Do you need to verify those certificates somehow? Or just keep them on file? I've had a few business customers claim they're exempt but I wasn't sure if I should just take their word for it.

You need to collect the actual certificate from them - don't just take their word for it. Most states have specific forms customers need to fill out. You should verify the certificate has all required information (their tax ID number, signature, etc.) and keep it on file. Some states also let you verify tax ID numbers on their websites. You don't need to send these certificates to the state, but you absolutely must have them available if you get audited. I now keep digital copies of all certificates in a dedicated folder so I can find them easily.

I've used both. TaxJar is more affordable for small businesses but Avalara has more features if you're growing fast. With your sales level ($2,500/month), TaxJar's basic plan would probably be sufficient. The time savings is definitely worth it - it automatically files your returns in multiple states and keeps track of all the weird local tax rates.

Yes, the amended returns already accounted for the wage deduction reduction. The consulting firm actually handled that part correctly, reducing the wage expenses for the quarters we claimed the ERC. My main concern was just the timing of deducting their fees, which were substantial (around $43,000 on a $285,000 ERC claim). Based on everyone's feedback, it sounds like I'll deduct them in 2023 when they were actually paid, rather than trying to amend the 2020/2021 returns again to include them.

That's good to hear! So many ERC companies miss that wage reduction part. And yes, deducting in 2023 when paid is the correct approach for a cash basis S-Corp. No need to complicate things by trying to amend the already amended returns. One other thing to keep in mind is that the IRS announced increased scrutiny of ERC claims, so keep all your documentation organized including proof of business impact during COVID that qualified you for the credits. They're doing a lot of audits on these claims, especially the larger ones.

Sorry to hear that. What was the reason they gave for rejection? Was it related to the partial/full shutdown requirement or the gross receipts test? Many of these ERC mills were approving everyone regardless of whether they truly qualified under the rules.

That's actually a really good idea! I hadn't thought of trying a third one as a tiebreaker. I'll give TaxSlayer a shot tonight and see if it aligns with either Keeper or FreeTaxUSA. I'm guessing if two of them match, that's probably the right calculation? Though with my luck all three will show different amounts lol.

Yeah, exactly - if two match and one is different, that's usually a good indication. And with three states and multiple 1099s, it's worth the extra effort to be sure. Just make sure you're entering everything identically in all three systems. I found sometimes even the order of entering certain forms can affect calculations in weird ways. Let us know which one ends up matching!

In my experience, TurboTax seems to handle the QBI (Qualified Business Income) deduction best for multi-state situations. I had issues with H&R Block last year where it wasn't properly allocating the QBI between states. Maybe try that as your third option?

Thanks for the tip! I didn't want to spend the money on TurboTax since it's so expensive compared to the others, but if it handles QBI better it might be worth it. Definitely seems like that could be part of my issue.

Wait, really? I didn't know that scholarships would reduce the amount I can withdraw penalty-free. My daughter did get about $15K in merit scholarships. So I would need to subtract that from the total expenses before figuring out my penalty-free withdrawal amount?

Yes, that's correct. Any tax-free educational assistance must be subtracted from your qualified expenses before calculating your penalty-free withdrawal amount. This includes tax-free scholarships, Pell grants, employer-provided educational assistance, and veterans' educational assistance. In your case, if your daughter received $15K in merit scholarships, you would subtract that from your total qualified expenses. So if tuition is $80K and other qualified expenses are, say, $10K, your total qualified expenses would be $75K ($90K minus the $15K scholarship) rather than the full $90K.

This is actually an important timing consideration. The IRS requires that the IRA withdrawal occur in the same tax year that you pay the qualified education expenses. If you pay tuition in December 2025 (which is in tax year 2025), but take the IRA withdrawal in January 2026 (tax year 2026), you wouldn't be able to connect those specific education expenses to your withdrawal for the penalty exception.

Thanks for clarifying that! Guess I need to time my withdrawal more carefully than I thought. I'll make sure to take out the money before the end of December since that's when I'll be paying the spring tuition bill.

If I file an amended return just for the stimulus credit, will that affect any other parts of my tax situation from that year? I'm worried about opening a can of worms or triggering an audit.

Filing an amended return for just the Recovery Rebate Credit shouldn't affect other aspects of your tax situation if that's the only change you're making. You'll need to complete the entire 1040-X form, but you'll only be changing the specific line related to the credit. The amendment itself doesn't increase your audit risk if the claim is legitimate. Just make sure you have documentation showing you were eligible and didn't receive the payment. The IRS should have records of which payments were issued to you, but having your own bank statements as backup is always smart.

You can check your IRS online account instead. Go to irs.gov and look for "View Your Account." You'll need to create an ID.me account if you don't have one, but once you're in, you can see all the payments that were issued to you including all stimulus payments. It's actually more reliable than the old GetMyPayment tool was.