Which tax software do you use? I usually just use the free online ones but I'm willing to pay for something if it'll make this process easier.

I use TurboTax Premier which is specifically designed for investors. It's not the cheapest option, but it directly imports from most brokerages and handles all the stock transactions automatically. H&R Block's Deluxe + State is another good option that's a bit less expensive and also has import capabilities for many investment platforms. If you want a free option, FreeTaxUSA can handle investments too, but you might need to enter summary information manually rather than direct importing.

This is actually not quite right. The composite method doesn't exempt you from reporting - the IRS still needs to be able to match what's on your 1099-B. What you're thinking of is summary reporting which is only available if all your basis was reported to the IRS (covered securities).

That's really interesting, I hadn't even thought about changing my business structure. How much does it cost to set up and maintain an S-Corp compared to a partnership? And is there a certain income threshold where it makes sense?

Setting up an S-Corp typically costs between $500-1500 depending on if you do it yourself or hire someone. There are ongoing costs too - you'll need to run payroll (even if just for yourself), which might cost $40-50/month with a service like Gusto, and tax preparation is more expensive (usually $800-1200 for an S-Corp return vs. $300-500 for Schedule C). Generally, the breakeven point is around $30-40k in profit. Below that, the extra costs might outweigh the SE tax savings. Above that, you usually come out ahead. At $24k you're close, but might want to wait until your business income is a bit higher unless you expect significant growth soon.

Do you mind sharing what percentage of those bills the CPA was able to deduct? I'm trying to figure out if I can deduct part of my internet and phone for my side business, but I'm not sure how to calculate what's reasonable.

Where do you find these VITA locations? And do they have appointments or is it just walk-in? I've never filed and have W-2s going back to 2021 😬

You can find VITA locations by using the IRS VITA Locator tool on their website or by calling 800-906-9887. Most locations operate by appointment, but some do accept walk-ins depending on volunteer availability. For your situation with multiple unfiled years, I'd definitely recommend making an appointment and specifically mentioning that you have returns for multiple years. Bring all your tax documents for 2021, 2022, and 2023 with you. They can help with all of them, but keep in mind they might need multiple sessions since each year is a separate return. The assistance is completely free as long as your income is within their guidelines!

Yes, unfortunately if you owed taxes, the penalties can add up quickly. There are two main penalties: the failure-to-file penalty (usually 5% of unpaid taxes per month, up to 25%) and the failure-to-pay penalty (usually 0.5% per month). Plus, interest accumulates on both the unpaid tax and penalties.

Yikes that sounds bad. Is there any way to get those penalties reduced? I honestly just completely forgot to file, it wasn't intentional.

This is great advice. I did this exact thing - strategic Roth conversions for 3 years between retirement and when my RMDs kicked in. Saved a ton on lifetime taxes and now almost none of my SS is taxable.

This is what scares me about these situations. Did your sister have any idea the preparer was doing shady stuff? Like did she sign the return without reviewing it, or did the preparer hide what they were doing?

She had some suspicions when her refund was so much higher than usual, but the preparer assured her everything was "industry standard" and "completely legal tax strategies." My sister didn't understand all the tax jargon and forms, so she trusted the "professional." The preparer had her sign the final return without really explaining the details, and my sister didn't carefully review what was filed. The reality is that most people don't understand tax forms well enough to catch these issues, which is exactly what these shady preparers count on. When the audit came, the preparer's phone was disconnected and the office was empty.

I tried this approach with a similar situation. I asked the preparer to explain specifically what deductions she was claiming and why I qualified. She got super defensive and vague, saying things like "I have 20 years of experience" and "I know what I'm doing." When I insisted on seeing the actual forms before filing, she tried to rush me through signing. Huge red flag.

That definitely sounds suspicious! You're right that a legitimate tax professional should be able to clearly explain their strategy without getting defensive. I guess the best approach is to ask specific questions and expect specific answers. I still think there's a small chance this person just knows the tax code really well and finds legitimate deductions others miss, but the defensiveness you described would make me walk away too. Thanks for sharing your experience!