


Ask the community...
Don't overwhelm yourself! I hadn't filed for 5 years and did it all in a month. My biggest tip: set up an IRS online account ASAP - it gives you wage transcripts showing all reported income. Make a timeline and tackle one year each weekend. For software, I used TaxAct for older years - cheaper than TurboTax and lets you file past years electronically when possible. Important: request installment agreement using Form 9465 if you can't pay all at once. The monthly payment can be as low as $25 depending on your situation.
Just remember state taxes too! Everyone's talking about federal, but depending on your state, you might have similar issues with unfiled state returns. Some states have different requirements and deadlines for back taxes. Also, if you moved between states during these years, you might need to file partial-year returns for multiple states. This gets complicated fast.
As a custom furniture maker who went through this exact process last year, here's my practical advice: go back to cash method ASAP. The paperwork needed to switch back isn't that complicated, and the cash method is so much simpler for our type of business. For tracking materials, I just keep receipts and categorize expenses - no need for complex inventory systems. Under current rules for small businesses, you can expense materials when you buy them rather than tracking inventory changes. This works perfectly for custom goods where most materials are purchased for specific client projects anyway. The accrual method with formal inventory tracking is really designed for businesses with large stock and standardized products. For custom makers like us, it's unnecessary complexity.
Couldn't you potentially save on taxes by using accrual method though? I've heard you can deduct expenses before you actually pay them. Would that be beneficial for someone who buys a lot of supplies in December but doesn't pay until January?
Cash method actually tends to be more beneficial for most small custom goods businesses. While accrual lets you deduct some expenses before paying, it also forces you to report income when you invoice clients - even if they haven't paid you yet. For most of us, that's a big disadvantage. The December/January scenario you mentioned is a real consideration, but for most custom makers, the simplicity of cash method far outweighs any potential timing benefits. Plus, with cash method, if you have a client who hasn't paid yet, you don't have to pay taxes on that income until you actually receive payment. This is huge for small businesses with cash flow challenges or clients who pay late.
Has anyone used TurboSelf-Employed for this accounting method change? I'm in a similar situation but my accountant wants to charge $600 just to file the Form 3115 for me, which seems excessive.
I used TurboSelf-Employed last year and it handled my accounting method change pretty well. The software walked me through the Form 3115 with guided questions. It wasn't perfect - I still had to do some research on my own, but it was way cheaper than paying an accountant $600. They also have some decent articles about cash vs. accrual in their help section.
Pro tip: If you're choosing between H&R Block and TurboTax mainly for the Rakuten deal, check both services before deciding. Sometimes TurboTax offers better cash back percentages than H&R Block. Right now H&R Block is higher at 16%, but that can change throughout tax season. I've seen TurboTax go up to 20% cash back at times.
Thanks for this! Do you know how often the cash back percentages change? Should I wait until closer to the filing deadline to see if the rates go up?
The cash back percentages typically change every 2-4 weeks, sometimes more frequently during peak tax season. They usually increase as we get closer to April 15th, but there's no guarantee. Last year the highest rates were actually in mid-March, then they dropped slightly in April. If you don't need to file immediately, checking back every week or so might help you catch a better rate. Just don't cut it too close to the deadline in case of technical issues.
Don't forget you can also use coupons WITH the Rakuten cash back! I found a code for 25% off H&R Block Premium which stacked with the 16% Rakuten cash back. Just Google "H&R Block coupon codes 2025" and try a few until you find one that works.
Another approach I've used for RSUs is to look at my prior year's effective tax rate as a starting point. If your income will be similar year-to-year, your effective rate shouldn't change dramatically. For example, if your total effective federal tax rate last year was 26%, start there and then add 1-2% to account for growth. It's simpler than trying to calculate different rates for different vesting events. I also keep a separate savings account where I set aside an additional 5% of each RSU vest value as a buffer. Then quarterly, I evaluate if I need to make estimated tax payments from this fund or if my withholding is on track.
But doesn't this approach fall apart if your RSUs increase significantly from one year to the next? I'm looking at a 60% increase in RSU value for 2025 compared to 2024, so last year's effective rate seems like it would be too low.
You're absolutely right - significant changes in income require adjustments. In your case with a 60% increase in RSU value, you'd want to calculate a new estimated effective rate. A quick way to approximate this is to take your total projected income for 2025 and use an online tax calculator to estimate your total tax burden. Divide that by your projected income to get your estimated effective rate. That becomes your baseline withholding percentage, and then you can still use the buffer account approach for safety. The key is that withholding at your effective rate is generally more accurate than withholding at your marginal rate for every RSU vest. Your first dollars of income are still taxed at lower rates even when your total pushes you into higher brackets.
Has anyone had success with adjusting withholding between different vesting dates? My company uses Schwab and I have to contact them directly each time I want to change the withholding percentage. It's a huge pain.
I use Schwab too. Pro tip: you can actually schedule a call with their equity compensation team ahead of each vesting date. I set calendar reminders 1 week before each vest to call and adjust my withholding rate. Takes 5 minutes once you have a system in place.
Eve Freeman
Something else to consider: cost difference. Tax attorneys typically charge $300-500/hour while CPAs are usually in the $150-300/hour range. If your issue is mostly about documenting legitimate business expenses rather than defending against serious allegations of tax fraud, a CPA is probably sufficient AND more affordable. Also, many tax situations can be handled in stages. You can start with a CPA to organize your documentation and respond to initial IRS inquiries. If things escalate to an audit or legal territory, you can bring in a tax attorney at that point.
0 coins
Clarissa Flair
ā¢Do you know if either CPAs or tax attorneys offer any kind of guarantee that they'll resolve the issue? I'm worried about paying someone a ton of money and still ending up with problems.
0 coins
Eve Freeman
ā¢Neither CPAs nor attorneys can typically guarantee specific outcomes with the IRS - anyone who promises this should be viewed with suspicion. What they can guarantee is proper representation and application of their professional expertise. Most reputable tax professionals will clearly explain what they believe they can accomplish based on your specific situation and their experience with similar cases. They should be upfront about potential outcomes, both favorable and unfavorable. This transparency is actually a good sign of professionalism rather than a limitation of their services.
0 coins
Caden Turner
I'm actually both a CPA and have a tax law degree, and here's my quick take: For questionable business deductions around $15k, start with a CPA who specializes in small business/self-employment. Save the attorney for if/when the IRS actually proposes penalties or formal audit. Most IRS letters at this stage are just inquiries - they're asking for documentation, not accusing you of fraud. A good CPA can help organize your records, determine which deductions are defensible, and respond appropriately. Much more cost-effective approach.
0 coins
McKenzie Shade
ā¢So does that mean the home office, travel and equipment deductions the OP mentioned are likely to be rejected? I claim similar things for my business and now I'm worried.
0 coins