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Tax prep checklist for accountants? Need to share EVERYTHING with my CPA about finances/tax situation this year
Last year was my first time working with a CPA as a newly established business owner. He handled both my business taxes and the joint filing for my wife and me, but I wasn't thrilled with the experience. The accountant basically just took our previous year's returns and worked from there without asking me any questions. We had to have him correct the return twice before filing - once because he completely missed our child tax credit (that's like $2,000 we almost lost!), and then again because he overlooked several employer savings plans clearly listed on our W-2s. I've decided to switch accountants this year, and I want to be super prepared. I'd like to walk in with a comprehensive list of everything they should know about our financial situation so nothing gets overlooked. The problem is I honestly don't know much about taxes myself. When we used TurboTax in previous years, the software just walked us through everything with their questionnaire. Is there something similar online - maybe a checklist or questionnaire I can complete beforehand that will help me compile all the necessary information about our personal and business finances for the accountant? I just want to make sure taxes go smoothly this time and that my new CPA has a complete picture of our situation.
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Is my tax situation bad enough to need a tax attorney or can a CPA handle the unfiled returns?
I'm in a bit of a mess with my small e-commerce business and wondering if I need to go full tax attorney or if a CPA can handle it. Here's where I stand: I ran an online shop from 2019-2020, and in 2020 the business brought in about $850k in gross revenue. I filed an extension for 2020 and sent about $27k as an estimated tax payment, but then never actually filed the return. The business technically stayed open (though not actively selling) and I haven't filed ANY tax returns since then - no Federal, State, or Sales Tax for 2020, 21, 22, 23, or 24. The IRS just created a substitute return for me and says I owe $540k for 2020! This seems way too high since they didn't factor in any of my substantial business expenses. To make matters worse, my state (Florida) just levied my bank account for $9k with no warning. I talked to a CPA who referred me to another CPA, who then suggested I need a tax attorney. When I went back to the first CPA, they said tax attorneys are "extremely expensive & definitely overkill" and I'm just going in circles. For reference, the attorney wants $6,500 retainer at $500/hour. They're saying I should use a CPA just to prepare the returns, then come back to them to handle filing and IRS communications. Can't a good CPA do all of this for less money? I'm not trying to be cheap at this point - I know this needs to be fixed ASAP. But if we're talking about a $7-13k difference in cost, that's significant money.
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As a practical matter, here's the breakdown of what you actually need: For a complex case like yours with $850k revenue, multiple unfiled years, and state levies already happening, you ideally want BOTH a CPA and a tax attorney, but in a way that minimizes cost. Here's what I'd recommend: 1. Have a CPA prepare all your actual returns with proper expenses (much cheaper than an attorney doing this) 2. Have a consultation with a tax attorney (1-2 hours) to assess if there's risk of criminal charges 3. If no criminal risk, let the CPA handle the IRS negotiations 4. If there is risk, then yes, retain the attorney I've gone through this with my business. Initially used just a CPA, but when the IRS started making noises about willful neglect, I brought in an attorney. The attorney only handled the specific negotiations and communications, while the CPA did all the preparation work. This hybrid approach kept my costs reasonable while still getting proper protection.
Would the original poster need to file business returns separately from personal returns? And what about sales tax - is that a completely different process? I'm confused about how all these different tax types get resolved.
Based on the description, it sounds like the business was likely a sole proprietorship or single-member LLC, which means business income would be reported on Schedule C of the personal return. So the CPA would prepare personal returns (Form 1040) with business schedules attached for each year. Sales tax is indeed a separate process handled at the state level. The CPA would need to prepare and file sales tax returns for all unfiled periods. This is separate from income tax filings but should be addressed simultaneously since the state has already started collection actions. Most tax resolution CPAs can handle both income and sales tax matters, but it's worth confirming this specifically when hiring someone.
Don't overlook the penalties here - they're gonna be massive after 5 years of non-filing. Make sure whoever you hire talks about penalty abatement. The IRS has "first-time penalty abatement" and "reasonable cause" options that could save you tens of thousands. I had 2 years unfiled and the penalties were almost 40% of what I owed! My CPA got most of them removed by showing I had health issues that prevented timely filing.
Good point about penalties. I think with the substitute return already filed, doesn't that mean some penalties are already assessed? Is it harder to get abatement after that point?
IRS claims I owe $140,000 - Need a CPA, Tax Attorney, or both for help?
So I just received a scary letter from the IRS saying I owe them approximately $140,000 in back taxes, penalties and interest from my small business I ran between 2020-2023. I'm completely freaking out right now. This came out of nowhere! The letter mentions something about underreported income and disallowed business expenses for those tax years. They're saying I didn't properly document some major equipment purchases and that I had cash transactions I didn't report. There's also something about self-employment taxes I supposedly didn't pay correctly. I honestly did my taxes myself using TurboTax because I thought my situation was straightforward enough. I kept receipts for most things but I admit my bookkeeping wasn't perfect. Now I'm terrified and don't know where to turn. Should I hire a CPA to go through all my records? Or do I need a tax attorney at this point since the amount is so large? Or both? I've never dealt with anything like this before and I don't have anywhere near that kind of money to pay the IRS right now. I'm losing sleep over this and need guidance ASAP!
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One thing nobody's mentioned yet - don't ignore the letter or miss the deadline to respond! Even if you haven't hired help yet, send something in writing acknowledging receipt of their notice and stating that you're in the process of gathering records and seeking professional assistance. I made the costly mistake of missing the 30-day window to contest an IRS assessment, and it severely limited my options after that. At minimum, request an extension while you find representation. You can always do this yourself even before hiring someone.
Thank you for mentioning this! The letter gives me 45 days to respond or file an appeal. Should I just send a simple letter saying I'm gathering documentation and seeking professional help? Or is there specific language I should use?
Yes, send a simple letter acknowledging receipt of their notice (include the notice number) and state that you're gathering documentation and seeking professional representation. Request an extension of time to respond fully - typically 30 or 60 additional days. Keep it professional and straightforward - don't try to argue your case yet or make any specific claims about your tax situation until you have professional guidance. The goal is simply to prevent default assessment while you get your team together. Send it certified mail so you have proof of delivery.
Been through this. For $140k, definitely get a tax attorney first, then let them decide if you need a CPA too. Don't cheap out here - a good tax attorney literally saved me about $70k on a $120k assessment. Make sure whoever you hire specializes in tax controversy/IRS disputes specifically. Regular CPAs who just do tax prep often make things worse in audit situations. Look for someone with at least 10+ years experience dealing with the IRS.
How did you find a good tax attorney? Just Google? Any specific credentials to look for?
Issues with Backdoor Roth IRA Basis Tracking After Investment Losses - Form 8606 Question
I ran into a situation with my Backdoor Roth IRA and was hoping someone could help me understand if I need to be worried. About three years ago, I contributed to my Roth IRA as usual. But when tax season came around, I discovered my income had increased beyond the eligibility threshold. So I had to recharacterize my contribution to a traditional IRA and then do the backdoor Roth conversion. Here's where it gets tricky - during the time the money was sitting in the account, the investments lost some value (about $725). When I filled out Form 8606, the converted amount on Line 8 ended up being less than the contribution amount on Line 5. This created a basis carryforward on Line 14 that gets carried to next year's form. From what I can tell, this basis carryforward is going to keep happening year after year. I'm wondering if this is going to cause any issues or raise red flags with the IRS? Should I be concerned about this situation or is it normal when you have investment losses during the backdoor Roth process? Also, is there any way to "use up" this basis carryforward, or am I stuck with it forever? I'd appreciate any advice from someone who's dealt with this situation before.
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One thing to consider with your basis carryforward situation is whether you have any other traditional IRA assets. The pro-rata rule could make this more complicated. If you have other pre-tax money in any Traditional, SEP or SIMPLE IRAs, you won't be able to just convert the non-deductible portion. You'll have to convert a proportional amount of pre-tax money too, which creates a tax liability. For example, if you have $5,000 in non-deductible contributions (your basis) and $45,000 in pre-tax traditional IRA money, any conversion will be 10% tax-free and 90% taxable because of the pro-rata rule. Many people overlook this when doing backdoor Roth conversions and end up with unexpected tax bills.
I fortunately don't have any other traditional IRA assets - I've always used my 401k for pre-tax retirement savings and only opened the traditional IRA temporarily for the backdoor process. So I think I'm ok on the pro-rata rule, but that's definitely an important point for others to consider. Actually, I'm wondering if there's any advantage to purposely waiting until the market goes up before doing the conversion next time? That way I could potentially use up some of this basis carryforward?
Intentionally waiting for the market to go up before converting could help use up your basis carryforward, but it comes with risks. The longer you wait to convert, the more potential tax liability you could create if investments grow substantially before conversion. Remember that any growth that occurs while the money sits in the traditional IRA will be taxable when you convert. So while waiting might help with the basis issue, it could create a different tax problem. Most financial advisors recommend doing the conversion quickly after contribution to minimize taxable growth. It's usually a better strategy to just continue with regular backdoor contributions and let the basis work itself out over time rather than trying to time the market for tax purposes.
Can someone explain how to calculate the amount that gets carried forward when doing the Form 8606? I'm about to do my first backdoor Roth and want to understand this better.
The basis carryforward calculation happens on Form 8606. If you contribute $6,000 (non-deductible) to a traditional IRA but the value drops to $5,500 before you convert to Roth, you'll have: - Line 5: $6,000 (your non-deductible contribution) - Line 8: $5,500 (the amount you actually converted) - Line 9: $0 (assuming no previous basis) - Line 10: $6,000 (from line 5) - Line 11: 1.000 (divide line 10 by line 8, but capped at 1.000) - Line 13: $5,500 (line 8 × line 11) - Line 14: $500 (line 10 minus line 13) That $500 on line 14 is your basis carryforward to next year's Form 8606.
How to calculate my Airbnb Rental Depreciation on a renovated property?
I purchased an older home (90 years old) back in 2023 for $179K and then put about $114K into renovations and improvements. So all in, I'm at $293K total investment. The current fair market value of the property is around $360K according to recent appraisals. The land itself is valued at approximately $90K of the total. I'm using this property as an Airbnb rental, and it's been occupied about 74% of the year. The rest of the time it sits empty or we occasionally use it ourselves. I'm trying to figure out the yearly depreciation amount for my taxes. I'm currently working in H&R Block software and it's telling me the depreciation is around $5200 for the year, but I'm not sure if I'm entering everything correctly or if that number makes sense. How should I be calculating the depreciation on this Airbnb rental? Do I use the original purchase price, the total with improvements, or the fair market value? And how does the 74% rental usage affect the calculation?
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One thing to watch out for with Airbnb rentals is the personal use calculation. If you or family members use it for more than 14 days OR more than 10% of the days it's rented out (whichever is greater), it's considered a mixed-use property and the depreciation rules change slightly. In your case, with 74% rental usage, you need to determine if the other 26% was simply vacant or if it included personal use days. If you personally used it for more than about 27 days (10% of the 74% rented days, assuming a full year), then you need to allocate expenses differently.
Thanks for pointing this out! Of the 26% non-rental time, we probably used it personally for about 20 days total throughout the year. The rest was just vacancy between bookings. Does that change how I should handle the depreciation?
Since you used it for 20 days personally and that's less than both 14 days and 10% of your rental days, you're still in the clear to treat it as a regular rental property. Your depreciation calculation remains the same - you can deduct 74% of the annual depreciation amount. Remember though, when allocating other expenses like utilities and maintenance, you'll need to use the 74% factor consistently. And keep good records of personal use days versus rental days versus vacant days, as the IRS might ask for this documentation if you're ever audited.
Just a heads up - don't forget to report all your Airbnb income! They now send 1099-K forms to the IRS for any amount earned, so everything is tracked. But on the plus side, you get all these great deductions like depreciation to offset that income.
Is that true for 2024 taxes? I thought there was still a $600 threshold before they send a 1099-K?
ThunderBolt7
As an additional tip - one thing that helped me immensely was creating a "tax events" document throughout the year. Every time something happens that might affect your taxes (starting a new client, buying business equipment, making charitable donations, etc.), I add it to a running document with the date and any relevant details. When tax time comes around, I'm not trying to remember everything that happened 9-12 months ago. Has saved me from missing deductions multiple times!
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Jamal Edwards
This is brilliant! Do you use any specific app or format to track these "tax events" throughout the year? I always find myself scrambling in April trying to remember everything that happened the previous year.
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ThunderBolt7
I keep it super simple - just a Google Doc that I can access from my phone or computer anytime. I have it organized by month, and I set a monthly calendar reminder to update it. For format, I just do bullet points with the date, what happened, and approximate dollar amount if applicable. For example: "3/12 - Bought new laptop for business use - $1,450" or "7/23 - Started contract work for ABC Company, expecting approximately $20k income through end of year." Nothing fancy, but it's saved me thousands in deductions I might have forgotten about!
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Mei Chen
Just want to add that most CPAs actually prefer clients who come organized rather than just dumping a shoebox of receipts on their desk. But don't go overboard creating elaborate spreadsheets that might actually make things harder. Ask your new accountant what format they prefer to receive information in. Some want digital files organized in specific ways, others have their own systems and prefer you just organize by category. A 15-minute phone call asking about their preferences could save both of you hours of frustration later.
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Nia Williams
AuthorThat's a really good point. I didn't even think to ask my new accountant about their preferred format. I'll definitely reach out before I spend hours organizing everything in a way that might not be helpful to them.
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