tip: practice explaining your case out loud beforehand. My brother said he froze up initially because it's intimidating, but he'd practiced his explanations so much that he was able to get back on track. Also, be respectful and never interrupt the judge or IRS attorney. My brother said the judge was actually quite helpful in guiding him through the process, but he saw another self-represented person get on the judge's bad side by being argumentative and disorganized. That case did not end well for them.