Do you know which states offer free filing? I'm in Ohio and always end up paying for state filing even when I get the federal for free.

I don't have a comprehensive list for all states, but I know Ohio has something called Ohio I-File which is a free electronic filing service. It's separate from the IRS Free File program though, so you'd need to go directly to the Ohio Department of Taxation website to access it. Many states actually do offer some form of free filing, but they don't advertise it well. Check your state's tax department website and look specifically for terms like "free file" or "e-file." Sometimes you need to dig around a bit to find the free options.

Next time try FreeTaxUSA - they handle HSA and basic investment stuff on their free version. I've used them for years and only pay like $15 for state filing. Their federal filing is free regardless of complexity for most situations.

Do you need a separate bank account too? Or can you just use your personal account as long as you keep good records?

You don't absolutely need a separate bank account from a legal standpoint if you're a sole proprietor, but I highly recommend it. Having a dedicated business account makes it so much easier to track income and expenses cleanly, and it looks more professional when clients pay you. If you ever get audited, having separate accounts makes it much easier to prove which transactions were business-related. It's also helpful for calculating your actual profit each month. Most banks offer free or low-cost business checking accounts for small businesses, so there's really no downside to setting one up.

I've used it for 2 years for my web development side gig. Honestly it's been worth every penny. It automatically categorizes expenses, tracks mileage if you need that, and separates business from personal transactions. The best part is at tax time - it generates all the reports you need and transfers everything to TurboTax if you use that.

Thank you so much for the insider perspective! The letter my dad got has almost all of these warning signs you listed. They're definitely using scare tactics with all the talk about "immediate action required" and "avoid asset seizure." Would the IRS ever send letters through third parties like this? Or is that alone enough to know it's not legitimate?

The IRS will never initiate contact through a third party. That alone is a huge red flag. All official IRS communications come directly from the IRS on their letterhead with official seals and usually include your tax ID number. The only time third parties might legitimately contact you about taxes is if you've already hired them, or in rare cases if you've been assigned to a private debt collector - but even then, the IRS would contact you first to tell you they've assigned your case to a private collection agency.

This happened to my mom too! These scammers specifically target older people who might not know how to verify if tax issues are real. They got her for $3,200 claiming they would "settle her tax debt" which turned out to be completely made up.

Is 30% really enough? I've been setting aside 35% and still ended up owing more last year.

It really depends on your income level, state taxes, and available deductions. For many people, 30% is a good starting point, but if you're in a high-tax state or making over $100k, you might need to set aside more like 35-40%. If you found 35% wasn't enough last year, try bumping it up to 38-40%. It's always better to end up with a small refund than to owe more than you expected. Also make sure you're maximizing your business deductions - things like home office, business mileage, health insurance premiums, and retirement contributions can significantly reduce your taxable income.

Thanks for mentioning this! Do you know what qualifies as "financial hardship" for an Offer in Compromise? With my house repairs and existing debt, I'm definitely struggling financially, but I do still have income coming in.

The IRS looks at your assets, income, expenses, and ability to pay both now and in the future. There's no specific income threshold - instead, they calculate something called your "reasonable collection potential." In your case, having necessary home repairs (especially structural ones) and existing debt would be factors in your favor, but they'd also look at your ongoing income potential. The fact that you're actively working and earning would make an OIC harder to qualify for, but not impossible. The IRS has a pre-qualifier tool on their website that can give you a rough idea if you might qualify. But honestly, for most people with ongoing income, a payment plan is the more realistic option. The retirement account suggestion would be more helpful for reducing next year's taxes rather than dealing with what you currently owe.

That's an interesting approach I hadn't thought about. How would we structure the ownership in that case? Would we need to form an LLC or something similar to make it official?

You don't necessarily need an LLC, though many investors do use them for liability protection. You could simply have both names on the deed with specified ownership percentages (like 50/50 or whatever split makes sense based on your contributions). The simplest approach would be to use what's called "tenants in common" ownership, which allows for different ownership percentages and doesn't have right of survivorship (meaning if something happens to one owner, their share goes to their heirs, not the other owner). When you're ready to buy him out after the refi, you'd execute a deed transferring his ownership percentage to you, which is a fairly straightforward process.

That's not entirely accurate. While the annual gift exclusion is $18,000 per person, your solution still requires filing a gift tax return (Form 709) for the amounts over $18,000 to each person. The dad would need to report $49,500 to each person as taxable gifts ($67,500 - $18,000 = $49,500). While you're right that this likely won't result in actual gift tax being paid due to the lifetime exemption, it's still additional paperwork and reduces the lifetime exemption amount. The loan approach with proper documentation is cleaner if they truly intend to pay the money back.