I've thought about the nonprofit route but honestly it seems overwhelming. Do I need a lawyer to set that up? And would I have to have an actual board of directors with meetings and all that? It's just me running this little gallery out of a converted garage, so it all seems like overkill, but maybe I'm underestimating the benefits?

You don't absolutely need a lawyer, though having one review your paperwork is helpful. There are services that can guide you through the process for much less than attorney fees. And yes, you would need a board of directors - typically minimum 3 people including yourself. They could be friends or family who support your mission. For a small operation like yours, you might consider fiscal sponsorship instead. This is where you operate under an existing nonprofit's umbrella. You'd maintain creative control while they handle the administrative/tax side. Many community arts organizations offer this service for a small percentage fee. This gives you many nonprofit benefits without creating an entire organization structure yourself.

Not a silly question! But unfortunately it's not quite that simple. The IRS looks at the overall pattern and intent, not just whether you charge something nominal. Charging $1 admission that doesn't come close to covering costs might actually reinforce that it's a hobby rather than a genuine profit-seeking business. They look at your overall approach, whether you have business plans, separate accounting, etc. It's more about demonstrating genuine business intent rather than just token income.

Technically you can file as soon as the season opens IF you have all your documents. But employers aren't required to send W-2s until January 31st. So unless your employer sends them early, you'll need to wait. Don't file without all your documents! I made that mistake once and had to file an amendment, which was a huge pain.

Thanks for clarifying! I'll wait till I have everything then. Don't want to deal with amendments or worse, getting audited for missing information.

I filed early last year too and got my refund in 2 weeks with direct deposit. But I have a super simple return with just one W-2 and standard deduction. I think complexity matters more than when you file.

This is really helpful advice. Do you know if TurboTax can help me calculate how much I should be paying quarterly? Or should I just put aside 30% of everything I make to be safe?

TurboTax can give you estimated quarterly payment vouchers based on your previous year's income, but since your situation has changed, it might not be accurate. For simplicity, I'd recommend setting aside 30% of every payment you receive in a separate savings account dedicated to taxes. Then each quarter, calculate your actual tax obligation more precisely (or use a tax calculator online) and make your payment. Whatever is left in the account after your quarterlies can go toward retirement savings or other goals. This approach gives you a buffer and prevents nasty surprises.

This! I'm in California and they're even stricter about estimated payments than the feds. And their penalties are no joke either.

This is super helpful! I hadn't even thought ahead to resolution options yet. Any tips on documentation needed for the Offer in Compromise? I suspect my client will have significant tax debt once we figure out all the unfiled years.

For the OIC, you'll need comprehensive financial documentation - recent bank statements (3 months), pay stubs, vehicle registrations, property records, investment accounts, retirement accounts, credit card statements, loan statements, and monthly expense documentation. The IRS Form 433-A (individual) or 433-B (business) will be required. The key is accurately documenting your client's collection potential. This includes liquid assets, equity in property, and future income potential minus allowable expenses. If your client has few assets and limited income, that strengthens the OIC position. Make sure to fully document any hardship conditions or special circumstances that would justify accepting less than the full amount owed.

Streamlined procedures only apply to international situations with unreported foreign assets/income. If this is purely domestic, it wouldn't qualify. Regular voluntary disclosure through filing the required back returns is the way to go.

Thank you for the insider perspective! Our company is pretty small (only about 25 employees) so I'm dealing directly with the owner's wife who handles all the payroll stuff. She seemed annoyed when I brought it up, which is probably why she claimed there was a "window" that closed. Do you know if there are any potential consequences for me if I just file without mentioning the HSA contributions since I don't actually have an HSA?

The main concern would be that the IRS's systems might flag a mismatch between what your employer reported and what you're reporting. However, for a small amount like $65, it's unlikely to trigger any serious issues. If you file without claiming any HSA (which is correct since you don't have one), you're being honest about your actual tax situation. If the IRS does question it, simply explain that your employer made an error and refused to correct it despite your requests. The fact that you've tried to get it fixed works in your favor.

Most tax software including TurboTax has a section for HSA contributions. Just don't enter anything in that section even though your W-2 shows the code W amount. If the software asks about it specifically, there's usually an option to indicate it's incorrect or doesn't apply to you.