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I'm a treasurer at a nonprofit preschool and we actually issued special receipts for families who continued paying during our COVID closure. The IRS rules say that if you make a payment that's partly for goods/services and partly a contribution, the nonprofit should provide written acknowledgment that specifies the value of what was provided. In our case, we calculated the value of Zoom sessions at about 15% of normal tuition and documented the remaining 85% as potentially tax-deductible contributions. But parents need to check with their own tax advisors because everyone's situation is different!
That's super helpful! Do you have any sample language I could show my preschool? They're a small operation and probably haven't dealt with this specific situation before. I'd love to give them a template they could use.
Sure! The language we used was something like: "Thank you for your payment of $X during our closure period from [dates]. During this time, XYZ Preschool provided limited virtual services valued at $Y. The difference of $Z may be considered a charitable contribution. Please consult your tax advisor regarding deductibility." Make sure it includes the preschool's official name, EIN (tax ID number), address, and the date range. The more specific they can be about the limited services provided and their approximate value, the better. Remember they need to be honest about the value of what they provided - they can't just say the Zoom sessions were worth $1 if similar virtual programs would cost significantly more.
Has anyone successfully claimed the Child and Dependent Care Credit for these pandemic preschool payments instead of trying for the charitable deduction route? My tax software is suggesting this might be a better option for us.
We did this! Our accountant said it was much cleaner to claim the dependent care credit rather than trying to split hairs on what portion was charitable. As long as both spouses were working (or looking for work), payments to the preschool can qualify even if your child wasn't physically attending. The dependent care credit got expanded for 2021 taxes too.
Have you considered just putting an additional dollar amount on line 4(c) of your W-4 instead of using the multiple jobs worksheet? That way your spouse could have more withheld from their larger paycheck, and you could keep more of yours. You'd need to calculate the right amount together, but this approach often works better for couples with very different income levels.
Wouldn't I need the IRS withholding calculator to figure out that exact amount though? I'm worried about getting it wrong and owing a huge amount at tax time.
You can do a rough calculation without the IRS calculator. Look at your last year's total tax and divide by the number of pay periods between you and your spouse (accounting for weekly vs biweekly). Compare that to what's currently being withheld from your spouse's check, and the difference is approximately what needs to be additionally withheld. The calculator is more precise, but this method works as a temporary solution until it comes back online. Just be slightly conservative (withhold a bit extra) to be safe. You can always adjust again once the official calculator is available.
Has anyone tried checking the "Married filing separately" box on the W4 but still filing jointly on the actual tax return? My tax guy suggested this for my situation where my wife makes 3x what I make.
Our tech startup (Series B) uses a combination of NetSuite for core accounting + Expensify for expenses + Stripe for billing. The key is getting these systems to talk to each other properly - that's where most companies mess up. We also have a part-time controller who comes in 2 days a week rather than having a full accounting department. This hybrid approach of good systems + fractional expertise has worked well for us.
How much did the NetSuite implementation cost you? I've heard horror stories about six-figure implementation projects that take forever.
Our NetSuite implementation was about $75K all-in, which included customization for our specific SaaS business model and integrations with other systems. It took approximately 3 months from start to finish. The key to keeping costs under control was having very clear requirements upfront and limiting customizations to only what was absolutely necessary. We also used a specialized implementation partner who had experience with tech startups rather than going with a generalist.
Has anyone tried Pilot.com? We're considering them for our fintech startup but wondering if they're worth the cost compared to hiring a dedicated bookkeeper.
We used Pilot for about a year. They're good for basic bookkeeping but we outgrew them when we hit about $5M ARR. Their tech stack integration is decent but struggles with complex revenue recognition scenarios.
My uncle was in this exact situation! Never filed for like 30 years, worked mostly construction jobs for cash. He finally got caught when he tried to take out a loan to buy a truck and they needed proof of income. The aftermath was actually less catastrophic than everyone expected. He had to file 6 years of back taxes and pay some penalties, but he worked out a payment plan with the IRS. The scariest part was just taking the first step. The biggest issue now is that he has no social security credits, so his retirement options are really limited. That's the part your friend should be most concerned about - even if they escape IRS notice, they're shooting themselves in the foot for retirement.
That's a great point about Social Security that I hadn't even considered. Do you know if there's any way to "make up" those credits once you start filing, or is that money just permanently lost for all those working years?
Unfortunately, there's no way to make up those credits retroactively beyond the statute of limitations. Social Security benefits are calculated based on your highest 35 years of earnings. If you have fewer than 35 years of reported earnings, they fill in the missing years with zeros, which significantly reduces your benefit amount. For my uncle, it means his Social Security benefit is tiny compared to what it could have been. He's basically relying on family support in his old age now. It's one of his biggest regrets - not the penalties or back taxes, but missing out on decades of Social Security contributions.
Your friend might be what the IRS calls a "ghost taxpayer" but it's definitely not sustainable! A few thoughts on how this might have happened: 1) If they've worked as an independent contractor and nobody issued 1099s, the IRS might not have automatic records of their income 2) For the mortgage, they're probably not on the loan at all - only their partner with the W2 qualified 3) For hospital bills, if they paid cash or had insurance through a partner/employer without being the primary policyholder, it wouldn't trigger tax flags 4) For the child, the other parent may be claiming them on their taxes The most concerning part is retirement. Without tax records, they won't have Social Security credits for those working years. They're effectively planning to retire with potentially zero Social Security benefits. They need to fix this ASAP, starting with consulting a tax attorney who specializes in non-filer cases.
Exactly this. I work in financial planning and see this occasionally. The retirement aspect is what will really hurt them in the long run. If they're in their 40s they still have time to accumulate ~20 years of Social Security credits, but they've lost a significant portion of their potential benefits already.
Landon Flounder
Have you considered just starting over with a clean QuickBooks file? For my lawn care business, when I had a similar issue last year, I found it easier to export all my transactions to Excel, remove the duplicates there, and then import the clean data back into a fresh QuickBooks company file. It took a few hours but was actually less frustrating than trying to fix it in QuickBooks directly. If you go this route, make sure you reconcile your accounts before and after to ensure everything matches up. Also, keep your old QBO file as a backup. This approach worked well for me for Schedule C filing.
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Callum Savage
β’Wouldn't that mess up all your existing categorizations and receipt attachments? I have about 300+ transactions with receipts carefully attached and categorized for tax purposes. Starting over sounds terrifying.
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Landon Flounder
β’You're right to be concerned about losing attachments. The export/import method works best if you haven't attached many receipts yet. In your case with 300+ transactions with attachments, I'd definitely go with the selective deletion approach instead. If you do need to delete transactions one by one, a time-saving tip is to open two browser windows side by side - one showing your bank's actual transactions and the other showing your QuickBooks register. This makes it easier to quickly identify which entries are the duplicates as you go through them.
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Ally Tailer
Has anyone used the QuickBooks Audit Log to help with this? I had a similar issue and found that looking at the audit log helped me identify which transactions were manually entered vs. automatically imported. The manually entered ones usually showed up as "Created by [your name]" while the imported ones showed "Created by Bank Feed." This made it much easier to figure out which set to keep. For Schedule C purposes, I kept the bank feed ones since they had the exact transaction dates from the bank rather than when I manually entered them.
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Aliyah Debovski
β’This is brilliant! I just checked my audit log and can clearly see which transactions I entered manually vs which came through the bank feed. This will make cleanup so much faster. Does anyone know if there's a way to filter the audit log to only show transaction creations?
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