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FreeTaxUSA is great for simple returns but if you have an HSA, just double check everything carefully. I used them last year and somehow my HSA contribution didn't get properly reported even though I swear I entered it. Ended up having to file an amendment which was annoying. Not saying don't use them, just verify all the numbers on the final PDF before submitting. Their interface for the HSA section is a little confusing with the contribution vs distribution sections.
Do they charge extra for amending returns? I know TurboTax hits you with another fee if you need to correct something after filing.
They do charge for amendments, I think it was about $15 when I did mine. Still cheaper than most other places, but definitely an extra expense I wasn't planning on. The process wasn't too difficult though - you basically just go through their amendment section, fix what was wrong, and they generate the proper 1040-X form. Just make sure to print and mail it rather than e-file, since the IRS still requires paper amendments in most cases.
I'm going against the grain here but I still use H&R Block's software (not their in-person service). Yes it's more expensive but I've had issues with state returns on the cheaper services. H&R had better guidance for my state's weird local tax rules. If ur taxes are super basic FreeTaxUSA is fine but sometimes the extra $40 is worth the peace of mind.
What state are you in? I'm in Pennsylvania and our local taxes are a nightmare with all the different municipality rates.
One thing nobody's mentioned yet - age makes a difference too! If you're 50 or older, you can make catch-up contributions of an extra $1,000, bringing your limit to $7,500 for 2023. Also, remember that you can make 2023 IRA contributions all the way until April 15, 2024 (tax filing deadline). My wife and I always max out the previous year's contributions in January-April of the next year when we have extra cash flow.
I'm turning 50 in November 2023. Can I make the catch-up contribution for the whole year, or just for the months after my birthday?
You can make the full catch-up contribution of $1,000 for the entire 2023 tax year! The IRS bases eligibility on whether you're 50 or older at any point during the calendar year. So even though you're turning 50 in November, you qualify for the full $7,500 contribution limit for 2023. This is actually a nice little bonus for people in your situation - you effectively get to make "catch-up" contributions for the months before you turn 50.
Has anyone used TurboTax for figuring out IRA contributions when one spouse has no income? When I tried entering our info last year it got super confusing and I'm not sure if I did it right.
I used TurboTax last year in this exact situation (I worked, husband didn't). It actually walked me through the spousal IRA contribution pretty well. There's a specific section about retirement contributions, and it asked if my spouse had any earned income. When I entered zero, it explained the spousal IRA rules and confirmed we could still contribute up to the full amount for him. The key is making sure you indicate that you're filing jointly - that's what enables the spousal IRA option.
Thanks for explaining that! I think I must have missed something in the questionnaire because it never gave me that option clearly. I'll look specifically for the retirement contributions section this year and make sure we're filing jointly (which we are). Really appreciate the tip about where to find it.
Does anyone know if the IRS automatically gets copies of 1099-NECs? Like, do they already know I didn't report this income?? Now I'm worried they've been building a case against me this whole time π°
Yes, the company that paid you would have sent a copy of your 1099-NEC to the IRS. The IRS has automated systems that match reported income with filed tax returns, so they likely know about the discrepancy. That's why it's good you're fixing it proactively!
One tip - when you file your 1040-X, include a brief letter explaining that this was an honest oversight and that you're voluntarily correcting it as soon as you discovered the error. I did this when I had to amend a return, and I think it helped me avoid penalties. Make sure to keep copies of EVERYTHING you send them.
Just want to mention that reasonable salary is somewhat subjective depending on your actual role and responsibilities. I'm a graphic designer making around $65k and my tax guy helped me document a $45k salary because I do a lot of administrative and sales work besides just design. Make sure you're documenting your various job duties. If you're doing sales, admin, project management etc on top of web development, you might be able to justify a lower salary percentage since part of your income is coming from non-development activities.
One thing to also think about: S-Corps have to file taxes on a calendar year, unlike LLCs which can choose fiscal years. Also ask your CPA about health insurance deductions which work differently for S-Corps. Don't forget you'll need to do a seperate tax return for the business (Form 1120-S) plus your personal return. And if you miss filing deadlines the penalties can be rough.
Oh that's a good point about the calendar year requirement. My business tends to be seasonal with a lot of income at the end of the year, so that might actually work out well for planning purposes. Do you happen to know if I'd need to start taking a salary immediately after forming the S-Corp? Or could I wait until I've built up some reserves in the business account first?
You should start taking a reasonable salary as soon as the S-Corp election is effective. The IRS looks suspiciously at S-Corps that distribute profits without paying any salary, as that appears to be avoiding payroll taxes. That said, you don't necessarily need to take a salary with every single payment that comes in. Many S-Corp owners set up quarterly or monthly payroll for themselves, allowing some cash to accumulate in the business account before processing payroll. Just make sure that by the end of the tax year, you've paid yourself a reasonable salary relative to the profit the business generated. Your payroll schedule should be consistent and documented as part of your business practices.
QuantumQueen
Another tip for Path filers - make sure you're looking at the right transcript! There are 4 different types and the Account Transcript is the one that shows refund info. I was confused at first because I kept checking the Return Transcript which doesn't show processing or refund dates. Also, if you see code 570 (additional account action pending) followed by 971 (notice issued), don't panic! That often means they're just verifying something and a release code (571) usually follows within a week or two.
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Aisha Rahman
β’What about code 846? I see that on mine with a date of 3/5/25 but WMR still shows processing. Does that mean I'm getting my refund on 3/5?
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QuantumQueen
β’Code 846 is exactly what you want to see! That's the "refund issued" code, and the date next to it is when the IRS will release your refund. So yes, your refund should be sent on 3/5, though it might take 1-3 business days after that to show up in your bank account depending on your bank's processing time. The WMR tool often lags behind the transcript updates, so it's totally normal for your transcript to show a refund date while WMR is still on processing. Your transcript is the more accurate source.
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Ethan Wilson
Has anyone received their Path refund earlier than the date shown on their transcript? Mine shows 3/7 but I'm hoping it might come sooner!
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Yuki Sato
β’I actually got mine a day earlier than the transcript date! Transcript said 2/28 but it hit my bank on 2/27. I think it depends on your bank though.
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