Thanks for breaking it down! Is FreeTaxUSA actually accurate though? I know TurboTax is expensive but I'm scared of using something cheap and getting audited or missing out on money I should get back.

FreeTaxUSA is absolutely accurate - I've used it for years including with some complicated situations (rental property, investments, etc). The calculations are all based on the same tax laws regardless of which software you use. Regarding audit concerns, your audit risk is based on what's reported on your return, not which software you use to file it. TurboTax doesn't have any special "audit protection" in their standard packages anyway - they just try to upsell you on that service. The best protection against audits is simply reporting all your income accurately and keeping good records of your deductions.

I used the IRS Direct File pilot program when they expanded it this year. It's completely free and pretty straightforward if you have a simple tax situation (W-2 income, standard deduction). The interface isn't as polished as TurboTax, but it gets the job done and there are absolutely zero upsells or hidden fees. The main limitation is that it only supports certain types of income and credits right now - no self-employment income, no itemized deductions, etc. But if you qualify, it's the most straightforward option.

This is super helpful. They've had the S-Corp for about 20 years, and it was always an S-Corp (never a C-Corp), so maybe the passive income concern isn't an issue? Do you think it would be better for them to just dissolve the S-Corp after the asset sale and create a new LLC specifically for the rental property? Or would that trigger immediate taxation on the asset sale proceeds?

You're right that the passive income concern wouldn't apply if they've always been an S-Corp, so that's good news. That issue primarily affects companies that converted from C to S status. Creating a new LLC after dissolving the S-Corp could be a better long-term solution. However, the dissolution would still trigger taxation on the asset sale proceeds - you can't avoid that tax by changing entities afterward. The tax is due when the sale occurs while still in the S-Corp. If they're set on the rental property approach, they might consider selling the business assets, distributing the after-tax proceeds to themselves personally, and then purchasing the rental property in their own names or through a new LLC. This gives them a clean break from the business entity and often provides better tax treatment for rental properties, especially regarding potential future benefits like step-up in basis for heirs.

Would the reverse 1031 exchange work in their situation? I'm curious because I'm facing a similar issue where I need to acquire a new property before my current one sells.

Thanks for bringing that up about her student aid. She did get some grants, but they all went directly to tuition and books, so I think those are tax-free? She doesn't have any loans. About claiming both her and her son - that's good to know. If I had to choose, would it be more beneficial to claim her or him for tax purposes?

Grants that went directly to qualified educational expenses like tuition and required books are generally not taxable, so you're probably right that she doesn't need to file if that was her only income beyond the child support (which isn't taxable to the recipient). As for whether to claim her or her son, it usually makes more financial sense to claim the child if you have to choose. A qualifying child can potentially make you eligible for credits like the Child Tax Credit (worth up to $2,000 per qualifying child) and potentially the Earned Income Credit if your income falls in the eligible range. These are typically worth more than the standard dependent deduction you'd get for claiming your girlfriend.

100% this! I work at a tax prep office and the #1 issue we see with dependent claims is lack of documentation. Keep receipts for major purchases, rent payments, utilities, etc. If you're audited, you'll need to prove you provided over half of the child's total support.

What about Medicare premiums? I'm retired but also have some self-employment income from consulting. Are those deductible too? TurboTax never seems to ask me about this.

Medicare premiums (Parts B and D) are indeed deductible as part of the self-employed health insurance deduction if you have self-employment income! This is a commonly missed deduction. The key is that you can only deduct premiums up to the amount of your net self-employment income. If you're using TurboTax, you'll need to look in the self-employment section and find where you enter your health insurance. There should be an option to include Medicare premiums there. If your consulting income is reasonably substantial, this could be a significant tax savings for you.

I used IRS Free File through one of their partners last year and it was actually pretty straightforward about insurance premiums. It specifically asked about self-employed health insurance in a separate section and had clear explanations. Much more direct than the commercial versions where they hide things in weird places.

Does Cash App Taxes handle 1099-MISC forms? I did some freelance design work and got one of those, plus I have some investment stuff to report.

Yes, Cash App Taxes handles 1099-MISC forms without any issues. I've used it for freelance income alongside investment reporting for years now. The interface for entering 1099 information is actually pretty straightforward, and they support multiple 1099s if you had several clients. They also walk you through any deductible expenses related to your freelance work, which can significantly reduce your taxable income from those gigs.

Whats substituted cost basis mean? I have investments but im confused by all the tax language on my forms.