That's a great idea! I didn't think about using a third software as a tiebreaker. Have you found any free options that would work for this? I'm hesitant to pay for yet another tax program just to verify.

CashApp Taxes is completely free for federal and state, so that's a good option for a tiebreaker. TaxAct also has a free version that might work depending on your tax situation. Just enter your information and go far enough to see the calculation results - you don't need to file through them. Even if you just get to the federal calculation stage, that should tell you which of your other returns is calculating federal taxes correctly.

Same thing happened to me but with H&R Block calculating it wrong! The ACA credit calculations are super complicated. Double check Form 8962 on both returns if you have marketplace health insurance.

Is there any way to see this breakdown before finalizing the return? I'm using TaxAct and it's just giving me a big total number for "education credits" without splitting it up.

Yes, in TaxAct you can view the forms directly before filing. Go to the "Review" section, then look for an option like "View Tax Forms" or "Preview Tax Return." Find Form 8863 (Education Credits) in the forms list. On that form, you'll see the breakdown with line 8c showing specifically how much is refundable. In general, any good tax software should let you preview the actual IRS forms before filing. This is the best way to see exactly what's happening with your credits, rather than relying on the simplified summary screens which can be misleading.

Did you end up owing money back after your audit? I'm worried because I claimed some textbooks but don't have all the receipts.

That's really helpful info about the automatic penalty systems! Do you know if there's a specific form or procedure for "reopening" a partnership for tax purposes after a final return was filed? Or do I just file a regular 1065 again?

You just file a regular Form 1065 again. There's no special "reopening" form needed. Just make sure you don't check the "final return" box this time! The IRS systems are pretty forgiving about this situation since it happens fairly often. The most important thing is to make sure your client properly closes everything at the state level once they're truly done with the business. Until they formally dissolve the LLC with the state, they'll need to keep filing returns as long as there's any activity. Some states also require annual reports or minimum taxes just to maintain the LLC, even with zero activity.

In my experience, the penalties really depend on the amount of tax that was underpaid as a result. Small K-1 with minimal income? Probably just interest. Large K-1 with significant income? Could be 20% accuracy-related penalty plus interest. But filing voluntarily before they catch it is ALWAYS better than waiting.

Thanks for mentioning this about being a dependent! So if my parents claim me, does that mean I'll end up owing more in taxes than if I filed independently? And what kind of things should I be tracking in this spreadsheet? Just dates, clients, and amounts or is there more I should be writing down?

Being claimed as a dependent could result in owing more taxes in some situations because your standard deduction might be lower than if you filed independently. However, there are other benefits your parents get from claiming you that might outweigh this difference for your family overall. For your spreadsheet, track way more than just the basics! Record dates, client names, payment amounts, payment methods, mileage to/from each client (with starting/ending odometer readings ideally), any supplies purchased (treats, bags, etc.), apps or software you use for the business, a portion of your phone bill if you use it for client communication, any insurance you get, and even home office expenses if you use part of your living space exclusively for business administration. Basically, document EVERYTHING with receipts. Tax time will be so much easier, and you'll maximize your deductions which directly reduces your taxable income.

This is a really good point. I'm in NYC and got completely blindsided by having to pay city tax on top of state and federal. It was an extra 3.8% I wasn't expecting!

That's what I suspected! I was so confused because it directly contradicted what other teachers in my district told me about their education expenses. Is there any documentation I should specifically request from the university to help with claiming education credits?

You should definitely request Form 1098-T from your university, which shows your tuition payments and is required for claiming education credits. Also keep all receipts for required books, supplies, and equipment as these can sometimes be included in qualified education expenses depending on the credit you're claiming. Make sure the 1098-T shows your payments rather than just amounts billed. Some universities only report billed amounts by default, which can cause issues with your tax filing. You may need to specifically request a 1098-T that shows actual payments made during the tax year.

You can potentially do both but NOT for the same expenses. If you claim certain expenses for the LLC, you cannot also deduct those same expenses on Schedule C. It would be considered double-dipping. However, if you have enough education expenses, you could use some for the LLC (up to the $10k limit) and then deduct additional, separate expenses on Schedule C if they're directly related to your self-employment work.

Thanks for clarifying! That makes sense - I wasn't sure if it was an either/or situation or if I could split the expenses between the two. I'll make sure to track which expenses I'm applying to each category.