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My neighbor reported her ex-husband for hiding rental income about 5 years ago. She knew exactly how much he was making from multiple properties that weren't on his tax returns because she had handled the books during their marriage. Two years after she filed the report, he suddenly had to sell several properties quickly. She later found out through mutual friends that he was audited and hit with massive penalties and back taxes. The IRS never contacted her directly, but it was pretty obvious her report triggered the audit.
Did she get any kind of reward money for reporting him? I heard somewhere that the IRS pays a percentage of what they collect if your tip pans out.
No, she never got any reward money because she didn't file the specific whistleblower form that's required for that program. She just wanted him to get caught, not to profit from it. From what I understand now, she could have potentially received 15-30% of whatever they collected from him if she had filed Form 211 instead of the standard reporting form. She was kicking herself when she found that out later, since he apparently had to pay back over $100k in taxes and penalties.
My friend works for a small accounting firm and they actually have a policy to NEVER report clients, even if they suspect fraud. Apparently it's considered a breach of client confidentiality in their profession. But they will refuse to continue working with clients who insist on filing fraudulent returns.
The pricing varies so much depending on where you live! In my HCOL city, I paid $1200 for a similar situation (my consulting LLC and husband's W-2), which seemed reasonable for our area. But friends in smaller towns paid half that. Where are you located? That could be affecting the price.
This is true! I'm in rural Missouri and pay $450 for my photography business taxes. My sister in Chicago pays almost triple for basically the same service.
Regardless of who you go with next year, start keeping REALLY good records now! I use QuickBooks Self-Employed ($15/month) to track all my business expenses, mileage, etc. Having organized records cut my tax prep fee by almost 40% because my accountant didn't have to sort through a shoebox of receipts. Even if you DIY, good bookkeeping makes everything easier.
One more simple solution - if you have a copy of last year's return (even just the PDF), your AGI is on line 11 of your Form 1040. Check your downloads folder or email - FreeTaxUSA usually emails a copy when you file. If all else fails, you can also enter $0 as your prior year AGI if you're a first-time filer OR if you didn't file last year. Some tax software also lets you verify your identity through other means if you can't provide your AGI.
Wait, you can just put $0 if you can't find your AGI? Is that legit or will it cause problems? I'm in a similar situation and getting frustrated.
You should only enter $0 if you truly didn't file taxes last year or if you're a first-time filer. It's not a workaround for when you can't find your AGI - the IRS will reject your return if you put incorrect information. If you filed last year, you need your actual AGI. The IRS uses it as a security verification measure to prevent fraud. Your best bet is to either access your previous return or get a tax transcript from the IRS as others have mentioned.
I think everyone's overcomplicating this. I just called FreeTaxUSA customer support at 801-717-1040 and they told me my AGI over the phone after verifying my identity. Took like 5 minutes. No need for special services or waiting for IRS transcripts.
Did they charge you anything for that? Their website makes it seem like you need to pay for customer support if you used their free version.
Just wanted to add - check if your state has income tax! I was in the same boat with $0 federal withholding (which was correct), but my state DOES have income tax and nothing was being withheld for that. Ended up owing $600 to my state at tax time which was a nasty surprise. You might want to adjust your W-4 for state withholding even if federal is correct at $0.
That's a great point I hadn't considered! I'm in Georgia, so I think we do have state income tax. How do I figure out if I need to have state tax withheld? Is that a separate form or the same W-4?
Depends on your state. Some states use the federal W-4 information, while others have their own separate state withholding forms. Georgia uses a state-specific form called the G-4. You should talk to your payroll department and ask for a G-4 form to adjust your state withholding. Based on your income, you probably still qualify for some state exemptions, but Georgia's thresholds are different from federal, so you might still owe some state tax even if you don't owe federal.
If you're nervous, you could always ask your employer to withhold a small amount like $10 per paycheck for federal taxes. That's what I do just for peace of mind even though I'm in a similar situation and probably don't owe anything. Better safe than sorry, and it's kinda like forced savings that comes back as a refund.
This is actually not great financial advice. If you're confident you won't owe taxes, having extra withheld is just giving the government an interest-free loan of your money for the year. You could put that same $10/week into a savings account and at least earn some interest on it.
Savannah Weiner
I think everyone's overreacting here. Tax preparers use different strategies - some more aggressive than others. Unless your guy is claiming totally fictional deductions like dependents who don't exist, it's probably just a difference in risk tolerance. Most "questionable" returns are just maximizing gray areas in the tax code. My brother-in-law is a CPA and says the IRS is so understaffed they only audit a tiny percentage of returns. You could probably just switch preparers and move forward without any issue. Why create problems for yourself?
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Levi Parker
โขThis is dangerous advice. The IRS may be understaffed, but their computer systems automatically flag suspicious returns and discrepancies. They can also open audits years after filing. When they do catch fraudulent returns, the penalties and interest can be devastating. I've seen people lose their homes over this kind of thinking.
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Savannah Weiner
โขI'm not suggesting anyone commit fraud - just pointing out that "aggressive" tax preparation isn't necessarily illegal. There's a difference between creative but legitimate deductions and outright fraud. Most preparers operate in the gray zone where they're maximizing every possible deduction while staying technically within the rules. The reality is that many people switch preparers without facing any consequences. The IRS processes over 150 million individual returns annually and audits less than 1%. If the issues aren't egregious, there's a good chance nothing will happen, especially if future returns are filed properly.
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Libby Hassan
Has anyone just tried talking to their tax preparer about their concerns? Before I switched from my questionable guy, I scheduled a meeting and asked him to explain some deductions I didn't understand. His reaction told me everything - he got defensive and couldn't provide documentation. If your preparer can explain their methodology clearly and stands by their work, maybe it's just aggressive but legal preparation?
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Hunter Hampton
โขI did this and it backfired badly. My "tax guy" realized I was questioning him and suddenly "lost" my previous years' documentation. Then he started saying any problems were because of information I provided, not his work. It created a huge mess. I'd recommend having a new preparer review things first before confronting the old one.
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Sofia Peรฑa
โขI think this approach depends entirely on the relationship and the preparer's character. Some might be open to explaining their process, while others could see it as a threat and react poorly. If you do meet with them, make it conversational rather than accusatory. Ask things like "Can you help me understand this deduction so I can keep better records for it next year?
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