Do you need receipts for absolutely everything? I haven't been great about keeping track so far. Also, how do you calculate the portion of internet/phone to deduct?

Yes, you should keep receipts for everything - the IRS can ask for documentation if you're ever audited. But if you've lost some, bank/credit card statements can sometimes work as backup. For internet/phone, you need to determine what percentage is used for business. For example, if you estimate 30% of your phone use is for business communications with customers, you can deduct 30% of your phone bill. Just be honest and reasonable with your estimates. Some people keep a log for a few weeks to establish a usage pattern. Same concept applies to your home office - you calculate what percentage of your home's square footage is used exclusively for business, then deduct that percentage of rent/mortgage, utilities, etc.

Omg this tax stuff is so complicated. Im making bracelets and selling them on etsy too and i had no idea about any of this!!! How do you even make quarterly payments? And what's this 199A thing?

What about if one spouse is a stay at home parent? They technically didn't contribute any tax payments, but they're enabling the working spouse to earn income. Should they get 0% of the refund?

That's an excellent question and highlights why this isn't a simple mathematical equation. In a stay-at-home parent situation, that spouse is providing substantial economic value to the family through unpaid labor that enables the working spouse to earn income. In that case, I generally advise clients to view family finances (including tax refunds) as fully shared resources rather than trying to split based on direct financial contribution. The non-working spouse is contributing significantly to the family economy in non-monetary ways. Most of my clients in this situation treat the refund as joint family money and make decisions about it together, recognizing both partners' contributions to the family's overall financial situation.

This is exactly what we do! Joint refund goes to joint expenses or something fun we do together. No arguments ever. We actually have our refund automatically split into savings for our annual vacation. Tax time = vacation planning time lol

I really like this approach. We've been talking about saving for a home renovation, so maybe using the refund for that would be a good compromise where we both benefit. That would definitely avoid the whole percentage split issue entirely. Do you find that system works well overall for managing finances? We've been mostly separate but are considering more joint planning.

I considered that, but wouldn't that mean double the fees for annual LLC filings? Also, would I need separate business bank accounts, insurance, etc?

Yes, you would have separate filing fees for each LLC, which can add up depending on your state. Here in Pennsylvania it's $520 annually PER LLC, so having multiple LLCs gets expensive fast. You would ideally have separate bank accounts for proper accounting, and separate insurance policies might be required depending on the nature of the businesses. It definitely creates more administration and costs, which is why a DBA under a single LLC makes more sense for many small business owners who have multiple related activities. I only recommend the separate LLC approach if the businesses have different liability concerns or if you might sell one business but keep the other.

This is the truth. I didn't separate my dog walking service from my pet supply sales (same LLC) and my accountant charged me an extra $400 to sort it all out at tax time last year.

Did you use the IRS's online payment plan setup? I'm wondering how flexible they are with the monthly payment amounts and if they charge a lot of interest while you're paying it off.

Yes, I used the online payment plan tool on IRS.gov. It was much simpler than I expected. You can actually propose your own monthly payment amount based on what you can afford. There is a minimum (I think around $25-50) but they're pretty flexible. They do charge interest (federal short-term rate plus 3%, compounded daily) and a small failure-to-pay penalty while you're in the payment plan, but those rates are way lower than credit cards or loans. You'll also pay a setup fee ranging from around $31 to $130 depending on how you apply and pay, but low-income taxpayers can get reduced fees or even have them waived.

This is helpful! Do you know which software providers specifically offer free prior year filing? I looked at TurboTax but they wanted to charge me for going back to 2022.

This breakdown is really helpful. Is there a diplomatic way to figure out which type of accountant I'm dealing with without offending them? I'm paying good money and want someone who falls into your third category.

Ask them about a recent tax law change and how they stay current on updates to the code. Good accountants will mention specific resources they use to track changes to primary tax law. You could also ask a specific question about your situation and request the citation to the relevant code section. Be direct but respectful - "I'd like to understand more about the underlying tax code for my situation. Could you point me to the specific sections that apply so I can read more?" A good accountant won't be offended by this. They'll appreciate a client who wants to be informed. If they get defensive or dismissive, that tells you a lot about which category they fall into.

As someone who's been in practice for 25 years, I can tell you that what they teach in school and what happens in the real world are very different. Most accountants use specialized tax databases and software. Nobody has time to read the entire IRC for every client question.