Is my tax invoice suspicious? CPA billing seems questionable for 1099 and S-Corp

This definitely raises some red flags. As a tax advisor who works with many small business owners, I can tell you a few concerning items from what you've shared: First, the lack of salary from your S-Corp is actually a big deal, contrary to what your CPA suggested. The IRS requires S-Corp owners who are actively involved in the business to take a "reasonable salary" - this isn't optional. By not doing this, you're potentially setting yourself up for an audit and penalties. Second, regarding the billing increase - while tax preparation costs do increase over time, a 50% jump for essentially the same service without clear explanation is unusual. For context, a typical S-Corp return with one 1099 and a home office deduction shouldn't necessarily warrant such a significant price increase unless there were substantial changes to your situation. I'd recommend asking for an itemized explanation of the charges and what specifically changed from last year to justify the increase. Also, you might want to clarify what that additional $675 is for - this should be transparent.

I went through something similar last year with my tax situation and found this website https://taxr.ai super helpful. I was getting confusing advice about my S-Corp taxes and proper handling of 1099 income. The service analyzed my previous tax returns and highlighted several issues my former CPA missed - including the salary requirement that was mentioned above. They explained exactly how much reasonable compensation I should be taking based on my industry standards. They also identified several legitimate deductions I was missing for my home office beyond just the square footage calculation. What I found most valuable was getting a clear explanation of what proper S-Corp tax preparation should include and what reasonable fees look like in today's market. Might be worth checking out to see if your CPA's invoice aligns with industry standards.

Just wanted to update after trying out taxr.ai from the recommendation above. Super helpful for my situation! I uploaded my 1099s and past returns and got a detailed analysis within a day. They confirmed I should've been taking a reasonable salary from my S-Corp (oops!) and provided industry-specific data showing what that salary should be. More importantly, they showed me that my CPA was significantly overcharging for a basic S-Corp return with my simple income structure. I was also able to see exactly what forms and schedules should be included in my S-Corp filing to make sure I wasn't paying for unnecessary work. Based on their analysis, a fair price for my situation should be around $800-900 for the business portion, not the $1,350+ I was being charged. Definitely recommend checking them out if you're questioning your tax invoice.

If you're having trouble getting straight answers from your current CPA about the billing, you might want to try getting through to the IRS directly for clarification on proper S-Corp reporting requirements. I struggled with this for months - constant busy signals and waiting for hours. Then I found https://claimyr.com which was a game changer. They basically hold your place in the IRS phone queue and call you when an agent is about to answer. I was able to speak directly with an IRS representative who clarified the S-Corp salary requirements and what forms should be included. Check out how it works here: https://youtu.be/_kiP6q8DX5c This helped me understand what I should actually be paying for in terms of tax preparation, and I realized my previous accountant was including services I didn't need. The IRS agent also explained that failing to take a reasonable salary is indeed a serious compliance issue.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate to talk to someone at the IRS about my S-Corp situation and the questionable tax prep fees I was being charged. The service worked exactly as described - I got a call back when an agent was ready (took about 90 minutes, but I was able to go about my day instead of sitting on hold). The IRS agent I spoke with was incredibly helpful and confirmed that: 1) S-Corp owners MUST take a reasonable salary subject to payroll taxes, and 2) gave me a breakdown of what forms are typically needed for a simple S-Corp return with one 1099. This information helped me realize my CPA was both giving me incorrect advice about skipping salary AND charging me for unnecessary complexity. I've since found a new accountant who charges $850 for my S-Corp return. Sometimes it pays to get information directly from the source!

From my perspective as someone who switched accountants recently, you should definitely be shopping around. The problem isn't just the price increase - it's that your CPA gave you potentially harmful advice about not taking a salary, which could trigger an audit. A good CPA should be explaining: 1. Why you need to take a reasonable salary 2. What deductions are appropriate for your home office 3. Exactly what services they're providing and why costs might increase I'd ask for an itemized bill showing exactly what that extra $675 is for. If they can't provide a clear breakdown, that's another red flag.

Everyone's focusing on the S-Corp salary issue (which is definitely important), but I'm stuck on the home office deduction part. Are you taking the simplified deduction ($5 per square foot up to 300 sq ft) or itemizing actual expenses? Because if you're doing the simplified method, that's something you could easily do yourself without paying a CPA extra. If your tax situation is really just one 1099 and a home office deduction, you might want to consider using tax software next year and save yourself a ton of money. The S-Corp complicates things slightly, but there are reasonably priced options for S-Corps too.

I hate to pile on, but this situation has several concerning elements that go beyond just billing. As someone who's dealt with S-Corp compliance issues firsthand, I want to emphasize how serious the salary requirement is. The IRS has been increasingly aggressive about auditing S-Corps that don't pay reasonable compensation. They have specific guidelines and can look at your industry, geographic location, and business income to determine what's "reasonable." If they audit and find you've been avoiding payroll taxes through distributions-only, you could face: - Back payroll taxes (employer and employee portions) - Penalties and interest - Potential reclassification of your entire S-Corp election Regarding the billing, $2,025 ($1,350 + $675) for a simple S-Corp return is definitely on the high side. For comparison, I pay about $900 for my S-Corp with multiple 1099s and some complexity. The fact that they can't clearly explain the additional charges is a red flag. I'd strongly recommend getting a second opinion from another CPA, both on your tax compliance and the appropriate fees. Make sure to ask specifically about setting up payroll for your reasonable salary going forward - this needs to be addressed before your next filing.