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Former H&R Block preparer here. Their new client bonus was $25 last year but the base fee for even a simple return started at $149 plus extra for each form. If you have investments, HSA, or itemize, you're looking at $250+ easy. Liberty Tax gave $50 Amazon cards but charged even more. Most bonuses are marketing gimmicks. You're better off finding a reputable local CPA or EA (Enrolled Agent) who charges a flat reasonable fee. Ask specifically if they have experience with your tax situation (investments, rental property, whatever applies to you).
Thanks for the insider perspective! What credentials should I be looking for when choosing someone? Is there a big difference between a CPA and an EA when it comes to regular tax prep?
For most individual returns, both CPAs and EAs are qualified, but there are differences. CPAs have broader accounting education and can handle financial planning beyond taxes. EAs specifically focus on taxation and representation before the IRS. Both have to pass rigorous exams and maintain continuing education. What's most important is finding someone with experience in your specific situation. Ask how many similar returns they've prepared and what their process is for staying current with tax law changes. Also inquire about their availability throughout the year - you want someone who's accessible if you have questions or receive IRS notices, not just during tax season.
Don't chase bonuses. I fell for that with Liberty Tax last year - got a $75 gift card but ended up paying almost $300 for a return that should've cost $150. Look at total cost not just the bonus. Plus, the preparer was clearly new and missed some credits I was eligible for. Had to get it amended.
3 Another important thing to consider - if your girlfriend claims the kids with such low income, she might qualify for other government benefits too. When I was in a similar situation, my tax refund helped me qualify for education grants that completely covered my associate's degree. Make sure she also checks if this will affect any benefits she's already receiving. Sometimes a big tax refund can temporarily push you over income limits for certain programs, so plan accordingly!
17 This is really good advice! My sister got a huge refund from EIC and it messed up her Medicaid for two months because it counted as income. She had to pay out of pocket for her prescriptions until it got sorted out. Definitely worth looking into how it affects other benefits.
3 Absolutely right about the potential Medicaid issue. The good news is that tax refunds only count as a resource for 12 months after receiving them for Medicaid purposes, so it's temporary. For SNAP benefits (food stamps), federal tax refunds don't count as income at all. For education grants, the FAFSA doesn't count tax refunds as income either, which is why it can be such a good opportunity for low-income parents. I was able to use my refund to cover childcare while I took classes, and the Pell Grant covered everything else. Changed my whole career trajectory!
14 Just to add another perspective - I was in your girlfriend's exact situation in 2022. I only made about $5800 that year while my boyfriend supported us and our twins. I claimed both kids and received almost $11,000 in tax refunds through EIC, Child Tax Credit, and Recovery Rebate Credit (that was during Covid). The only issue we ran into was that my boyfriend had already claimed one of our kids the previous year, so the IRS flagged our returns for review. We had to submit extra paperwork showing our living situation had changed, but ultimately everything was approved. Just document everything - keep records showing the kids live with you both (school records, medical records), proof of your address, etc. Better safe than sorry!
Has anyone noticed how dumb it is that they don't let you use your unused AOC years for grad school? Like... why does it matter what level of education it is if you haven't used all 4 years? The tax code makes no sense sometimes!
The AOC was specifically designed to encourage and support undergraduate education. The government allocated funds differently for different education levels. It's not about logic so much as different policy priorities. Graduate education is subsidized through other mechanisms like the Lifetime Learning Credit.
FYI - make sure to keep really good records of which education credits you claim each year. My son had his return flagged for review because we apparently claimed the AOC for too many years (we didn't realize his community college year counted toward the 4-year limit). The IRS is definitely tracking this stuff!
Here's what people aren't mentioning - the type of settlement matters HUGELY for how it's taxed. If your settlement was for physical injuries or illness, that part is generally NOT taxable (even the attorney portion). If it was for emotional distress, lost wages, or punitive damages, different rules apply. What was your settlement for? That makes all the difference in whether you pay taxes on the full amount or not. Some settlements are completely tax-free while others are fully taxable.
It was an employment lawsuit - wrongful termination and some back wages. Does that change things? I'm still confused about whether I need to itemize to deduct the attorney fees or if I can take the standard deduction AND still deduct the attorney portion somehow.
That's actually good news! For employment-related lawsuits including wrongful termination, you can deduct your attorney fees as an "above-the-line" deduction. This means you can still take the standard deduction AND deduct your attorney fees. You'll want to look at Schedule 1, Line 24 "Other adjustments" and write "ATTORNEY FEES" next to it with the amount. This way you're not taxed on money that went straight to your attorney. Employment cases specifically have this special treatment thanks to a tax law change that was made specifically to address this unfair situation.
The issue isn't just with settlements - it's with our stupid tax code in general. You're being double-taxed on money you never received! Your lawyer also pays taxes on that same money as income. So the government gets to tax the same dollar twice. And depending on your income level and state, you might end up paying 40%+ in taxes on money that you never even saw. The whole system is designed to extract maximum revenue.
While I agree the tax code is complex, this isn't quite accurate. For employment-related cases (which OP mentioned in comments), the attorney fees can be deducted as an above-the-line deduction. Congress actually fixed this problem for certain types of cases, including employment claims, civil rights cases, and whistleblower claims specifically to prevent double taxation.
Lauren Johnson
After trying several options over the years, I think FreeTaxUSA is seriously underrated. Used it last year after switching from TurboTax (which was getting too expensive for what it offers). FreeTaxUSA handles everything the expensive software does including self-employment, investments, and itemized deductions. Federal filing is free and state is only like $15. Interface isn't as pretty as TurboTax but it gets the job done.
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Jade Santiago
ā¢Does FreeTaxUSA handle investment sales with basis reporting? That's where I got stuck with another budget option last year and had to upgrade.
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Lauren Johnson
ā¢Yes, FreeTaxUSA handles investment sales with basis reporting really well. I had about 20 stock transactions last year with various purchase dates and it handled everything smoothly without making me upgrade. The interface for entering the information is straightforward - you can either enter transactions manually or import a spreadsheet if your broker provides one. Much better than my experience with other budget options that either couldn't handle investments or required upgrading to a premium tier.
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Caleb Stone
One important thing nobody's mentioned - if your income is under $73,000, you might qualify for IRS Free File which gives you access to premium tax software completely free. Check the IRS website before paying for anything! The software companies hide these free versions on their own websites but they're required to offer them through the IRS Free File program.
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Daniel Price
ā¢I tried Free File last year and it was confusing because there were multiple options. How do you know which one to pick?
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