I didn't have any unemployment this year, but I did cash out about $2000 from an old 401k from a job I had years ago. Could that affect things? I completely forgot about that until just now.

That would absolutely affect your taxes! 401k withdrawals are typically taxed as ordinary income, and there's usually an additional 10% early withdrawal penalty if you're under 59½. So on a $2000 withdrawal, you could be looking at your regular tax rate plus potentially a $200 penalty. This is definitely what caused your situation. The withdrawal added $2000 to your taxable income, and if they only withheld the standard 20% (which is common), that might not have covered your full tax obligation including the penalty. Mystery solved!

This is a good point. I had a similar experience a few years back. Made almost the same income but lost the American Opportunity Credit when I graduated. My refund dropped by like $1000 even though nothing else changed!

Thanks for sharing your experience! What specific types of grants did your spouse have that were affected by filing status? My wife mentioned something about a state grant but I'm not sure which one exactly.

My wife had a combination of a federal Pell Grant and a state grant that was specifically for lower-income students returning to education. Both had income limits that would have been exceeded if we filed jointly. The state grant (in California) was particularly sensitive to income changes. If your wife has a state grant, that's a huge flag to investigate further because many state grants have strict income requirements that can disappear entirely once you cross a threshold - unlike federal aid which often gradually phases out. I'd recommend having her contact her school's financial aid office directly to ask how joint filing would impact her specific grants. They usually have better information than the general FAFSA helpline.

Yes! The new FAFSA has increased the income protection allowance, meaning more of your income is shielded from aid calculations. For married couples, you get a higher protection amount than single filers. This actually makes filing jointly slightly LESS harmful to aid eligibility than before.

Can you explain more about this S-Corp election thing? At what income level does it actually start making sense from a tax perspective?

The S-Corp election starts making financial sense when your business profit is high enough that the tax savings exceed the additional costs of maintaining an S-Corp. For most small businesses, that's typically around $60,000-$80,000 in annual profit. The primary tax advantage comes from splitting your income between a reasonable salary (which still gets hit with self-employment tax) and distributions (which avoid self-employment tax). But there are additional costs - you'll need payroll processing, more complex tax filings, and possibly higher accountant fees. It's definitely not worth it for businesses with modest profits.

Which state are you in? Some states have crazy high annual LLC fees! California is brutal at $800/year minimum.

11 Do you need to be a student at the college to attend these workshops? I've never thought about checking community colleges for this type of resource.

21 Nope! The small business workshops are open to the community, not just students. That's what makes them such a great resource. They're funded through the college's community education program and some small business grants. Check your local college's "Community Education" or "Continuing Education" section on their website. If they don't have anything listed, also try your local Small Business Development Center (SBDC) which offers similar free workshops.

13 This is such good advice! I used to just toss receipts in a shoebox and it was a disaster come tax time. Is there a specific app you recommend for tracking all this stuff?

Thanks for the tip about Form 9465. Is that something I'd need to submit now, or when I actually file my taxes next year? And how long does it typically take for the IRS to approve an installment plan?

You'll submit Form 9465 when you file your tax return, so you don't need to worry about it until tax time next year (unless you're filing for a previous year). You can actually include it right with your tax return, which is the easiest approach. The IRS is pretty quick with streamlined installment agreements. If you owe less than $10,000, request a reasonable monthly payment, and have filed all required tax returns, approval is usually automatic and happens within about 30 days. If you apply online through the IRS website after filing, it can sometimes be approved immediately. Just make sure when you file that you still pay as much as you can upfront - this reduces the amount subject to penalties and interest. Every dollar you can pay when filing saves you money in the long run!

Good point! Oregon has pretty high state income taxes too. OP mentioned being in Washington, which doesn't have state income tax, but if they worked in OR at all or live near the border and work in OR, they could definitely have state tax obligations.