I hadn't even thought about state taxes! Do you know if I need separate documentation for state tax purposes versus federal for the donated equipment?

Generally the same documentation works for both federal and state returns. The donation receipt from the school and your completed Form 8283 should be sufficient for both. However, states sometimes have their own forms for charitable contributions that exceed certain thresholds. Where I live, donations over $10,000 required a state-specific form. I'd recommend checking your state's tax department website or calling them directly to confirm any additional requirements.

Good point! You can also check their status yourself using the IRS Tax Exempt Organization Search tool online. Just enter the organization's name or EIN and it'll tell you if they're qualified to receive tax-deductible donations.

Would it also be smart for OP to get something in writing from the relatives stating it's a gift with no strings attached? Or would that actually look worse to the IRS since it shows they discussed the tax implications?

That's a thoughtful question. I don't think a formal gift letter is necessary for smaller amounts like this, and you're right that it might actually draw more attention to the arrangement. For larger gifts (especially those approaching the annual gift tax exclusion amount), having a simple gift letter is common practice and wouldn't raise eyebrows. But for a $375 gift, normal documentation like a check or bank transfer record showing it came from the relatives to you personally should be sufficient. The key is making sure there's nothing in writing that indicates a requirement to donate the money.

I used FreeTaxUSA and they handled this fine too. They specifically had a help article about this exact scenario that explained it's legitimate as long as you have full control of the money before donating it. Definitely cheaper than TaxAct or TurboTax if you're looking to save some money.

Thanks for bringing this up! We do have our own EIN that we got when we first hired our nanny. HP has been using that for all the filings and payments. So if I understand correctly, I should still file Schedule H on our personal return, but make sure to include our EIN on it so the IRS can connect the dots with the payments we've already made?

Yes, exactly! Since you have your own EIN and the payments were made under that number, you should definitely file Schedule H with your personal return and include that same EIN on the form. This will help the IRS match up the payments you've already made through EFTPS with your personal tax return. You should also contact HP and tell them to stop filing 940/941 forms going forward, since Schedule H is the proper way to report household employment taxes. They can still calculate your nanny taxes and make payments through EFTPS using your EIN, but the formal reporting should be done through Schedule H on your personal return.

It won't necessarily trigger an audit, but it could cause confusion at the IRS that might lead to notices being sent to you. The issue is that you'd be reporting the same employment taxes in two different ways. The best approach is to contact your payroll provider immediately and have them stop filing the 940/941 forms if they've been doing so. Then file your personal return with Schedule H. For any quarters where 940/941 forms were already filed for 2024, you should make sure the Schedule H reflects those payments were already made. This is definitely a situation where getting professional tax advice specific to your situation would be worthwhile to avoid future complications.

That's a really interesting point I hadn't considered. Do you think reporting them could cause problems for us though? We're more concerned about getting our taxes right than getting the company in trouble. Would filing that SS-8 form someone mentioned above trigger some kind of audit or investigation?

Filing an SS-8 does alert the IRS to potential misclassification, which could trigger them to look at the company's practices. However, this wouldn't cause problems for you - in fact, it could work in your favor. If the IRS determines your wife should have been classified as an employee, you would only be responsible for the employee portion of FICA taxes (7.65%) rather than the full self-employment tax (15.3%). The process is designed to protect workers, not penalize them. You can file the SS-8 and still go ahead with filing your taxes using Schedule C in the meantime. If the determination later comes back in your favor, you can file an amended return. Many companies incorrectly classify workers because they don't understand the rules or they're trying to save money. The determination process is one way the IRS educates employers and protects workers from bearing tax burdens that should be the employer's responsibility.

You definitely need TurboTax Self-Employed for any 1099-NEC income. The Deluxe version won't let you file Schedule C which is required for reporting self-employment income. Learned this the hard way last year and had to upgrade midway through filing.

That's really helpful to know! Do you happen to remember what that special rule for the Earned Income Credit was called? I'd like to look it up so I can mention it specifically when I talk to another tax preparer.

The special rule relates to disability benefits that are taxable in the year you reach minimum retirement age. If you receive disability benefits from an employer plan and report them as wages, those can count as earned income for the EITC until you reach minimum retirement age. It's in IRS Publication 596 under "Disability Benefits and the EIC." The exact wording gets technical, but basically, if you're getting taxable disability benefits and haven't reached retirement age, you might qualify. It made a huge difference for my sister's refund.

I used FreeTaxUSA last year with SSDI and a dependent. It worked well and asked all the right questions about my disability income and how it was reported. They had specific sections for disability benefits and walked through all the potential credits. Don't use the totally free version though - spend the extra $7 or whatever for the deluxe version which gives you better support for credits and deductions. Saved me way more than that $7 in the end.

Thanks for the recommendation! I'll check out FreeTaxUSA. The $7 upgrade sounds worth it if it helps find all the credits. Did they handle state taxes well too or just federal?