I've used Form 4852 twice when employers either sent incorrect W2s or I couldn't obtain them. Both times went smoothly - the IRS did not audit or question the returns. Just make sure your estimates are reasonable and as close as possible to the actual amounts. Using your final pay stub is the best approach since the YTD figures should be very close to the W2 amounts.

Yeah I used FreeTaxUSA last year for a move from Washington to Texas. It worked fine for me but both states don't have income tax so it was pretty simple. I think they do handle part-year state returns but not sure how good they are with the more complicated situations.

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.

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.

Thanks for bringing that up! Unfortunately, she already closed on the sale in April without setting up a 1031 exchange, and she's planning to retire with the proceeds rather than buying another investment property. I definitely should have mentioned that in my original post. I'm more concerned with making sure I've got the tax calculation right so she knows exactly what she'll owe. I realized I should also check if she's eligible for any state-specific tax breaks since this is a pretty significant capital gain and she's in her 70s.

Yes, that's an important consideration. The bonus depreciation taken would still be subject to recapture, but at ordinary income tax rates (not just the 25% rate that applies to straight-line depreciation). Make sure you separate out the portion that was taken as bonus depreciation from the regular depreciation when calculating the tax. Also remember that for improvements made in 2020, they would have been eligible for 100% bonus depreciation, so likely the entire cost was written off in that year. You'll need to recapture all of that at ordinary income rates.