Is it normal for tax preparers to charge so much? I've been filing my S-Corp taxes with TurboTax for $170. Am I missing something by not using a professional?

It depends entirely on your business complexity and comfort level with tax regulations. TurboTax works well for straightforward businesses with minimal special situations. Where professionals provide value is with tax planning, specialized deductions, complex allocations, and having someone to represent you if questions arise. If you're confident in your understanding of business tax rules and your return is relatively straightforward, software might be sufficient. But many business owners find professionals help identify deductions and planning opportunities that more than offset their fees. Also, having representation during notices or audits can be invaluable for complex business structures.

Do you think its worth getting a lawyer involved? My cousin is an attorney and said I could have him send a letter for free.

In my experience, involving a lawyer should be your absolute last resort, not your first step. A strongly worded attorney letter might get immediate attention, but it also immediately creates an adversarial relationship that can make an amicable resolution harder. I'd recommend following the escalation chain first - preparer → office manager → corporate customer service. Most tax preparation chains have established protocols for handling errors and want to preserve their reputation. Save the legal approach for if they flatly refuse to address the issue after you've exhausted normal channels. Even a free lawyer letter from your cousin changes the dynamic significantly.

Thanks for this detailed advice! Did you also need to submit a revised Form 940 for 2022, or was providing the proof of state payments enough? I'm wondering if I need to get our accountant involved to redo any filings.

We didn't need to submit a revised Form 940. The documentation of state payments was sufficient since we had already filed the original Form 940 correctly - the issue was just that the states hadn't reported our payments to the IRS. I'd recommend having your accountant review the documentation package before submission though. In our case, our accountant noticed that we needed to include Schedule A of Form 940 to properly document the credit reduction states where we had employees. This was crucial for getting the assessment reversed.

Look at Box 16 on the notice - it should list the "Credit Reduction States" that are causing the issue. For 2022, there were specifically 5 states that had FUTA credit reductions: California (0.9% reduction), Connecticut (1.5%), Illinois (1.2%), New Jersey (1.8%), and New York (1.2%). If your notice doesn't specify, you'll want to gather documentation for any of these 5 states where you had employees in 2022.

How detailed does the mileage log really need to be? I've been just writing down the total miles at the end of each day with a quick note like "job sites" or "supplier runs." Is that enough or will I get flagged?

That's definitely not enough detail if you get audited. The IRS requires contemporaneous documentation, which means recording each trip as it happens, not at the end of the day or week. For each business trip, you need: date, starting point, destination, business purpose, starting odometer, ending odometer, and total miles. For example: "4/15/23, Office to Smith Project Site, Client meeting about landscaping project, 12,345 to 12,367, 22 miles." There are good apps that can help with this - I use MileIQ which lets me swipe left for personal and right for business trips.

I've been using the QuickBooks Self-Employed app for about 8 months now. The automatic mileage tracking works decent but not perfect. Sometimes it doesn't catch short trips under 5 miles, and occasionally it'll think I'm driving when I'm actually on a train. But the convenience factor is huge compared to manually logging everything. At tax time, it generated a nice report that my accountant was happy with. You can also easily categorize trips as business/personal with a quick swipe, which helps with mixed-use vehicles.

I didn't even think about that! I do have some investments where I might have screwed up the cost basis method. I'm using both average cost and specific identification for different accounts but might have mixed them up. I'll go back through and make sure I'm consistent with each investment. Could differences in rounding also cause this error? Like if I rounded something to the nearest dollar in one place but used the exact amount with cents in another?

Yes, rounding differences can absolutely trigger this error! The IRS's validation system is looking for exact matches between forms, so even small rounding discrepancies can cause problems. I always recommend using the exact amounts with cents throughout your return for consistency. Another thing to check is if you sold partial shares of any investments. Sometimes tax software can handle these differently in different sections of the return, especially with reinvested dividends or drip programs where you might have tiny fractional shares.

I had this happen with Free File last year! The tricky part with Fillable Forms is that it doesn't have the error-checking capabilities of paid software. What worked for me was printing out ALL the forms and manually comparing every single number that appeared in multiple places. Look especially at any investment-related forms. For me it was literally a $1 difference between what I reported as interest income on the 1040 vs what was on Schedule B. Such a tiny error but it triggered the rejection.

This is super helpful! I'm definitely going to use these points when interviewing potential CPAs. Quick question though - I've been operating as a single-member LLC but have been thinking about switching to an S-Corp. At what income level do you think that makes sense for an eCommerce/digital marketing business?

For digital marketing agencies and eCommerce businesses, the S-Corp election typically makes sense when your net profit reaches around $40,000-$50,000 annually. At that point, the self-employment tax savings usually outweigh the additional costs and compliance requirements. Remember that with an S-Corp, you need to pay yourself a reasonable salary subject to payroll taxes, with the remainder taken as distributions. For digital service businesses like yours, the IRS expects a higher percentage as salary compared to product-based businesses, usually 60-70% of profits. The exact amount depends on what similar roles would pay in your market and your level of involvement.

This is solid advice. My "eCommerce expert" CPA didn't understand that Shopify Payments fees should be treated differently than regular credit card processing. Ended up having to file an amended return. So annoying.