Thanks for this practical advice. I hadn't thought about doing it in TurboTax first and then just getting a review. That seems like a good middle ground between doing it all myself and paying the full price for preparation. Did your CPA find many errors when they reviewed your self-prepared return?

The first year, yes - my CPA found several issues. I had misunderstood how to enter some 1099-MISC income and had incorrectly calculated my home office deduction. The corrections actually increased my refund by about $800. In subsequent years, I've gotten better at using the software correctly, and now the review is mostly just peace of mind. The CPA usually just verifies everything looks right and occasionally suggests an additional deduction I might have missed. Most errors happen when your tax situation changes significantly - like in your case with marriage, home purchase, and dependents all at once.

This is such a good point about withholding! When I got married, we both kept our "single" withholding rates for most of the year and ended up with a massive refund that seemed wrong but was actually correct.

That's an interesting alternative I hadn't considered. Would the interest I earn be considered passive income? And would the business still be able to deduct the interest payments? Seems like it could be win-win if structured properly.

Yes, the interest you earn would typically be considered portfolio income (not passive income in the tax sense, but not subject to self-employment tax either). It's reported on Schedule B and taxed at your ordinary income rate. The business could generally deduct the interest payments as a business expense, subject to certain limitations if the business is very large (which doesn't sound like the case here). This creates a tax-efficient arrangement where the business reduces its taxable income and you receive income without the complications of partnership taxation. You could even structure it with an equity conversion option if the business performs well and you later decide you want ownership.

What tax software did you use to handle your K-1? I'm looking at a similar situation and wondering if TurboTax can handle it or if I need something more specialized.

I started with TurboTax but switched to a CPA halfway through. TurboTax can technically handle K-1s, but it doesn't provide much guidance for complex situations. If your K-1 is straightforward it might be fine, but mine had unusual allocations, guaranteed payments, and some weird depreciation issues from business property. The best advice I can give is to either use a more specialized tax software like UltraTax if you're comfortable with tax concepts, or just pay for a CPA who specializes in partnership taxation. It's worth the money to avoid the headache and potential errors. My CPA actually found several deductions TurboTax missed that more than paid for her fee.

You can request tax transcripts from the IRS for previous years. Go to irs.gov and search for "Get Transcript Online" - you'll need to create an account if you don't already have one. The transcript will show what you reported for interest income each year. Alternatively, if you used the same tax software in previous years, you might be able to access your old returns through that software. Most keep records for at least a few years.

Thanks for that info about the transcripts! I just logged in and was able to download my last 5 years of returns. I can see the interest income I reported each year, but it's not broken down specifically for savings bonds vs other interest. Is there a more detailed transcript that would show that breakdown?

I used TaxSlayer last year and they do have a specific section for savings bonds where you can enter previously reported interest. It's under "Federal → Income → Interest Income" and then there's a checkbox for US savings bonds that opens additional fields. Much more straightforward than FreeTaxUSA in my experience.

That's really helpful, thanks! I might make the switch then. Do you know if I can import my W-2 and other forms from FreeTaxUSA to TaxSlayer or would I have to re-enter everything manually?

That's reassuring to hear. Did you get hit with any penalties or just the back taxes and interest? And did you use a tax professional or just do it yourself?

I ended up paying a penalty of about 20% on top of the taxes owed, plus interest. It wasn't fun writing that check, but it was bearable and totally worth the peace of mind. I used a CPA for the amended returns. It cost me about $350, but they found some deductions I'd missed that probably saved me twice that amount. Plus they handled all the paperwork correctly which I think helped avoid any audit flags. If you've got somewhat complicated taxes or multiple years to amend, a professional is definitely worth the money.

The IRS doesn't automatically know about your eBay income though. They only know what gets reported to them through forms like W-2s and 1099s. If eBay/PayPal didn't issue 1099s (which they wouldn't for smaller sellers back then), the IRS has no way of knowing about that income until they audit you or match bank deposits.

Do you know if I can change the withdrawal date each month? My paychecks come on different days depending on the month.

When you set up a direct debit installment agreement with the IRS, you can choose a monthly payment date that works best for you - the 1st, 8th, 15th, or 22nd of each month. Unfortunately, you can't change the date each month - you have to pick one consistent date. Most people pick a date that's a few days after their typical paycheck arrives. If your pay schedule varies that much, you might want to consider keeping a buffer in your account or choosing a date later in the month.

Yes, there's a setup fee, but it's lower if you choose direct debit vs. other payment methods. I think it's around $31 for direct debit if you set it up online. Regular installment agreements have higher fees (like $149). If your income is below a certain threshold, you might qualify for a reduced fee or fee waiver. Check out Form 13844 for fee reductions based on income.