1 Thank you for this list! The only thing that might apply to me is that I did start doing some side gig work and claimed a few business expenses, but nothing major - maybe $1,200 total on a side income of about $8,000. Could that be what she was referring to? Or is that ratio pretty normal?

18 That expense-to-income ratio is completely reasonable for side gig work and wouldn't raise any red flags by itself. 15% expenses on self-employment income is actually quite conservative by most standards. What's more likely is that your preparer may have been using scare tactics to justify their fee or to encourage you to purchase audit protection services, which is unfortunately common practice among some tax preparation businesses. Some preparers use audit warnings to upsell clients on representation services they likely won't need.

1 Oh my god, she actually did! She mentioned their "audit defense package" for $79 right after making those comments, but I declined because I was already paying quite a bit for the preparation. I didn't even make the connection until you mentioned it. That makes me feel both better and worse at the same time - less worried about an audit but annoyed I was manipulated.

What's the actual difference between a CPA and a regular tax preparer when it comes to handling 1099 income? Is one riskier than the other if you get audited?

The main difference is credentials and scope of expertise. CPAs have to pass rigorous exams and maintain continuing education in all areas of accounting, while tax preparers specifically focus on tax preparation and might have more specialized experience with certain types of returns. For audit protection, what matters more is whether they offer audit assistance/representation, not their title. Many non-CPA tax preparers offer excellent audit support. Just make sure whoever you choose has a PTIN (Preparer Tax Identification Number) from the IRS and ask specifically about their experience with 1099 income situations like yours.

Yes!! This! I got hit with a $800 penalty for not doing quarterly payments on my 1099 income last year. I had no idea it was required. Definitely ask about this in your consultation.

I think there is one on campus, but I heard they don't take complicated situations involving status changes. Is that true? And wouldn't I need special forms that they might not have?

It depends on the specific VITA site. Some standard VITA sites might not handle international tax situations, but many universities have specialized VITA sites with additional training for international student issues - these are sometimes called VITA-International. You don't need special paper forms - VITA sites use software that can handle 1042-S reporting. Just call ahead and specifically ask if they handle status changes and 1042-S forms. If your campus site doesn't, they can usually refer you to one that does. Be sure to bring your immigration documents too (passport, visa, I-94, green card) as they'll need those to determine your tax residency for the split year.

TaxSlayer technically "supports" 1042-S but does it poorly. It has space to enter the info but doesn't guide you through it correctly if you have status changes mid-year. H&R Block and TurboTax handle it better, but even they sometimes struggle with splitting the year between nonresident and resident status.

I did this calculation last year. The rental only makes sense in specific situations: 1. If you need the car very short term (1-3 months) 2. If you're doing HEAVY driving (like 50+ hours per week) 3. If you can't qualify for financing to buy 4. If you're testing whether rideshare works for you before buying For most people, buying even a $5k used car is better financially in the long run.

Makes sense. I guess there's value in having no maintenance costs or worries too, since everything is covered by the rental. But still seems like a huge premium to pay just for the convenience factor. I wonder if the tax deduction aspect changes the math at all.

What about car washes? I'm always getting my car washed because of the rating system. Can I deduct those too when using a rental?

That's a great idea, I didn't even think about contacting the institutions directly! Would they have the same information that was sent to the IRS though? The notice mentions something about securities transactions but doesn't specify which company they're from.

Yes, they'll have records of exactly what was reported to the IRS. The 1099-B forms that investment companies file with the IRS (and the information that triggers CP2000 notices for unreported securities) come directly from these institutions. The CP2000 should list the payer's name somewhere in the notice (usually in a table showing the income that wasn't reported). If you can't find it, when you call the IRS to get your response deadline extended, ask them which financial institutions reported the income. They can tell you exactly where the information came from.

This happened to me too! I reported everything correctly on Schedule D, but my brokerage didn't report my cost basis to the IRS. Got a scary CP2000 saying I owed $6,400 in additional taxes. Once I sent in my documentation showing what I paid for the stocks originally, my additional tax ended up being only $320.