I've been doing my own business taxes for my small craft shop for 3 years now. My advice: if you have a simple situation with clear income/expenses, absolutely do it yourself. Just make sure you: 1) Keep ALL receipts (paper or digital) 2) Track mileage if you use your car for business 3) Separate business/personal expenses completely 4) Set aside at least half a day to do your taxes carefully I learned the hard way that rushing through leads to mistakes. For your first year with minimal revenue, a CPA probably isn't worth the $300-500 they'll charge.

I tried using TurboTax for my first year in business and ended up missing so many deductions. When I finally used a CPA the next year, she found over $2,000 in deductions I'd missed! Just saying sometimes paying a pro is worth it.

Just wanted to jump in with something no one's mentioned - make sure you're tracking everything in the RIGHT tax year!! I made the mistake of filing startup expenses from December 2023 on my 2024 return and got a letter from the IRS. You have to claim expenses in the tax year you actually paid them, even if your business hasn't launched yet. You can go back and amend prior year returns if needed.

Great question! I went through this exact same situation when I was starting my freelance graphic design business. You absolutely CAN file a Schedule C even without income yet, but there are some important things to keep in mind. The key distinction is between "startup costs" and "business expenses." True startup costs (before your business is actually operational) can only be deducted once your business begins - up to $5,000 in the first year, with the remainder amortized over 15 years. However, if you're already actively conducting business activities (even without revenue), those can be current year deductions. Since you mentioned spending on equipment, software, and courses, document WHY each expense was necessary for your business and WHEN you plan to launch. The IRS looks for genuine intent to make a profit, not just tax benefits. Keep a business journal showing your planning activities, market research, and steps toward launch. One tip: consider whether waiting until you actually start generating income might be simpler for your first year. You could still claim those startup costs retroactively once you begin operations. But if you're confident in your business plan and timeline, filing now is totally legitimate - just be prepared to show you're serious about this as a business, not a hobby.

If you don't report that W-2 income, you're almost guaranteed to get a letter from the IRS later. They automatically match all W-2s against tax returns. Even small amounts will trigger this process. I learned this the hard way when I didn't report a $275 W-2 from a weekend job. Six months later, I got a notice saying I owed additional tax plus interest. Just not worth the hassle!

Pro tip: if you have multiple small jobs throughout the year, try to keep track of your total estimated income and adjust your W-4 withholding accordingly. I work several part-time jobs as a musician, and made sure each employer withheld enough so I wouldn't owe at tax time.

My sister actually got busted for this exact thing last year. She was claiming my niece who lived with their dad. The IRS sent her a letter demanding proof that the child lived with her. When she couldn't provide it, they made her pay back THREE YEARS of tax refunds plus penalties! It was like $16k total and she's still paying it off. Tell your friend it's not worth it. The IRS has been getting way more aggressive about this lately with their new funding. They know exactly what to look for.

This is definitely tax fraud and your friend needs to stop immediately. The IRS has specific rules about who can be claimed as a dependent - they must live with you for more than half the year AND you must provide more than half their financial support. Just being related isn't enough. What makes this worse is that they're openly admitting to splitting the fraudulent refund money, which shows intent to defraud. The IRS has been cracking down hard on dependent fraud lately with their increased funding and better detection systems. Your friend could face serious consequences: paying back all the fraudulent refunds (potentially thousands per year), hefty penalties, interest charges, and even criminal prosecution. The "everyone does it" excuse won't hold up in court or with IRS agents. If I were you, I'd strongly encourage your friend to consult with a tax professional immediately about how to handle this situation going forward. The longer this continues, the worse the eventual consequences will be.

Has anyone tried requesting records directly from the Social Security Administration? They keep track of your earnings history and might be able to provide verification of your income for that year.

I went through almost the exact same situation a few years ago! My former employer was being completely unhelpful and I was panicking about my audit deadline. Here's what worked for me: First, definitely try the IRS Wage and Income Transcript that others mentioned - it's free and contains everything from your W-2. But if you're having trouble accessing it online (their identity verification can be tricky), you have another option. Contact your state's Department of Labor or Employment Security office. They often have records of wages reported by employers for unemployment insurance purposes. While this isn't a perfect substitute for a W-2, it can provide additional documentation to support your case with the auditor. Also, don't be afraid to push back a little with the auditor about your employer's non-cooperation. Document every attempt you've made to contact them (dates, methods, responses) and present this to the auditor. Sometimes they can issue a formal request to the employer on your behalf, which carries more weight than your individual requests. The key is showing good faith effort to obtain the documents. Most auditors are reasonable when they see you're genuinely trying to comply but facing obstacles beyond your control.