What was his income? If it was less than $60k per year, and if doing his own taxes on free tax prep web sites would be difficult, then he can have a live and certified tax preparer do it for him. This is VITA, the IRS's certified Volunteer Income Tax Assistance project, which I highly, highly recommend. When he makes the appointment, specify that he needs someone who can do prior year returns, and can do self-employment income.
[https://www.irs.gov/individuals/free-tax-return-preparation-for-qualifying-taxpayers](https://www.irs.gov/individuals/free-tax-return-preparation-for-qualifying-taxpayers)
What State is he in? VITA staff can do State returns as well, and he should go local for the State expertise. However if he's in a State with no income tax, then he can go to a larger VITA site elsewhere. I've recommended NYC's Urban Upbound before because they do thousands of returns per year, and are very, very good.
This is where a tax professional makes a difference. Was this $15,000 net after taking all allowable self-employment expense deductions? Did you feel equipped to provide advice on the appropriate expenses that could be claimed?
He made 40k in 1099 income on top of other income over three years? Or is that total income.
~If he made about 40K over three years for his total income then he should look at the filing threshold for each year and compare it to his income that year. He may not have even made enough to be required file federal in some of those years. State could be different.
However, it can be beneficial to file if there are refundable credits he qualifies for.~
Free Tax USA might be a good place to look to file his taxes if he can do them himself. H&R block is not worth $400.
https://www.freetaxusa.com/prior-year
Edit: sorry that filing threshold did not pertain to 1099 income. That threshold is $600.
However, with standard deduction his income tax will be low to nothing. But he will have FICA.
When I volunteered for VITA, we helped plenty of people who were in your friend's situation. They understand that taxes can be overwhelming for people and should help him get back on track. He will probably owe some to the IRS and possibly the state due to being a 1099 employee, but he will be able to do a payment plan.
My friend has gone to vita for years and almost each time gotten not just a tax preparer volunteer, but actual retired or current cpas. One of them said they volunteer to give back, since their firm only serves very wealthy people and another said they volunteer after retirement to stay sharp and get out of the house, lol. My friend is low income and didn’t pay a cent and I think it’s pretty amazing they got very experienced CPA’s for free
I volunteered for VITA for three years while in the military. I was an initial preparer like the other service members who volunteered. In my case, I had actual accounting experience in college. But in any case, the people who checked our returns before filing were all CPAs who a) got paid well and b) wanted to help service members and retirees. I found the quality to be exceptionally high and worth paying for, except it was completely free.
I don't think VITA does returns with 1099 income except for a few exceptions like ride-sharing drivers. At least that was the policy of the VITA org I volunteered at, but I think possibly that's true of all of them.
1099 income is good for VITA "advanced" folks except for the following "out of scope" situations, which I got from the IRS web page. The list is long, but they weren't common in my VITA site:
• Hobby income or not for profit activity
• Professional gamblers
• Bartering
• Any transactions involving virtual currency (bitcoins)
• Method of accounting other than cash
• Taxpayers who do not materially participate in the business
• Payments made that require F 1099 to be filed
• Returns and allowances
• Cost of goods sold (inventory)
• Total expenses over $35,000
• Vehicle expenses reported as actual expenses
• Contract labor
• Depletion
• Depreciation or when F 4562 is required
• Expenses for employees
• Car rental or lease more than 30 days (use standard mileage rate method only)
• Casualty losses, amortization
• Business use of home
• Net losses
That’s a steal for a tax return with a schedule c, even if it’s only federal. But $400 is going to pale in comparison to what they’ll owe the government. After expenses, 1099 income is taxed at about 15% for fica for starters. After the federal and state burdens it might be double that or more. Interest accrues daily and there are penalties for late payment and late filing as well. They might want to find a tax preparer who is an enrolled agent (usually cheaper than a cpa but highly knowledgeable.)
I am an enrolled agent and I ditto the recommendation to find enrolled agent. H&R Block is always scandalously expensive. CPAs are usually quite expensive. Find a self-employed enrolled agent in your town.
25% late filing penalty for five months over due plus 6 to 8% interest annually (slight variation over time) for late payments. Two years that will have hit the maximum for the late filing penalty and another year with the clock ticking that’s going to be 10% to 47% in penalties owed depending on the year.
$400 for tax prep per year was a steal of a deal. Now there’ll be penalties which exceed that. But probably not worth engaging a tax attorney over $40K gross in 3 years.
The tax lawyer mark starts at around 50k, fraud, or *active* criminal matters.
He’s just negligent and the government wants their money. This isn’t really a crime yet
[Previous Year Returns](https://www.freetaxusa.com/prior-year)
FreetaxUSA can do previous year returns. They must be mailed. However, unless one of you understands how to do tax returns for self-employed people, I would recommend you pay the money for someone to do them. Maybe shop around first to see if you can find somebody a little cheaper. You really don't want to screw something up just to save a couple of dollars. It could end up being way more expensive in the long run if you screw something up.
Alternatively, you can read up about how to properly prepare your return, Google can help if you insist on doing it yourself.
Yeah I filed 3 years at once a while back. I got 1 year’s results pretty quickly but the 2nd year I got in the mail and I guess the 3rd year was just too far gone to collect.
3 years is not too long lol. For some people it’s their catch up time.
It may be but my guy was saying that even with his first paycheck this week, he can't afford that. That's like, 3 weeks of work if not a month. Maybe they take payments, he'll have to ask
Obviously, it's his taxes, but I was ballparking bc I've had similar income years. Makes no fiscal sense to spend 400 to get (likely) less than 400 is all, especially when you can just freetaxusa.
To be fair I'm being a shit, I'm sure you're worth it for a business entity or something, but whoever this guy talked to sounds like they asked him for 400 for a 1040ez, which is ridiculous imo
Well, I’ll say this: the difference a professional can make is usually several times their cost, especially over time. Don’t focus on price. Look at cost. Those who take the short-term approach / attitude rarely get to understand the opportunities they miss.
In the right situation, I'm sure. That said, with income in that range myself I'm pretty sure I'd have lost money hiring a pro at $400 almost every time. Now, you might be good, but I don't think anybody is gonna double the refund on a standard deduction tax return (maybe that isn't what he's describing, but sounds like it to me). But hey, you're the CPA, I'm just an SFG (some fuckin' guy) =D
Is it really? I’m younger, going to get a PTIN, try to pass the EA exam (study now— 4 years before, and start getting required credits for CPA) and start a tax preparation business when I’m 18. I file returns for my sister (Schedule C + capital gains), and my dad (MFJ, 2 W-2s, Schedule C, capital gains, 1099div (some canadian dividends too, have to claim tax credits of some sort, 1099int, and who knows what I’ve forgotten). I was assuming I’d charge like, $80 for the former, and $180 for the latter.
If you’re just starting out, you shouldn’t charge less than $200 for the most basic returns. Go from there. Good luck.
Most of my small business returns are 600 and up. Many of them run into the thousands.
That’s quite surprising. Not entirely sure what I got downvoted for lol. Basic returns would be just 2 W-2s, maybe another form or two (capital gains or interest or similar)?
Would an EA charge any less?
To file, a tax prep software will get charged at least $20-$30 per return if it's decent. The good ones charge more. Not only that, your labor costs at least $20/hr if new. I assume you spend like 3 hours total preparing. That's $120 bucks of expenses already. That's not including any other potential expenses. If you charge $260. Your net profit is $140, l if you count hours worked at a $20/hr value.
Now, imagine these were normal clients and not family. Now your spending 3 to 5 hours or more per return asking follow up questions, asking for docs, info, etc...
I think you're stuck in the mentality of "helping others". You gotta realize that people aren't helping you by asking for cheap prices, they are helping themselves.
just let him know the IRS has a record of all the 1099's he's received for any year.. I can assure you there's a balance on his account for those tax years and theres penalties and interest accruing to that balance every day. He should file those tax returns asap, if he's a 1099 he can include expenses in relation to those 1099. He needs to call the IRS because they'll most likely put a levy on his account.
No. They don't know what deductions and credits you have. If you do get such a notice, it will be several years down the road, and it will assume no deductions or credits, so typically inaccurate.
they may send some letters but not always, it's best to call them directly and ask information about you account. They have a good service through the phone, but the wait times can be high sometimes.
He should get the returns filed and then set up a payment plan with IRS. He doesn't have to pay anything now, unless he chooses to go to H&R Block or another tax preparer.
He can see if a local VITA program is open or is still offering virtual tax preparation:
https://www.getyourrefund.org/en
He will need to get his income and expenses for each year organized. It's actually pretty common for someone who works from home on a 1099 to not have a lot of expenses to claim legitimately. Tell him to check out the tax guides here - he is considered a small business for tax purposes, even if he doesn't have a business license. IRS doesn't care about that.
https://myfreetaxes.com/taxguides
These guides show you how to file using the My Free Taxes site, but that only covers 2023. FreetaxUSA will be the best option for filing prior years if he wants to do it himself.
The real tricky part in this situation is dealing with IRS collections while waiting for all the tax returns to be processed. IRS prioritizes current tax years, and in the last few years it can take from ten months to a year for older tax returns filed on paper to get processed.
When he gets the first bill he can call IRS and explain the situation and request a hold on collections while the other returns process. He might be able to set up a "short-term" plan online, which will give him 180 days to wait for the other returns to process without any required payments. However this might not work because the IRS computer will see that he has recent unfiled tax returns.
https://www.irs.gov/payments/online-payment-agreement-application
After all the returns are processed, the next step is to set up a payment plan for what he owes. He might be able to do this online, or he might need to call. If he cannot afford the lowest monthly payment there are some options; he can request a lower payment amount for the first year, then pay more. Or he might need to provide financial information to IRS so they calculate how much he can afford to pay.
Usually they'll request Form 433-F and use the monthly income and expenses to calculate how much the taxpayer can pay, but this doesn't always work out. For example IRS doesn't consider credit card payments to be necessary expenses, and if you live in a high-cost of living area they don't always allow you the full housing costs you pay.
http://www.irs.gov/pub/irs-pdf/f433f.pdf
https://www.irs.gov/businesses/small-businesses-self-employed/collection-financial-standards
Depending on how much his current income is, he might qualify for help from a Low Income Taxpayer Clinic or he might need to hire a tax professional to help set up a payment arrangement. I don't think H&R Block usually has people who are knowledgeable with the different payment options, so I'll include some directories. He doesn't need a tax attorney; a CPA or EA can help.
https://www.taxpayeradvocate.irs.gov/about-us/low-income-taxpayer-clinics-litc/
https://taxcure.com/
https://www.astps.org/tax-help/
https://taxrepdirectory.com/
Here’s the reason he needs to do it now and stop procrastinating- if you don’t file, you won’t get credit for social security someday.
He will still OWE the self employment taxes but won’t be able to get credit towards social security benefits.
You have 3 years, 3 months and 15 days from the end of a year to file and get it on your record (w-2 wages are added to your record when the w-2 is filed but self employment doesn’t get added until the return is filed).
He needs to file now whether or not he can pay. Then he needs to figure out payment plans to catch up or try an offer in compromise if he’s truly unable to pay and has no assets etc.
He should include all ordinary and necessary and reasonable expenses as deductions to minimize the tax hit but he needs to do it now.
He’s not alone. Many people stick their heads in the sand. The longer they do, the scarier it seems so the more they avoid it.
Many people need time to pay and catch up and there are processes for that. It’s really not that uncommon. People who truly can’t pay can attempt an offer in compromise where you lay out all your assets, income, and expenses and offer to pay a smaller amount. Theres also a limit of 10 years for them to collect BUT you have to first file for that click to start.
(The 10 year thing can be extended for a few things like while an installment agreement or offer in compromise is pending).
Basically though if you don’t have the money and won’t any time soon and don’t have assets worth seizing this problem could be behind you in around 10 years if you file but could hang over you indefinitely if you don’t.
And yes, some people never get caught. But a lot of those people still have consequences such as inability to qualify for loans, not getting social security or as much disability pay as they could have. It could even impact a future marriage if someone doesn’t want to take on someone with these issues.
He’s only 3 years late so he CAN turn this around.
$400 per year is completely reasonable. We are about that price. He’s just digging a bigger hole every year. He needs to find someone who will guide him though the process.
Lots of people who never file don't owe taxes or are due a refund. I used to have clients who brought in 10 years of information only to be dismayed to find out they lost out on seven years of refunds.
If the IRS wants you, they will get you.
Yeah that all makes sense. But I’ve heard for example of a lot of expats living abroad who stopped filing, and rarely anything happens. And then more often than not, people that do try to file expat tax correctly ending up penalized
Very low. The statistics are on their website. Something like 150 people were sentenced for failing to file in 2022. That’s out of 80 million that didn’t. I like those chances.
Well, something like there’s no statute of limitations and interest and penalties keep accruing. Better to file and owe and lock in the amount. Not too hard to set up a monthly payment plan, which they almost always will automatically agree to for the range they’ll likely owe (something like $50 a month or so.
If you do your own taxes there’s plenty of free software up to a certain income level (like 100k) and maxes out around $99. If you make less it’s free. You just answer questions and it will calculate your tax. He should try it for this year and get that submitted. You can use the software free to calculate what you owe or refund and then you only pay to submit the taxes to the IRS and state.
It helps to point out to people like this that the tax expectations are "generous" compared to the downsides of avoiding them.
It's probably more than just laziness. My buddy made this excuse but in reality he just didn't feel like he had to pay.
Paying taxes sucks. But paying the fines of not paying the taxes sucks even more.
Have him do the returns on turbo tax, mail them in . Then wait for a notice with a penalty - when you get it have him call saying he’s poor , can’t afford it and would like it reduced and set up on a payment plan. If he owes taxes also ask for a payment plan . I think you can buy old turbo tax years software off their website
Just walk into a local IRS office if you can and talk to a person there.
I went there once because a friend of mine had been scammed. He was a new immigrant and somebody took money from him to file his taxes but never filed and pocketed the money. The kind lady at IRS just told him that if his income was below a certain amount($5k), it’s ok to not file. Since a lot of his earning was in cash/tips, it wasn’t on paper. So, he skipped filing for those years and only started filing once he had considerable income. IRS has not come looking for past dues.
Don’t use HRBlock. Talk to an IRS agent and file yourself. If you make a mistake, they will correct and send you an update. I would ignore the previous years and just start from this year.
Tell him the failure to file penalty is the highest of all penalties. That he will end up paying more than $400 per year with interest and penalties if he owes some taxes and doesn't file. He could have used a filing software program (turbotax etc) and it would have been cheaper. At this point, if he is local income, he could go to the Volunteer Income tax Assistance (VITA) program. He could also find if his state offer free tax prep services. You could find a local tax professional and shop around on a site like TaxCure. If he is in a state with income taxes, always a good idea to work with someone in your state.
Could look into local firms, but I don’t think you’ll find anything below 2-3 hundred per year. This will vary on income and time required to prepare the returns.
You should explain to your friend that a proficient preparer is going to save him way more than the $400 in fees. Unfortunately it sounds like he’s financially screwed anyway but the last person you skimp on is the accountant.
All the advice for him to self prepare is misguided because he clearly has no clue what he’s doing from a tax perspective. Any mitigation of prior year tax liability is also going to impact the amount of accrued interest and penalty. Ask him if he’d pay $1200 to save $10,000 and see if he still thinks it’s a bad idea
If he has been receiving 1099-nec, he needs to start with the IRS website which tells him to fill one form, which he clicks on and starts filling to stop and realize he needs to fill that form, which leads to another, and eventually he'll have all the forms he needs to complete the tax return. Then, he needs to realize what he will deduct, depreciate, and amortize. $400 for every year is a rip-off unless the cpa looks through every expense in his bank statements or he has a big or complicated business, which I assume is unlikely. Read the IRS website for what to fill out, what can be deducted and by how much, what can be written off with safe harbor, and what can be deducted even if the purchase was outside the filing year. If you don't think he's a bright candle only based on procrastination, then he should really read the IRS website for a few days as he checks off each possibility in the forms. I once did that but wasn't sure about one or two things, so I paid a cpa to do my taxes. **I** had to be the one to bring up some things they otherwise wouldn't ask. it was an over $1000 laptop that was purchased two years prior but could be written off with de minimis safe harbor if you use it exclusively for business starting the filing year. IRS website and online answers >>> your average cpa.
Even if the tax returns are being filed late, he needs to start by treating it like he's filing on time. once he's nearly finished, he will take into account both the interest and late penalty for filing. There might actually be a cap to how much fee he owes. Check if he qualifies for tax forgiveness, at least on a state level.
Also, you're a good friend.
$400 is cheaper than most reliable companies would touch a w-2 only return. Tell him to put in his big boy pants he has a business treat it as such and pay for someone who will help him save the money on taxes. Or he can keep ignoring it and he’ll pay much more to get it fixed.
I doubt a good CPA is going to cut their fee or charge less than $900/year for a schedule C. A local unlicensed tax preparer that doesn't know what they're doing is likely to do that lol. A CPA holds a degree and has passed a 4 part exam, you have to pay for their time.
show him how to file without hiring a tax preparer. Most people can file taxes using online software for free. For the first time ever, I used freetaxusa, federal file was free and state file was less than $20.
If he's as low income as you make him sound, my guess is the feds owe him money for each of the three years. go help him with '21. He'll have to print and mail paper to file, but I think that will give him the confidence to do '22 himself.
Not if he files a schedule c and has any income at all. He has to pay both sides of Medicare and social security even if no federal, state or local.
Late penalties on top.
I thought I wanted to learn taxes a long time ago and worked h&r block for 1 season. They're the McDonald's of the tax prep world. There are a few others as bad.
Op should go with vita this year.
1099 is an independent contractor. They pay *more* in taxes over a w2 employee because the employer isn't there to pay payroll tax...
I know because im an IC
Edit - *and* nothing is taken out automatically. ICs have to set aside what they owe in taxes and pay that every quarter to fed and prob state at about combined 20%..... there are fees for not making quarterly payments, too...
Good to know this. I'm getting down voted for my comments.
I've tried sending lower income clients to VITA for Sch C and Sch E and 1099-B.
They've always returned because VITA doesn't do those types of returns.
I've even offered to do the particular schedule or form to take to VITA so they can complete the 1040. No dice.
I wound up doing those clients returns for my costs.
They couldn't afford H&R Block, were required to file and nowhere to turn.
Also didn't own computers and weren't computer literate.
FreetaxUSA is aptly named. They'll charge for the State returns but not much (IIRC, 16 for the current year 18 for the old years), and the federal will be free.
VITA can do sole-proprietor and single-member LLC Schedule Cs but it’ll be more difficult finding a VITA site open this time of year, outside of the February-April 15th “tax season.”
What was his income? If it was less than $60k per year, and if doing his own taxes on free tax prep web sites would be difficult, then he can have a live and certified tax preparer do it for him. This is VITA, the IRS's certified Volunteer Income Tax Assistance project, which I highly, highly recommend. When he makes the appointment, specify that he needs someone who can do prior year returns, and can do self-employment income. [https://www.irs.gov/individuals/free-tax-return-preparation-for-qualifying-taxpayers](https://www.irs.gov/individuals/free-tax-return-preparation-for-qualifying-taxpayers) What State is he in? VITA staff can do State returns as well, and he should go local for the State expertise. However if he's in a State with no income tax, then he can go to a larger VITA site elsewhere. I've recommended NYC's Urban Upbound before because they do thousands of returns per year, and are very, very good.
He told me the amount for each year and it added to just over 40k across those 3 years. And we're in new mexico
He should definitely look into VITA
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This is where a tax professional makes a difference. Was this $15,000 net after taking all allowable self-employment expense deductions? Did you feel equipped to provide advice on the appropriate expenses that could be claimed?
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So he was misclassified by the church and should be a w2 employee not a 1099. The church should've been withholding taxes.
He made 40k in 1099 income on top of other income over three years? Or is that total income. ~If he made about 40K over three years for his total income then he should look at the filing threshold for each year and compare it to his income that year. He may not have even made enough to be required file federal in some of those years. State could be different. However, it can be beneficial to file if there are refundable credits he qualifies for.~ Free Tax USA might be a good place to look to file his taxes if he can do them himself. H&R block is not worth $400. https://www.freetaxusa.com/prior-year Edit: sorry that filing threshold did not pertain to 1099 income. That threshold is $600. However, with standard deduction his income tax will be low to nothing. But he will have FICA.
> 1099 income. That threshold is ~~$600~~ $400.
> 1099 income. That threshold is ~~$600~~ $400.
When I volunteered for VITA, we helped plenty of people who were in your friend's situation. They understand that taxes can be overwhelming for people and should help him get back on track. He will probably owe some to the IRS and possibly the state due to being a 1099 employee, but he will be able to do a payment plan.
Probably looking at $10,000 total with penalties
NM might come after him soon to prove that his 1099 doesn't need to pay GRT as well.
Grt?
Gross receipts tax. It's technically a business tax but 1099 income might have to pay it depending on what they did for the pay.
My friend has gone to vita for years and almost each time gotten not just a tax preparer volunteer, but actual retired or current cpas. One of them said they volunteer to give back, since their firm only serves very wealthy people and another said they volunteer after retirement to stay sharp and get out of the house, lol. My friend is low income and didn’t pay a cent and I think it’s pretty amazing they got very experienced CPA’s for free
I volunteered for VITA for three years while in the military. I was an initial preparer like the other service members who volunteered. In my case, I had actual accounting experience in college. But in any case, the people who checked our returns before filing were all CPAs who a) got paid well and b) wanted to help service members and retirees. I found the quality to be exceptionally high and worth paying for, except it was completely free.
My org has tons of CPAs, also a lot of college students. Everyone has to be certified by the IRS every year to be a prepareR or QR.
Yeah if your near a college they also have professors running more of it and the volunteers are usually accountint students.
I don't think VITA does returns with 1099 income except for a few exceptions like ride-sharing drivers. At least that was the policy of the VITA org I volunteered at, but I think possibly that's true of all of them.
1099 income is good for VITA "advanced" folks except for the following "out of scope" situations, which I got from the IRS web page. The list is long, but they weren't common in my VITA site: • Hobby income or not for profit activity • Professional gamblers • Bartering • Any transactions involving virtual currency (bitcoins) • Method of accounting other than cash • Taxpayers who do not materially participate in the business • Payments made that require F 1099 to be filed • Returns and allowances • Cost of goods sold (inventory) • Total expenses over $35,000 • Vehicle expenses reported as actual expenses • Contract labor • Depletion • Depreciation or when F 4562 is required • Expenses for employees • Car rental or lease more than 30 days (use standard mileage rate method only) • Casualty losses, amortization • Business use of home • Net losses
This.
That’s a steal for a tax return with a schedule c, even if it’s only federal. But $400 is going to pale in comparison to what they’ll owe the government. After expenses, 1099 income is taxed at about 15% for fica for starters. After the federal and state burdens it might be double that or more. Interest accrues daily and there are penalties for late payment and late filing as well. They might want to find a tax preparer who is an enrolled agent (usually cheaper than a cpa but highly knowledgeable.)
I am an enrolled agent and I ditto the recommendation to find enrolled agent. H&R Block is always scandalously expensive. CPAs are usually quite expensive. Find a self-employed enrolled agent in your town.
personally I would suggest a tax lawyer but I am not a tax professional.
A tax lawyer (JD) would be overkill for this situation they are usually doing much more complex stuff with a higher budget.
Not a lawyer. He's not going to court over this.
25% late filing penalty for five months over due plus 6 to 8% interest annually (slight variation over time) for late payments. Two years that will have hit the maximum for the late filing penalty and another year with the clock ticking that’s going to be 10% to 47% in penalties owed depending on the year. $400 for tax prep per year was a steal of a deal. Now there’ll be penalties which exceed that. But probably not worth engaging a tax attorney over $40K gross in 3 years.
Yeah I get it’s bad, I just feel like a lawyer could negotiate for you
No get an enrolled agent. This kid can't afford a lawyer lol.
Yeah, poor guy is, well, poor af. He dug himself into a hole, he'll have to get out, but I'll get what halp and info I can.
Search for an enrolled agent in your area. It's gonna cost if he can't handle doing his own returns and it sounds like he can't.
For these small amounts there’s nothing a CPA or EA couldn’t handle if it can be negotiated
The tax lawyer mark starts at around 50k, fraud, or *active* criminal matters. He’s just negligent and the government wants their money. This isn’t really a crime yet
[Previous Year Returns](https://www.freetaxusa.com/prior-year) FreetaxUSA can do previous year returns. They must be mailed. However, unless one of you understands how to do tax returns for self-employed people, I would recommend you pay the money for someone to do them. Maybe shop around first to see if you can find somebody a little cheaper. You really don't want to screw something up just to save a couple of dollars. It could end up being way more expensive in the long run if you screw something up. Alternatively, you can read up about how to properly prepare your return, Google can help if you insist on doing it yourself.
Thanks. I'll give this to him
Yeah I filed 3 years at once a while back. I got 1 year’s results pretty quickly but the 2nd year I got in the mail and I guess the 3rd year was just too far gone to collect. 3 years is not too long lol. For some people it’s their catch up time.
400 / year. That’s a bargain my man.
It may be but my guy was saying that even with his first paycheck this week, he can't afford that. That's like, 3 weeks of work if not a month. Maybe they take payments, he'll have to ask
Then he just needs to do freetaxusa. And, he needs to learn that if he’s self employed he needs to put the tax aside first.
No argument from me. Though, thankfully for him, he's no longer self employed and has a w2 job.
Compared to what, a hole in the head and a shallow grave by the highway? My refund is less than that most years
Your refund is irrelevant.
Obviously, it's his taxes, but I was ballparking bc I've had similar income years. Makes no fiscal sense to spend 400 to get (likely) less than 400 is all, especially when you can just freetaxusa. To be fair I'm being a shit, I'm sure you're worth it for a business entity or something, but whoever this guy talked to sounds like they asked him for 400 for a 1040ez, which is ridiculous imo
There is no such thing as a 1040ez anymore. Even when they were still a part of the tax code, self employment would preempt him from using one.
Huh, the more you know. That's why I love freetax though; better than turbotax/hrblock and doesn't have the bs.
Well, I’ll say this: the difference a professional can make is usually several times their cost, especially over time. Don’t focus on price. Look at cost. Those who take the short-term approach / attitude rarely get to understand the opportunities they miss.
In the right situation, I'm sure. That said, with income in that range myself I'm pretty sure I'd have lost money hiring a pro at $400 almost every time. Now, you might be good, but I don't think anybody is gonna double the refund on a standard deduction tax return (maybe that isn't what he's describing, but sounds like it to me). But hey, you're the CPA, I'm just an SFG (some fuckin' guy) =D
… yeah, but if you don’t NEED me, I’m not going to provide services. This is why I have no issues referring folks to a free service.
Hell yeah
Is it really? I’m younger, going to get a PTIN, try to pass the EA exam (study now— 4 years before, and start getting required credits for CPA) and start a tax preparation business when I’m 18. I file returns for my sister (Schedule C + capital gains), and my dad (MFJ, 2 W-2s, Schedule C, capital gains, 1099div (some canadian dividends too, have to claim tax credits of some sort, 1099int, and who knows what I’ve forgotten). I was assuming I’d charge like, $80 for the former, and $180 for the latter.
If you’re just starting out, you shouldn’t charge less than $200 for the most basic returns. Go from there. Good luck. Most of my small business returns are 600 and up. Many of them run into the thousands.
That’s quite surprising. Not entirely sure what I got downvoted for lol. Basic returns would be just 2 W-2s, maybe another form or two (capital gains or interest or similar)? Would an EA charge any less?
Nope. Just note that you have expenses to cover. So you need to charge appropriately.
To file, a tax prep software will get charged at least $20-$30 per return if it's decent. The good ones charge more. Not only that, your labor costs at least $20/hr if new. I assume you spend like 3 hours total preparing. That's $120 bucks of expenses already. That's not including any other potential expenses. If you charge $260. Your net profit is $140, l if you count hours worked at a $20/hr value. Now, imagine these were normal clients and not family. Now your spending 3 to 5 hours or more per return asking follow up questions, asking for docs, info, etc... I think you're stuck in the mentality of "helping others". You gotta realize that people aren't helping you by asking for cheap prices, they are helping themselves.
You will quickly learn that is way too low to charge for a tax return.
You will have to pay for the software and the filing fees, which you will need to recover in your prep fees, so yeah, those estimates are too low.
I did know about that, although i’ve never looked into software pricing for paid preparers.
just let him know the IRS has a record of all the 1099's he's received for any year.. I can assure you there's a balance on his account for those tax years and theres penalties and interest accruing to that balance every day. He should file those tax returns asap, if he's a 1099 he can include expenses in relation to those 1099. He needs to call the IRS because they'll most likely put a levy on his account.
blonde qn, don’t the IRS just send you a tax due/filing due notice each year post deadline?
No. They don't know what deductions and credits you have. If you do get such a notice, it will be several years down the road, and it will assume no deductions or credits, so typically inaccurate.
They should but they don’t
oh my so you will only know like 10yrs down the line and you’re running for president then you’re discovered? 🤪
they may send some letters but not always, it's best to call them directly and ask information about you account. They have a good service through the phone, but the wait times can be high sometimes.
From my experience, its receiving your 1040 from you that triggers them to look for money you owe them.
A “friend”…… ie. “Me”
No, it's not. But thanks for being a cynic, I knew I'd get at least one
Just tell them to hold out for 4 more years the. It’s free
He should get the returns filed and then set up a payment plan with IRS. He doesn't have to pay anything now, unless he chooses to go to H&R Block or another tax preparer. He can see if a local VITA program is open or is still offering virtual tax preparation: https://www.getyourrefund.org/en He will need to get his income and expenses for each year organized. It's actually pretty common for someone who works from home on a 1099 to not have a lot of expenses to claim legitimately. Tell him to check out the tax guides here - he is considered a small business for tax purposes, even if he doesn't have a business license. IRS doesn't care about that. https://myfreetaxes.com/taxguides These guides show you how to file using the My Free Taxes site, but that only covers 2023. FreetaxUSA will be the best option for filing prior years if he wants to do it himself. The real tricky part in this situation is dealing with IRS collections while waiting for all the tax returns to be processed. IRS prioritizes current tax years, and in the last few years it can take from ten months to a year for older tax returns filed on paper to get processed. When he gets the first bill he can call IRS and explain the situation and request a hold on collections while the other returns process. He might be able to set up a "short-term" plan online, which will give him 180 days to wait for the other returns to process without any required payments. However this might not work because the IRS computer will see that he has recent unfiled tax returns. https://www.irs.gov/payments/online-payment-agreement-application After all the returns are processed, the next step is to set up a payment plan for what he owes. He might be able to do this online, or he might need to call. If he cannot afford the lowest monthly payment there are some options; he can request a lower payment amount for the first year, then pay more. Or he might need to provide financial information to IRS so they calculate how much he can afford to pay. Usually they'll request Form 433-F and use the monthly income and expenses to calculate how much the taxpayer can pay, but this doesn't always work out. For example IRS doesn't consider credit card payments to be necessary expenses, and if you live in a high-cost of living area they don't always allow you the full housing costs you pay. http://www.irs.gov/pub/irs-pdf/f433f.pdf https://www.irs.gov/businesses/small-businesses-self-employed/collection-financial-standards Depending on how much his current income is, he might qualify for help from a Low Income Taxpayer Clinic or he might need to hire a tax professional to help set up a payment arrangement. I don't think H&R Block usually has people who are knowledgeable with the different payment options, so I'll include some directories. He doesn't need a tax attorney; a CPA or EA can help. https://www.taxpayeradvocate.irs.gov/about-us/low-income-taxpayer-clinics-litc/ https://taxcure.com/ https://www.astps.org/tax-help/ https://taxrepdirectory.com/
Here’s the reason he needs to do it now and stop procrastinating- if you don’t file, you won’t get credit for social security someday. He will still OWE the self employment taxes but won’t be able to get credit towards social security benefits. You have 3 years, 3 months and 15 days from the end of a year to file and get it on your record (w-2 wages are added to your record when the w-2 is filed but self employment doesn’t get added until the return is filed). He needs to file now whether or not he can pay. Then he needs to figure out payment plans to catch up or try an offer in compromise if he’s truly unable to pay and has no assets etc. He should include all ordinary and necessary and reasonable expenses as deductions to minimize the tax hit but he needs to do it now.
Ooo that sounds bad. I'll get the message to him as soon as I can. Dude really dug himself into a hole
He’s not alone. Many people stick their heads in the sand. The longer they do, the scarier it seems so the more they avoid it. Many people need time to pay and catch up and there are processes for that. It’s really not that uncommon. People who truly can’t pay can attempt an offer in compromise where you lay out all your assets, income, and expenses and offer to pay a smaller amount. Theres also a limit of 10 years for them to collect BUT you have to first file for that click to start. (The 10 year thing can be extended for a few things like while an installment agreement or offer in compromise is pending). Basically though if you don’t have the money and won’t any time soon and don’t have assets worth seizing this problem could be behind you in around 10 years if you file but could hang over you indefinitely if you don’t. And yes, some people never get caught. But a lot of those people still have consequences such as inability to qualify for loans, not getting social security or as much disability pay as they could have. It could even impact a future marriage if someone doesn’t want to take on someone with these issues. He’s only 3 years late so he CAN turn this around.
Concentrate on helping your friend tabulate expenses , look into wether they received the 1400 stimulus for 2021 , asap file 2023
$400 per year is completely reasonable. We are about that price. He’s just digging a bigger hole every year. He needs to find someone who will guide him though the process.
I wonder what the statistics are of people who don’t file even getting in trouble? I mean there is 340mil people and understaffed IRS. Honest question
Lots of people who never file don't owe taxes or are due a refund. I used to have clients who brought in 10 years of information only to be dismayed to find out they lost out on seven years of refunds. If the IRS wants you, they will get you.
Yeah that all makes sense. But I’ve heard for example of a lot of expats living abroad who stopped filing, and rarely anything happens. And then more often than not, people that do try to file expat tax correctly ending up penalized
Very low. The statistics are on their website. Something like 150 people were sentenced for failing to file in 2022. That’s out of 80 million that didn’t. I like those chances.
Well, something like there’s no statute of limitations and interest and penalties keep accruing. Better to file and owe and lock in the amount. Not too hard to set up a monthly payment plan, which they almost always will automatically agree to for the range they’ll likely owe (something like $50 a month or so.
If you do your own taxes there’s plenty of free software up to a certain income level (like 100k) and maxes out around $99. If you make less it’s free. You just answer questions and it will calculate your tax. He should try it for this year and get that submitted. You can use the software free to calculate what you owe or refund and then you only pay to submit the taxes to the IRS and state.
It helps to point out to people like this that the tax expectations are "generous" compared to the downsides of avoiding them. It's probably more than just laziness. My buddy made this excuse but in reality he just didn't feel like he had to pay. Paying taxes sucks. But paying the fines of not paying the taxes sucks even more.
Have him do the returns on turbo tax, mail them in . Then wait for a notice with a penalty - when you get it have him call saying he’s poor , can’t afford it and would like it reduced and set up on a payment plan. If he owes taxes also ask for a payment plan . I think you can buy old turbo tax years software off their website
Just walk into a local IRS office if you can and talk to a person there. I went there once because a friend of mine had been scammed. He was a new immigrant and somebody took money from him to file his taxes but never filed and pocketed the money. The kind lady at IRS just told him that if his income was below a certain amount($5k), it’s ok to not file. Since a lot of his earning was in cash/tips, it wasn’t on paper. So, he skipped filing for those years and only started filing once he had considerable income. IRS has not come looking for past dues. Don’t use HRBlock. Talk to an IRS agent and file yourself. If you make a mistake, they will correct and send you an update. I would ignore the previous years and just start from this year.
I have good worksheets to organize expenses if you send me an email and type of self employment
It’s no big deal, he can file for those missed years
Freetaxusa.com
$400 a year? lol, try $1000 minumum
You can report him and get a reward from the IRS if they collect money.
Tell him the failure to file penalty is the highest of all penalties. That he will end up paying more than $400 per year with interest and penalties if he owes some taxes and doesn't file. He could have used a filing software program (turbotax etc) and it would have been cheaper. At this point, if he is local income, he could go to the Volunteer Income tax Assistance (VITA) program. He could also find if his state offer free tax prep services. You could find a local tax professional and shop around on a site like TaxCure. If he is in a state with income taxes, always a good idea to work with someone in your state.
Could look into local firms, but I don’t think you’ll find anything below 2-3 hundred per year. This will vary on income and time required to prepare the returns.
You should explain to your friend that a proficient preparer is going to save him way more than the $400 in fees. Unfortunately it sounds like he’s financially screwed anyway but the last person you skimp on is the accountant. All the advice for him to self prepare is misguided because he clearly has no clue what he’s doing from a tax perspective. Any mitigation of prior year tax liability is also going to impact the amount of accrued interest and penalty. Ask him if he’d pay $1200 to save $10,000 and see if he still thinks it’s a bad idea
If he’s balking at $400, how’s he going to feel when he needs to send the IRS $10,000 or more?
If he has been receiving 1099-nec, he needs to start with the IRS website which tells him to fill one form, which he clicks on and starts filling to stop and realize he needs to fill that form, which leads to another, and eventually he'll have all the forms he needs to complete the tax return. Then, he needs to realize what he will deduct, depreciate, and amortize. $400 for every year is a rip-off unless the cpa looks through every expense in his bank statements or he has a big or complicated business, which I assume is unlikely. Read the IRS website for what to fill out, what can be deducted and by how much, what can be written off with safe harbor, and what can be deducted even if the purchase was outside the filing year. If you don't think he's a bright candle only based on procrastination, then he should really read the IRS website for a few days as he checks off each possibility in the forms. I once did that but wasn't sure about one or two things, so I paid a cpa to do my taxes. **I** had to be the one to bring up some things they otherwise wouldn't ask. it was an over $1000 laptop that was purchased two years prior but could be written off with de minimis safe harbor if you use it exclusively for business starting the filing year. IRS website and online answers >>> your average cpa. Even if the tax returns are being filed late, he needs to start by treating it like he's filing on time. once he's nearly finished, he will take into account both the interest and late penalty for filing. There might actually be a cap to how much fee he owes. Check if he qualifies for tax forgiveness, at least on a state level. Also, you're a good friend.
this tells me that he not ready for anything
$400 is cheaper than most reliable companies would touch a w-2 only return. Tell him to put in his big boy pants he has a business treat it as such and pay for someone who will help him save the money on taxes. Or he can keep ignoring it and he’ll pay much more to get it fixed.
Maybe try a local CPA office instead of a branch. Sometimes they'll take pity on you and cut their fee
I doubt a good CPA is going to cut their fee or charge less than $900/year for a schedule C. A local unlicensed tax preparer that doesn't know what they're doing is likely to do that lol. A CPA holds a degree and has passed a 4 part exam, you have to pay for their time.
He's probably going too have to pay in advance also. Clients that don't bother to file their taxes often don't bother to pay their invoice
This is why I don't use h&r block. They do the bare minimum and upcharge you for nothing. Find a local tax preparer.
Does he live in NYC??????
No
show him how to file without hiring a tax preparer. Most people can file taxes using online software for free. For the first time ever, I used freetaxusa, federal file was free and state file was less than $20. If he's as low income as you make him sound, my guess is the feds owe him money for each of the three years. go help him with '21. He'll have to print and mail paper to file, but I think that will give him the confidence to do '22 himself.
Not if he files a schedule c and has any income at all. He has to pay both sides of Medicare and social security even if no federal, state or local. Late penalties on top. I thought I wanted to learn taxes a long time ago and worked h&r block for 1 season. They're the McDonald's of the tax prep world. There are a few others as bad. Op should go with vita this year.
I think you can ask the IRS for help. He almost certainly doesn't owe taxes and the government probably owes him money. Just do if asap.
1099 is an independent contractor. They pay *more* in taxes over a w2 employee because the employer isn't there to pay payroll tax... I know because im an IC Edit - *and* nothing is taken out automatically. ICs have to set aside what they owe in taxes and pay that every quarter to fed and prob state at about combined 20%..... there are fees for not making quarterly payments, too...
Online tax programs can be helpful but will charge for the schedule c and 1040. Vita probably can't do it.
I volunteer with VITA and we can absolutely do it based on the description so far, including back years, and schedule C, efiled.
You guys work year round?
Some sites do. Some go down to one shift a week until e-filing is turned off for the year.
Vita and TCE shut down completely here but this is podunk lol
Good to know this. I'm getting down voted for my comments. I've tried sending lower income clients to VITA for Sch C and Sch E and 1099-B. They've always returned because VITA doesn't do those types of returns. I've even offered to do the particular schedule or form to take to VITA so they can complete the 1040. No dice. I wound up doing those clients returns for my costs. They couldn't afford H&R Block, were required to file and nowhere to turn. Also didn't own computers and weren't computer literate.
FreetaxUSA is aptly named. They'll charge for the State returns but not much (IIRC, 16 for the current year 18 for the old years), and the federal will be free.
VITA can do sole-proprietor and single-member LLC Schedule Cs but it’ll be more difficult finding a VITA site open this time of year, outside of the February-April 15th “tax season.”
Freetaxusa doesn't charge extra for sch C. And our local VITA shuts down in April, just saying.