Is there ANY legitimate reason to use one of these companies? Like what if your tax situation is really complicated or you owe hundreds of thousands of dollars?

There are very limited situations where professional representation makes sense. If you're facing criminal tax charges, have a complex business situation with multiple years of unfiled returns, or owe massive amounts (typically $250,000+) with significant assets to protect, then you should hire a tax attorney (not a "tax relief" company). For most people owing under $100,000 with relatively straightforward situations, you can handle it yourself. The IRS has standardized procedures for payment plans, offers in compromise, etc. They follow their own internal guidelines regardless of who's asking. A decent tax preparer can give you guidance for a fraction of what these companies charge.

Yeah I signed a contract but it was so vague about what they actually promised to do. Just said they'd "represent" me and "work toward resolution" without any specifics. I paid by direct withdrawal from my checking account, so I don't think I can dispute it like with a credit card. Been thinking about the BBB complaint though, good idea.

That's interesting! I've actually been thinking about doing some financial consulting on the side. How much of a side business do you need to have for this to be legitimate? And do you need to form an actual LLC, or could you just report the income on a Schedule C?

You don't necessarily need a formal LLC - that's just what I chose for liability protection. You can absolutely report side business income and expenses on Schedule C as a sole proprietor without forming any legal entity. As for how much business you need, there's no specific threshold, but the IRS does look for a profit motive. Generally, if you show a profit in 3 out of 5 years, they consider it a legitimate business rather than a hobby. Start tracking all business mileage from day one with a good app or logbook, noting the date, starting/ending mileage, purpose, and client. Just make sure you're only deducting the portion used specifically for your side business, not your main employment.

For leases, you can actually use either method (standard mileage or actual expenses), but there's a catch: if you choose standard mileage in the first year, you can switch between methods in later years. But if you use actual expenses in the first year, you're stuck with that method for the duration of the lease. Most people find the standard mileage rate (65.5 cents per mile for 2023) simpler since you just track miles rather than every expense. But actual expenses might be better for luxury vehicles or in high-cost areas. Do a calculation both ways for your first year to see which gives you the bigger deduction.

Would this apply if the stock options were from my employer where I'm just a regular W-2 employee? I don't have any self-employment income or a Schedule C.

No, unfortunately this wouldn't apply in your situation. Since you're a W-2 employee and these were personal investments (even though they were from your employer), you can't deduct these on Schedule C. This strategy only works for self-employed individuals where the investment is directly tied to their business operations. Your best approach is still to add the platform fee to your cost basis as mentioned in the earlier comments, which will reduce your capital gain amount.

I ran the numbers for my situation and it wasn't worth it. Had about $2,700 in investment interest but my total itemized deductions were still about $4k below the standard deduction. Plus you can only deduct investment interest up to the amount of your net investment income, which was another limitation for me.

Thanks for sharing your experience. I was thinking it might be the same for me - probably not worth the extra paperwork if I'm still better off with the standard deduction. Guess I'll stick with adding fees to cost basis where possible and not worry about trying to deduct the interest separately.

Is FreeTaxUSA good for self-employment returns? I've been using TurboTax but the fees are killing me for the self-employment version.

FreeTaxUSA is actually really good for self-employment returns and WAY cheaper than TurboTax. They include all the Schedule C forms and self-employment calculations in their free federal filing. You only pay for state filing (around $15). The interface isn't quite as polished as TurboTax, but it has all the same features for self-employment. It walks you through business income, expenses, home office deductions, vehicle expenses - everything TurboTax does but without the ridiculous upcharge for self-employment features. I switched three years ago and have saved at least $200 in tax prep fees since then.

The self-employment tax is included in that $832 "Total Tax" amount. It's actually made up of two parts: 1. Self-employment tax (15.3% of your net self-employment income) 2. Income tax (based on tax brackets, but likely $0 in OP's case because of the standard deduction) Since their income after the standard deduction is $0 for income tax purposes, the entire $832 is probably just self-employment tax. The confusing part is that you still owe self-employment tax even when you don't owe income tax. Self-employment tax starts from dollar one of profit, while income tax only kicks in after your income exceeds the standard deduction.

Wait, are you sure the penalty is gone? I thought Biden brought back the healthcare mandate? I've been worried about this for my 2024 taxes.

The federal penalty for not having health insurance (the individual mandate) was reduced to $0 starting in 2019, and that's still the case for federal taxes. The American Rescue Plan didn't reinstate the penalty. Some states like California, Massachusetts, New Jersey, Rhode Island, and DC have their own individual mandates with penalties, so if you live in one of those states, you might still face a state tax penalty. But on your federal return, there's still no penalty for not having coverage.

The federal penalty is $0 now, but it's not an "audit" if they're asking about it - it's just verification. I think the IRS systems still flag returns with no coverage marked, but they don't actually charge a penalty. They just want to make sure you really don't have coverage vs. forgetting to include your insurance info.