What happens if you miss a quarterly payment? I just realized I should have been doing this for my Etsy shop but I haven't made any payments this year at all...

If you miss quarterly payments, you might have to pay a penalty for underpayment. The penalty is basically interest on the amount you should have paid by each quarterly deadline. The more you earn from your business, the larger the potential penalty. For a small Etsy shop, the penalty might not be huge, but it's still something you want to avoid in the future. You can start making the payments now for the remainder of the year to minimize any potential penalties. Form 1040-ES is what you'll use for these payments. And definitely plan to make these payments next year - it's much easier to pay a little each quarter than to get hit with a big tax bill plus penalties at filing time!

The latest information is that the threshold is $5,000 for tax year 2024 (filing in 2025), and is scheduled to drop to $600 for tax year 2025 (filing in 2026). Congress has pushed back the $600 threshold implementation several times, so it's possible it could change again.

Do you think age plays a factor in this preference? I wonder if older clients prefer the phone calls while younger ones prefer digital communication. Maybe tax preparers should note communication preferences in their systems?

Age might be a factor for some, but I think it's more about personality and individual preferences than a strict generational divide. I'm in my 50s and strongly prefer text/email, while my 28-year-old daughter likes talking on the phone for business matters. I think you hit the nail on the head with your second point - tax preparers should definitely ask clients about their preferred contact method and make a note in their system. A simple field in the client database would solve this whole issue. Good communication is about respecting how people want to be communicated with.

I feel exactly the same way! My tax situation is complicated with rental properties and self-employment, and I always need that nudge to start gathering documents. My preparer sends one email in January and then one phone call in February if I haven't scheduled yet. Perfect system.

Thanks for this tip! I hadn't even thought about how to physically submit multiple years. Do they need to be sent to the same address or are there different addresses for back tax returns?

For most people, all prior year returns go to the same IRS processing center based on your state. The addresses are listed in the instructions for each year's 1040 form. But double-check each year's instructions separately because they do occasionally change the processing centers. If you end up owing for any year, I'd recommend sending those returns certified mail with return receipt. It costs a bit more but gives you proof of when you filed, which can be important for penalty calculations.

This! I got caught up on federal but forgot about state taxes. The state came after me with WAY worse penalties than the feds did. They even put a lien on my bank account which the IRS never did.

Ugh, good point. My state's tax system is completely separate from federal, isn't it? So I'll need to go through this whole process twice basically - once for federal and once for state.

That's really helpful advice about the approach. I'll definitely try framing it as helping them be compliant rather than accusing them of anything shady. Did you have to talk to your direct manager or did you go to HR/payroll directly?

I started with my direct manager who then connected me with our payroll person. In smaller companies, going directly to whoever handles payroll can be more efficient. The payroll person was actually relieved because she had inherited the system from someone else and wasn't sure if it was correct. She made the change starting with the next pay period.

Yeah, that's what makes this suspicious. POS systems and payroll software typically have separate classifications for tips vs. employer-provided benefits. Someone would have had to deliberately choose to classify these meal vouchers as tips. At my restaurant, our meal credits show up as "non-monetary compensation" on our pay stubs, definitely not as tips.

That's really smart! I did claim them on last year's taxes so the EIN should definitely be on my old Form 2441. I'll check my copy of last year's return tonight. If I can't find my copy, is the transcript free to get from the IRS website?

Yes, getting your tax transcript from the IRS website is completely free! Just go to IRS.gov and search for "Get Transcript Online." You'll need to create an account if you don't already have one, and they'll verify your identity with some security questions. Once you're in, you can request a "Tax Return Transcript" for the previous year. It should show up immediately and you can download it as a PDF. Form 2441 will be included, and line 1 should have the provider's name, address, and EIN. Super easy and definitely faster than waiting for the IRS on the phone.

This happened to me 2 years ago. I wrote "BUSINESS CLOSED" in the EIN field and attached a statement explaining my attempts to locate the information. The IRS accepted it without any issues.