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Former H&R Block employee here. Just wanted to add that there's a middle ground between the "do it all in front of you" approach and the "take everything and come back later" approach. Many independent tax pros (including some CPAs) will do an initial meeting to collect docs, then work on it, then schedule a review meeting where they walk you through everything they did and answer questions before filing. That way you get the benefit of their focused attention when preparing it AND you still get to see and understand what they did before it gets submitted. Just ask about their process when you're interviewing potential CPAs!
This is super helpful! That middle ground approach sounds perfect for what I'm looking for. Do most CPAs offer this option if you specifically ask for it?
Most CPAs are actually happy to offer this approach if you specifically request it. It's often their preferred method too since it gives them time to work thoroughly without rushing while still providing you with good service and explanation. Just be clear about what you want when you first contact them. I'd recommend saying something like: "I'd like to schedule an initial meeting to provide my documents, then have you prepare the return, and finally meet again so you can explain everything before filing." Many will already have this exact process in place, but being specific helps ensure you get what you're looking for.
One thing nobody mentioned - CPAs tend to be way more expensive than H&R Block. I switched last year and paid almost triple what I used to pay. For me it was worth it because the CPA found deductions I never knew about that more than covered the difference, but just be prepared for sticker shock!
That's a really good point! I paid about $450 for a CPA last year versus the $150 I was paying at H&R Block. But my CPA found over $2,000 in deductions I would have missed, so definitely worth it in my case. Price really depends on how complicated your return is.
Wait, so all moving expenses aren't deductible now? I moved last year for a new job that was 300+ miles away. My tax guy said I could deduct it?? Now I'm worried I'm gonna get audited.
If you're not active-duty military, then no, moving expenses haven't been deductible since 2018 due to the Tax Cuts and Jobs Act. This suspension runs through 2025. If your tax preparer deducted moving expenses on your 2024 return and you're not active-duty military, you might want to consider filing an amended return to correct this. It's better to fix it before the IRS notices, as penalties and interest can add up.
Has your friend considered taking the Section 195 startup cost deduction? The IRS allows you to deduct up to $5,000 of business startup costs in the first year (subject to limitations if total startup costs exceed $50,000), with the remainder amortized over 15 years. Some of his expenses might qualify if they're directly related to investigating or setting up the business.
Section 195 doesn't cover moving expenses though, right? I thought it was more for things like market research, analyzing potential locations, legal fees for setting up the business structure, etc.
Something nobody's mentioned yet - even with zero sales, you might need to file other forms depending on your state. For example, in California, LLCs have to file a Form 568 and pay an annual $800 franchise tax even if you had no activity. Check your state's requirements for LLCs. Some states require annual reports or have minimum taxes regardless of whether you had any income. That's separate from your federal filing requirements.
Oh that's a good point! I'm in Minnesota - do you know if there are similar requirements here? I paid the initial filing fee but wasn't aware of any annual requirements.
In Minnesota, you do have an annual filing requirement - you need to file an Annual Renewal with the Secretary of State by December 31st each year. The good news is there's no fee for the annual renewal in Minnesota (unlike California's painful $800 minimum), but you must file it or your LLC could be administratively dissolved. You can do this online through the Minnesota Secretary of State website. It's pretty straightforward - just updating your registered agent and address information. This is separate from your tax filing requirements.
Make sure you keep all your receipts organized! I messed up my first year with my LLC by not properly tracking expenses, and it was a nightmare come tax time. I recommend setting up a simple spreadsheet now with columns for date, vendor, amount, expense category, and payment method. Add all your 2024 expenses and keep it updated going forward. This will be super helpful when you file taxes next year and actually have some income to offset those expenses against.
Don't forget about the luxury auto limits for leased vehicles! If your lease is for a car over a certain value (around $60k in 2024), there's an "inclusion amount" that reduces your deduction. I learned this the hard way last year with my leased BMW that I use for my real estate business. Had to add back some income on my return.
Thanks for bringing that up - I hadn't even considered the luxury auto limits. My lease will be for a standard SUV around $42k, so I should be under that threshold. But good to know about the inclusion amount for future reference! Do you find the lease deduction to be worth it overall for your business? I'm still debating whether the record-keeping hassle is worth the tax benefit.
For me, the lease deduction is definitely worth it even with the extra paperwork. Since I use my vehicle about 70% for showing properties to clients, I get a substantial deduction that offsets a good chunk of my monthly payments. The record-keeping isn't too bad once you get a system in place. I use a mileage tracking app that automatically logs my trips, then I just categorize them once a week as business or personal. Takes maybe 10 minutes weekly. I also take photos of any car-related receipts with my phone and store them in a dedicated folder. My tax person loves me for being so organized!
Quick tip: If you're planning to do rideshare, track those miles separately! Rideshare driving falls under a different category than your IT consulting business. You'll essentially have two separate business uses to track.
Is that really necessary? Isn't it all just Schedule C income that can be lumped together?
Rita Jacobs
Has anyone considered getting a part-time W2 job to offset some of the SE tax burden? I'm currently doing this - 20 hrs at a coffee shop plus my freelance work - and it helps because I'm not paying SE tax on that portion of my income.
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Khalid Howes
ā¢This actually makes sense mathematically but seems like a lot of extra work just to avoid taxes. Wouldn't it be better to just charge more for your freelance work to cover the tax difference?
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Ben Cooper
If you're in a common law marriage in Texas, DEFINITELY file jointly! This was a huge help for me and my partner. My self-employment income combined with her W-2 income put us in a better overall tax situation, plus her withholding throughout the year covered a lot of what we owed. Don't hesitate on this one.
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