


Ask the community...
The one thing nobody has mentioned yet is to check that whoever you hire has experience with YOUR SPECIFIC type of audit. There are different kinds: - Correspondence audit (mail only) - Office audit (you go to IRS office) - Field audit (they come to you - the most serious) My brother hired an expensive tax attorney for what turned out to be a simple correspondence audit that an EA could have handled for half the price. Meanwhile, I had a field audit for my construction business and definitely needed the attorney because they found some serious issues. Also ask about their audit success rate! A good representative should be able to tell you what percentage of their audit cases result in reduced or no additional tax owed.
One approach nobody's mentioned - I used a COMBINATION when I was audited last year. I started with an EA who handled most of the basic documentation and preparation, then brought in a tax attorney specifically for negotiating the final settlement when it looked like penalties might be applied. The EA charged $200/hr and handled about 80% of the work. The attorney was $450/hr but only needed for about 5 hours total. This "tiered approach" saved me money while still getting specialized help when needed. For what it's worth, in my experience: - EAs know the tax code extremely well and are great for most audit situations - CPAs are best when there are complex accounting issues beyond just tax - Tax attorneys are essential if there's any hint of penalties, fraud accusations, or if you need attorney-client privilege protection Don't be afraid to ask any professional if your situation might benefit from a combined approach!
7 One thing nobody has mentioned yet is that Section 179 also has business income limitations. You can't claim more in Section 179 deductions than you have in business income for the year. So if your business only made $40,000 in net income this year, you couldn't take the full $60,000 truck deduction under Section 179 (though you could carry forward the excess to future years). Also, make sure you actually need the vehicle for business. Buying an expensive truck just for the tax deduction is never a good idea since you're still spending more than you're saving.
11 Wait, so if my business is just starting out and hasn't made much profit yet, Section 179 might not help me much? What about bonus depreciation as an alternative?
7 That's exactly right. If your business is just starting and hasn't generated much profit, the immediate benefit of Section 179 would be limited to your business income amount. Bonus depreciation is a great alternative to consider in that situation! Unlike Section 179, 100% bonus depreciation doesn't have the business income limitation. For 2023, you can still take 80% bonus depreciation (this percentage is decreasing each year), and it applies after any Section 179 deduction you take. So you could potentially use a combination of Section 179 up to your business income amount, then apply bonus depreciation to the remainder. Just keep in mind that for both Section 179 and bonus depreciation, the business use percentage matters. If you only use the vehicle 60% for business, you can only deduct 60% of the cost using these accelerated methods.
4 Has anyone considered leasing instead of buying? For my concrete business, I found that leasing heavy equipment and writing off the full lease payment each year was actually more advantageous than Section 179 for purchasing.
Just to add another perspective - I've been doing my own taxes for 15 years using various software options. Last year I finally hired an EA because I started a small business and was terrified of making mistakes. Cost me $375 for both federal and state, which seemed high until I realized all the deductions she found that I would have missed. She literally saved me over $2,100 in taxes! What surprised me most was how much I learned during the process. She explained everything and gave me tips for better record-keeping this year. Software can ask questions, but it can't look at your specific situation and proactively suggest strategies like a human can.
Did your EA charge a flat fee or hourly? And how did you find them? I'm in a similar situation and worried about getting overcharged.
Mine charged a flat fee based on the forms needed. She quoted the price upfront after our initial consultation once she understood my situation. Some do charge hourly, especially for more complex situations or ongoing advice throughout the year. I found her through the National Association of Enrolled Agents website (NAEA.org) which has a directory. I interviewed two before choosing. Definitely ask potential tax pros about their experience with your specific situation, their fee structure, and their availability throughout the year if you have questions. A good tax professional should be willing to explain their pricing clearly.
Does anyone know if most CPAs or EAs offer some kind of free initial consultation? I'm not sure if I need help or not and don't want to pay just to find out.
Most of the ones I've contacted do offer free 15-30 minute consultations. Just be prepared with specific questions about your situation so you can make the most of that time. And don't expect detailed tax advice during that free session - it's really more for them to assess your needs and for you to assess if they're a good fit.
One thing to consider - even though you probably won't owe capital gains tax, you may still have to FILE a tax return to properly document the home sale. The IRS likes to see that paperwork even if no tax is due. You'll need to report the sale on Form 8949 and Schedule D. Make sure you have good records of: - Original purchase price - Substantial improvements you made (can increase your basis) - Selling costs like realtor fees (these reduce your gain
What if the sale price is less than the $250k exclusion amount? Do you still need to file all those forms?
Yes, you still need to file and report the sale even if the gain is well under the exclusion amount. The IRS requires you to report the transaction on Form 8949 and Schedule D regardless of whether you'll ultimately owe any tax on it. This is important because it creates a record of you using the exclusion, and documents that you properly handled the transaction. If you don't report it, the IRS might send you a notice later asking about the sale since they receive information about real estate transactions.
Does anyone know if selling now with no income might actually be BETTER than waiting until you have a job? I'm wondering if the lower income bracket could help somehow, even with the exclusion.
If your gain is under the $250k exclusion, your income level doesn't matter at all - you won't pay tax either way. But if your gain is OVER $250k, then yes, selling during a low-income year could be strategic since any amount above $250k would be taxed at lower capital gains rates.
Honorah King
Virginia resident here! Just wanted to add that updating your name with Virginia DMV and tax department can be done separately from your federal tax filing. You'll need to update your name with Social Security first, then DMV, then everything else. For Virginia state taxes, you'll file under whatever name is on your federal return for consistency. The Virginia tax department actually recommends filing under your old name if that's what your W-2 and Social Security records still show, even if you have a court order.
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Oliver Brown
ā¢Do you know if Virginia requires any specific form to be filed with state taxes when you've had a name change? I'm in a similar situation but in North Carolina.
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Honorah King
ā¢Virginia doesn't require any special forms with your state tax return for a name change. As long as you file consistently with your federal return, you're good. They just care that your SSN matches what's in their system. For North Carolina, I'm not certain, but most states follow the same principle - file under whatever name is on your Social Security record, and update your state records after you've updated with the SSA. You might want to check North Carolina's department of revenue website for any state-specific requirements.
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Mary Bates
Honestly the worst part of changing your name is updating EVERYTHING. I changed mine last year and taxes were the least of my worries lol. Had to update my bank, credit cards, mortgage, car title, insurance, utilities, email addresses, subscriptions, professional licenses... the list goes on forever š© The key with taxes is definitely making sure your W-2 name matches your Social Security card name. Otherwise it'll get flagged in the system.
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Clay blendedgen
ā¢So true! I'm still finding random accounts in my old name 2 years later. Did you make a checklist? I wish I had been more organized about it.
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