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I've been self-filing for 10 years and nobody in my income bracket ($160k) uses tax preparers unless they have rental properties or complicated business situations. Tax software makes it super easy - just answer questions and it does all the calculations. If your situation is simple: W-2 job, standard deduction - should take like 30 minutes. If slightly complex: itemizing, investments, side hustle - maybe 1-2 hours. If complex: multiple businesses, rental properties - might want a professional. Most people spend more time watching YouTube videos about taxes than it actually takes to file them lol.
Thanks for breaking it down like this! I definitely don't have rental properties or a complex business - just regular W-2 income and some stocks. This makes me feel much better about trying it myself. Do you have a preferred tax software you'd recommend?
I've used both TurboTax and H&R Block over the years. TurboTax has a slightly better interface and is more user-friendly for beginners, but it's also more expensive. H&R Block is cheaper and gets the job done just as well once you get used to it. If your situation is relatively straightforward, I'd also look at FreeTaxUSA - it's much cheaper than the big names and handles all the basics plus investments really well. TaxSlayer is another good budget option. All of these will walk you through everything step-by-step, so you really can't mess it up too badly.
dont listen to these ppl saying u can do it urself easily. i tried last year and ended up owing $3700 when i shouldve got a refund!!! had to hire a pro to fix it and he found like 6 deductions i missed. if u make over 50k just pay someone, its worth it.
Another option to consider is a 1031 exchange if you want to invest in another rental property instead of taking the capital gains hit. You can defer all the capital gains, though you'd still have to pay the depreciation recapture. I did this with a property last year - sold my rental and rolled all proceeds into a new investment property. The key is you need to identify the replacement property within 45 days and close within 180 days. And you need to use a qualified intermediary to hold the funds between sales.
Thanks for mentioning the 1031 exchange option. I had considered that briefly but wasn't sure if it would work in my situation since I'm planning to move back into the property first. Would moving back in disqualify it from a 1031 exchange later? Or would I need to keep it as a rental the whole time?
Yes, moving back in would complicate things for a 1031 exchange. For a property to qualify for a 1031 exchange, it needs to be held for productive use in a trade or business or for investment purposes at the time of the exchange. If you convert it back to your primary residence, it no longer qualifies as investment property. So if you want to do a 1031 exchange, you'd need to sell it while it's still a rental property. Once you move back in, that option is effectively off the table.
One thing nobody's mentioned yet - if you claimed any rental losses during those 3 years when it was a rental property, check if any of those were suspended passive losses. When you sell the property, you can use those suspended losses to offset some of the gain or recaptured depreciation. This caught me by surprise when I sold my rental last year - had about $8k in suspended passive losses from years where my income was too high to claim the rental losses, and my accountant was able to apply those against my depreciation recapture amount.
Another option nobody's mentioned yet - if you used an IP PIN last year, check your old tax return! Your previous year's tax software might have saved a copy of the form with your IP PIN on it. I lost mine last year and nearly panicked until I realized I had a saved PDF of my entire return from the previous year which included the IP PIN letter. Might be worth checking your email for tax receipt confirmations too - sometimes they include that info. If that doesn't work, definitely try the specialized unit number (800-908-4490) that someone mentioned above - they're usually more accessible than the main IRS lines.
This is great advice! I just checked my old emails and found my TurboTax confirmation from last year which had my IP PIN information in the attached PDF. Saved me so much hassle! Definitely check your email archives before going through the whole recovery process.
Has anyone had success getting their refund without the IP PIN? I'm wondering if I can just file without it and explain the situation on the return somehow? I'm worried my stimulus money will go to someone else if I don't file soon.
DO NOT file without your IP PIN if you've been issued one! The IRS automatically rejects returns filed with your SSN that don't include the correct IP PIN. It triggers their fraud detection system and can cause even bigger delays and potential audits. Always get a replacement PIN through the proper channels before filing.
A quick tip that helped me with a similar issue - request your "Account Transcripts" directly from the IRS before filing any amendments. These will show how your business is classified in their system. You can get these online through the IRS website by creating an account at https://www.irs.gov/payments/view-your-tax-account. The transcript will show if you're on record as an S-corp or LLC, which helps confirm whether your election was properly processed. This saved me a ton of headache because I could prove to my new accountant that the S-corp election was in the IRS system even though my old preparer had been filing incorrectly.
Does anyone know if the transcripts also show if you've been assessed penalties for filing under the wrong business type? Or would those just appear as general penalties without specifying the reason?
The account transcripts generally don't specify the exact reason for penalties, they just show the penalty amount, code, and date assessed. However, you would see if there were any penalties at all, which might help you understand the full financial impact of the incorrect filings. If you need to know specifically why a penalty was assessed, you would need to request a call with the IRS (Claimyr mentioned above can help with this) or request a detailed explanation of penalties in writing, which takes much longer to receive.
Quick warning based on personal experience - when you amend from LLC to S-corp returns, make sure your new preparer correctly handles any state tax implications too. I fixed my federal returns but completely overlooked that my state returns also needed to be amended to match the corrected filing status. Ended up with a mess at the state level when they couldn't reconcile my federal and state filings. Some states also have different rules for S-corps vs LLCs, so you might have overpaid state taxes too that could be refundable.
Santiago Martinez
My accountant told me something important about tax record keeping that hasn't been mentioned yet - employment tax records need to be kept for at least 4 years, not just 3! This includes things like W-2s, payroll tax forms, and anything related to employment taxes. Just wanted to share that extra detail.
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Samantha Johnson
ā¢Does that 4-year rule apply to employees or just to employers? Like, do I as a regular employee need to keep my W-2s for 4 years, or is that just for businesses?
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Santiago Martinez
ā¢The 4-year retention rule for employment tax records applies primarily to employers who need to maintain payroll records, tax forms, etc. However, as an employee, it's still wise to keep your W-2s for at least 4 years too because they're essential for verifying your Social Security contributions and earnings history. If there's ever a discrepancy in your Social Security earnings record (which can happen), having those W-2s can be crucial evidence. The Social Security Administration can make corrections to your earnings record beyond the typical IRS audit period, so having documentation for longer than 3 years can be important for your future benefits.
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Nick Kravitz
I just want to say that I'm in the "shred everything" camp! Had my identity stolen back in 2020 after I just recycled some old financial statements. Now I shred EVERYTHING with my name on it. Bought a heavy-duty shredder for $89 and it was worth every penny for the peace of mind.
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Hannah White
ā¢Do you have a recommendation for a good shredder brand? Mine keeps jamming every time I try to do more than 2-3 pages.
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