Thank you for bringing this up! I do have a separate business account for the dance studio, but I've occasionally used my personal card for studio expenses when I forgot the business card. Is that going to be a problem? Should I be reimbursing myself officially or something?

Using your personal card occasionally isn't the end of the world as long as you properly document everything. Keep all receipts and create a formal reimbursement process - even if it's just you approving it as the director. I recommend creating a simple reimbursement form that details the expense, date, purpose, and business justification. Attach the receipt and have it "approved" (by you or ideally another board member if you have any). This creates a clear paper trail showing these were legitimate business expenses, not personal ones. The key is maintaining that clear separation with proper documentation.

This! I run a small nonprofit music education program and had to file separate forms with my state's department of revenue AND secretary of state to maintain our state-level exemptions. Each state has different requirements.

Is that actually legal though? Aren't they required to keep tax records for a certain period of time since they're an authorized e-file provider? Seems like there should be some regulation about this.

There's a difference between what's legally required and what they promise customers. Tax preparers are required to keep certain information for their compliance purposes, but that doesn't mean they're required to make it available to customers indefinitely. Their terms of service (which nobody reads) actually states they only "strive" to maintain access to returns for 7 years but make no guarantees. It's buried in the fine print. The IRS requires them to keep certain records, but that's for audit purposes, not customer convenience.

TurboTax Audit Defense is completely separate from their data retention policies. It's basically just insurance that provides representation if you get audited. I paid for it too thinking it included document storage, but when I called about missing returns, they told me it was completely different departments and services.

Do you know if we can just use regular tax software for this? Or do we need something special for self-employment stuff?

Regular tax software will work fine for this amount of self-employment income. All the major ones (TurboTax, H&R Block, TaxAct, etc.) can handle Schedule C and Schedule SE. Some free versions have limitations though, so you might need to pay for a slightly upgraded version that handles self-employment. The software will walk you through the specific questions about your business income and expenses. Just make sure to select the option that indicates you have self-employment or business income when you start the process.

That's true! But isn't the standard deduction only for income tax and not self-employment tax? I think they'd still owe the SE tax even with the standard deduction.

Did you use the IRS's online payment plan setup? I'm wondering how flexible they are with the monthly payment amounts and if they charge a lot of interest while you're paying it off.

Yes, I used the online payment plan tool on IRS.gov. It was much simpler than I expected. You can actually propose your own monthly payment amount based on what you can afford. There is a minimum (I think around $25-50) but they're pretty flexible. They do charge interest (federal short-term rate plus 3%, compounded daily) and a small failure-to-pay penalty while you're in the payment plan, but those rates are way lower than credit cards or loans. You'll also pay a setup fee ranging from around $31 to $130 depending on how you apply and pay, but low-income taxpayers can get reduced fees or even have them waived.

This is helpful! Do you know which software providers specifically offer free prior year filing? I looked at TurboTax but they wanted to charge me for going back to 2022.

This breakdown is really helpful. Is there a diplomatic way to figure out which type of accountant I'm dealing with without offending them? I'm paying good money and want someone who falls into your third category.

Ask them about a recent tax law change and how they stay current on updates to the code. Good accountants will mention specific resources they use to track changes to primary tax law. You could also ask a specific question about your situation and request the citation to the relevant code section. Be direct but respectful - "I'd like to understand more about the underlying tax code for my situation. Could you point me to the specific sections that apply so I can read more?" A good accountant won't be offended by this. They'll appreciate a client who wants to be informed. If they get defensive or dismissive, that tells you a lot about which category they fall into.

As someone who's been in practice for 25 years, I can tell you that what they teach in school and what happens in the real world are very different. Most accountants use specialized tax databases and software. Nobody has time to read the entire IRC for every client question.