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I've been a tax accountant specializing in oil and gas for 15+ years. Here's what you need to know: 1. Your new CPA is correct. IDC and depletion should be subtracted from box 14a when calculating SE income. 2. The note on your K1 about "QBI not reduced" is standard language that specifically exists to tell you these amounts need to be backed out for SE tax purposes. 3. Your former CPA was incorrect, and yes, you should definitely amend 2020 and 2021 returns. With differences of $45k and $85k, you're looking at potential SE tax savings of approximately $6,800 and $12,800 respectively. Don't be surprised that your former CPA is resistant - admitting this error would open her up to liability for the mistake. I'd suggest having your current CPA or another preparer handle the amendments.
Thank you for this clear explanation! Since my current CPA isn't being very responsive, do you think this is something I could potentially handle myself with tax software? Or is it too complex for DIY?
I wouldn't recommend DIY for this particular situation. The amendments will need to properly document the IDC and depletion adjustments, and most consumer tax software doesn't handle these specialized oil and gas calculations well. If your current CPA continues to be unresponsive, I'd suggest finding a new preparer who has specific experience with oil and gas partnerships. Look for someone who regularly works with clients who have working interests rather than just royalty interests. This distinction is critical, as they have very different tax treatments, and it's where many CPAs get confused. The investment in a knowledgeable preparer will likely pay for itself many times over given the tax amounts at stake.
A key point I haven't seen mentioned yet - the statute of limitations for amending returns is typically 3 years from the original filing date, but can be extended to 6 years in certain situations. Make sure you get those amendments in for 2020 ASAP before the window closes!
Don't forget that if you claim certain credits like the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC), the IRS can't issue your refund before mid-February by law, no matter how early you file. This is due to the PATH Act which helps prevent fraud.
The PATH Act requirements are still in effect for the 2025 filing season. There have been no changes to this law. If you claim EITC or ACTC, the earliest you would see your refund is around February 15th, regardless of when you file. The IRS uses this time to verify income reported on W-2s and 1099s against the credits claimed to prevent fraudulent refunds. While there are occasionally discussions about modifying these rules, no actual changes have been implemented yet.
last year i filed on feb 3 and got my refund by valentine's day. my friend waited til april and didn't get hers until june!! early bird gets the worm lol
Something nobody's mentioned yet - even if you can't beat the standard deduction now, keep track of your potential itemized deductions anyway. My first 3 years as a homeowner I couldn't itemize, but in year 4 I had some major medical expenses plus I replaced my roof and HVAC. That one "expensive year" pushed me well over the standard deduction threshold. If I hadn't been tracking things all along, I would have missed out.
Does the IRS ever question large jumps in deductions from one year to the next? I'm worried if I suddenly itemize after years of standard deduction it might trigger an audit.
A significant change in deduction strategy alone isn't typically what triggers IRS scrutiny. What matters is that you have proper documentation for everything you're claiming. The IRS understands that life events happen - medical issues, home repairs, major purchases - that can cause a one-year spike in deductions. Just make sure you keep receipts for any large purchases, medical bills, property tax statements, mortgage interest statements, and donation receipts. If you have the documentation to back up your claims, you shouldn't worry about itemizing when it benefits you.
Here's a tip that worked for me: If you know you're making a major purchase (car, boat, home renovation), try to time multiple big purchases in the same tax year when possible. I "bunched" my new car purchase and home renovations in the same year, which pushed me over the standard deduction. Then I took the standard deduction the following year. Alternating years can maximize your tax savings.
U might b able 2 take advantage of a tax credit instead of a deduction if ur income is low. Look into the Savers Credit if u put $ into retirement or check if ur state has any low income credits. Deductions just reduce ur taxable income but credits directly reduce taxes u owe which is better!!
Has anyone considered that a dental implant might actually count as a capital improvement to your body and should be depreciated over time rather than expensed in a single year? š¤ Just kidding!! Sorry, tax humor. But on a serious note, make sure you keep ALL your receipts, including costs for traveling to and from dental appointments - mileage can add up and is deductible as a medical expense too!
Yuki Sato
Has anyone tried those online CPA matching services? I've seen ads for them but not sure if they're legit or just trying to push you to the highest bidding accountants.
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Carmen Flores
ā¢I used CPAselect last year and it was hit or miss. They matched me with three accountants but only one was actually taking new clients. That said, the one I ended up with has been great. Just make sure to do your own vetting even after they match you.
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Yuki Sato
ā¢Thanks for sharing your experience! I'll give it a try but will definitely interview them carefully before committing.
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Andre Dubois
Just want to add - check if your prospective new CPA has experience with your specific situation (small business, investments, etc). I switched to a CPA who specializes in freelancers and she catches deductions my previous general accountant missed completely. Also ask about their preferred communication method! My old CPA was phone-only which drove me nuts, new one does email which is so much better for me.
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Luca Ferrari
ā¢Good point! My business involves international clients and my current CPA seems completely lost with the foreign income reporting. Need to find someone who specializes in that for sure.
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