Oh geez, I didn't even think about state taxes! I moved from California to Texas during this period, so I guess I'll need to file a partial year return for California? This is getting complicated fast.

Yes, you'll need to file a part-year resident return for California covering the period you lived there. The good news is that Texas doesn't have state income tax, so you won't need to file there. California is particularly aggressive about collecting taxes, so definitely prioritize getting that part-year return filed. They'll want to see exactly when you established residency in Texas. Keep any documentation showing your move date (lease agreements, utility setup, driver's license change, etc.).

That's a really important point! The IRS has a 3-year limit on claiming refunds, but there's no time limit on them collecting what you owe them. Completely unfair system if you ask me.

I heard businesses with inventory HAVE to use accrual. Is that true? I'm planning to sell handmade jewelry through my LLC and will have some materials on hand.

That's super helpful! My business will be mostly project-based digital marketing with clients paying after work is completed, usually within 30 days. No inventory really, just my time and some software subscriptions. So it sounds like cash would be simpler to start with?

For a project-based digital marketing business with 30-day payment terms and no inventory, cash accounting would absolutely be simpler to start with. It'll align better with your actual cash flow (which is what you really care about when you're starting out), and the record-keeping is much more straightforward. You'll just record income when clients actually pay you, which makes tax planning easier too. If your business model changes significantly down the road or you grow substantially, you can always reconsider, but cash accounting is the right choice for your situation now.

Thanks for the tip! I do use H&R Block usually, but I never thought about using it mid-year. Do I need to buy the current tax year version now or can I use last year's until the new version comes out?

You'll need the current year version, but you don't have to pay for it yet. H&R Block and most other tax software companies let you create an account and start entering information for free. You only pay when you actually file. So you can use their calculators and worksheets now to estimate your quarterly payments without paying for the full software. Just make sure you're using the 2025 version (for taxes you'll file in 2026), not the 2024 version that was for filing this past April.

Yes, there is a threshold. Generally, you need to make quarterly estimated tax payments if you expect to owe at least $1,000 in tax for the year after subtracting withholdings and credits, AND your withholding and credits will cover less than 90% of your current year tax or 100% of your prior year tax. For $2,200 in crypto gains, it depends on your overall tax situation. If you have a regular job with withholding that covers most of your tax liability, you might not need to make estimated payments for this relatively small amount.

That's a really good point I hadn't considered. I've been so focused on figuring out the right donation value that I didn't step back to look at the bigger picture. I'm single and definitely won't have anywhere near $13,850 in itemized deductions. So you're saying this whole thing is basically moot for me since I'll be taking the standard deduction anyway? Ugh, I've spent hours researching this for nothing!

Yes, that's exactly right. Many people get caught up in the details of specific deductions without considering whether they'll actually itemize at all. The 2017 tax law changes nearly doubled the standard deduction while eliminating or limiting many itemized deductions, so now only about 11% of taxpayers itemize. However, your research wasn't entirely wasted! This knowledge will be helpful for future tax planning. If you know you'll be close to the itemization threshold in a particular year, you might strategically bunch charitable donations into that year to exceed the standard deduction amount and get tax benefit from them.

This is really good advice! I live in Colorado and was able to claim charitable donations on my state return even though I took the standard deduction federally. Saved me about $75 on my state taxes.

That's really encouraging to hear. How long did the whole process take for you from filing the back returns to getting the Offer in Compromise accepted?

The entire process took about 14 months from start to finish. The first part - gathering all my documentation and filing the back returns - took about 2 months. Then I submitted the Offer in Compromise application, which took another 2 months to prepare properly with all the required financial information. After submission, the IRS review process took about 10 months, including some back-and-forth with the assigned officer who was evaluating my case. There were a couple of requests for additional documentation during that time. It wasn't quick, but considering how much I saved in the end, it was absolutely worth the wait and effort. Just be prepared for a marathon, not a sprint.

This is good advice. Also, send everything via certified mail so you have proof of when you submitted each return. Helps a ton if there are ever questions about timing.