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I had a similar issue and found out it was because I had moved during that time period and the IRS was sending notices to my old address. Once I updated my address with them, I received letters about minor adjustments they'd made to my returns from those years. Check if you've moved or changed contact info!
I haven't moved in the last 5 years, so that's not the issue in my case. Did they eventually update the status in your online account, or did it stay as "received but not approved" even after resolving whatever issues they found?
My online account actually never updated to show "approved" even after everything was resolved. The IRS rep I eventually spoke with said their online system often doesn't update that status field properly, especially for returns where you owe instead of getting a refund. They focus their system updates on refund cases. What ultimately mattered was that I had confirmation from the IRS that everything was processed completely. If you haven't received any notices requesting additional information or payment, you're probably fine despite what the online status shows.
Does anyone know if this affects your ability to get loans? I'm trying to buy a house and the mortgage company is asking for tax transcripts. Will this "received but not approved" status cause problems with that?
You should be fine for mortgage purposes. What lenders care about is the tax transcript itself, not the status shown in your online account. You can request your tax transcripts directly through the IRS website or through your lender, and these will show your income history accurately even if your online account shows "received but not approved.
The IRS EITC Assistant is actually pretty good if you input everything correctly. Make sure you're counting all sources of earned income (W-2 jobs plus net self-employment) but separating out any unearned income like investments or unemployment. Don't get tripped up by the investment income limit question - that's asking about interests, dividends, and capital gains, not your 401k or IRA.
Is anyone else having issues with the EITC assistant tool crashing? I tried using it on Chrome and Firefox and it keeps freezing up when I get to the income section. Not sure if it's just me or if the IRS website is having problems.
From personal experience, here's a quick breakdown of costs to help your decision: - Bookkeepers: $30-75/hr or $200-500/mo for small biz - Tax preparers (not CPAs): $150-400 for business returns - Enrolled Agents: $200-700 for business returns depending on complexity - CPAs: $500-2,500+ for business returns, often $150-350/hr for consulting For your situation with multi-state issues and equipment purchases, an EA might be the sweet spot between expertise and cost unless you need financial advising beyond taxes.
Thanks for the cost breakdown! That's super helpful. Do most of these professionals offer free consultations? I'd like to chat with a few before deciding.
Most reputable tax professionals do offer free initial consultations, usually lasting 15-30 minutes. This gives you a chance to explain your situation and see if they're a good fit, while they can give you a more accurate price estimate based on your specific needs. When you schedule these consultations, come prepared with a list of questions about their experience with multi-state taxation and small business equipment deductions. Also ask about their communication style and availability throughout the year - you want someone who's accessible for questions, not just at tax time. The right professional should feel like a partner in your business, not just a once-a-year service.
One thing nobody mentioned - if ur main issue is just organizing receipts and tracking expenses day to day, you might not need a professional yet! I use QuickBooks Self-Employed ($15/month) to track everything, categorize expenses, and log miles. Then I send the organized info to my tax guy once a year. Saved me a ton vs hiring a bookkeeper.
I'm a tax preparer (not an accountant, just do this seasonally) and I see this ALL THE TIME with people who switch from self-prepared returns to professional preparation. The estimated tax penalty (Form 2210) is one of those things that many tax software packages don't handle well for average users. The way it works: if you owe more than $1,000 when you file AND didn't pay at least 90% of your tax during the year (or 100% of last year's tax if that's higher), you're supposed to pay a penalty. Most software will calculate this if the numbers are obvious, but many people don't enter their payment information correctly or the software doesn't prompt properly. If the IRS never caught it, you got lucky! But your accountant is correct to include it. They're not making you pay "more than you have to" - they're making you pay what the tax code actually requires.
Thanks for explaining this! Do you think I should go back and amend my previous returns to add this penalty, or just start including it going forward now that I know?
I generally wouldn't recommend amending prior returns just to add an estimated tax penalty if the IRS hasn't noticed it. The statute of limitations for most issues is 3 years from filing, so older returns are likely closed anyway. Going forward, your best approach would be working with your accountant to either increase your withholding at your job (if you have W-2 income) or make quarterly estimated payments if you have significant 1099 income. Proper planning eliminates the penalty entirely, which is better than calculating it correctly! The penalty is meant to incentivize paying throughout the year rather than all at filing time.
My experience is that different tax software handles Line 38 very differently. After using FreeTaxUSA for years, I switched to TaxAct and suddenly had an estimated tax penalty where FreeTaxUSA never showed one. Then switched to an accountant who calculated it yet another way. The trick is Form 2210 which calculates the penalty has different methods that can be used. Some software automatically uses the "short method" which might not apply the penalty in certain cases, while accountants often use the regular method which is more accurate but can result in higher penalties.
Amina Toure
Your client should look at the actual employment tax burden versus total tips. While they can't use Form 8846, they could potentially adjust their business model. Some businesses are moving to service charges instead of tips (which are technically different for tax purposes). There can be advantages from a business accounting perspective. Another option is to restructure compensation entirely. If tips are consistently 10%, they could potentially incorporate that into pricing and then pay higher wages instead. This changes the customer experience but can simplify accounting and might have tax advantages depending on their specific situation.
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Dmitry Petrov
ā¢Thanks for this suggestion! My client actually did consider switching to a service charge model. Do you know if there are any specific records or documentation they would need to maintain if they went this route? And would this still allow the employees to receive similar compensation?
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Amina Toure
ā¢For service charges, they would need clear documentation showing these are mandatory fees rather than discretionary tips. This typically means updating all marketing materials, customer receipts, and internal accounting practices to clearly categorize these as service charges. Employees can absolutely receive similar compensation through service charges, but the key difference is that these would be classified as regular wages rather than tips. This gives the employer more control over distribution but also means the full amount is subject to payroll taxes upfront. Many employers who make this switch set up a clear distribution formula so staff understands exactly how service charges are allocated.
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Oliver Weber
Has your client considered automated tip processing systems? We use a POS integration that automatically handles tip reporting and tax calculation, which cut our administrative costs significantly. We're a salon, so we're in the same boat - no access to Form 8846 but still dealing with all the tip processing expenses.
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FireflyDreams
ā¢Which system do you use? We're a spa and our tip processing is a nightmare. We're spending so much time and money just managing the tip distribution and payroll calculations.
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