22 Has anyone actually calculated the dollar value of those benefits? I mean, 1 week vacation + 6 sick days + holidays is probably around 15-16 paid days off? At $26/hr that's like $3,300 in benefits (assuming 8hr days). Plus you're paying extra 7.65% in SE tax as 1099, which on $54k annual is about $4,100. So you're down like $800 before any deductions. You'd need enough legitimate business expenses to make up for that difference.

One thing that might tip the scales in favor of 1099 is the control and flexibility it gives you. As a contractor, you typically have more leverage to negotiate rates in the future, set your own schedule, and potentially take on additional clients to increase income. The entrepreneurial experience alone can be valuable for your career development. However, don't underestimate the administrative burden. You'll need to track all expenses meticulously, handle your own bookkeeping, and manage quarterly tax payments. Consider whether you're prepared for that extra work or if you'd need to hire help (which cuts into your savings). Also worth noting - make sure this arrangement truly qualifies as 1099 work under IRS guidelines. If you're doing the same job with the same level of control from your employer, they might be misclassifying you to avoid paying their portion of payroll taxes and benefits. The IRS takes worker misclassification seriously.

This is such a frustrating situation, and I feel for you dealing with this mess. Beyond the great advice already given about filing complaints and penalty abatement, I'd strongly recommend also checking if your state has a victim compensation fund for financial crimes. Some states offer restitution programs specifically for fraud victims. Also, when you file your complaint with the IRS using Form 14157, make sure to request they investigate whether this preparer is doing this to other clients. If there's a pattern of this behavior, the IRS can shut them down and potentially pursue criminal charges. The more documentation you can provide about their fraudulent practices, the stronger the case becomes. One more thing - if you paid by check, contact your bank to see if they can provide additional documentation showing the check was cashed. Sometimes banks can provide more detailed records than just your statement, which can be helpful evidence in both your penalty abatement request and any legal action you pursue.

I'm so sorry you're dealing with this nightmare situation. As someone who works in tax resolution, I see cases like yours more often than I'd like to admit. The good news is you have solid grounds for both penalty abatement and recovering your money. A few additional steps to consider: First, if you haven't already, immediately file your 2024 taxes yourself or hire a legitimate preparer to do so. This stops additional penalties from accruing and shows the IRS you're taking corrective action. Second, when you file Form 843 for penalty abatement, include a timeline of events showing you acted reasonably - paid a professional in February, waited a reasonable time for filing, and only discovered the issue when the IRS contacted you. This demonstrates "reasonable cause" for the late filing. Also consider reporting this to your state's Attorney General's office in addition to the other agencies mentioned. They often have consumer fraud units that can add pressure on the preparer and sometimes facilitate mediation or restitution. Document absolutely everything going forward - save voicemails, screenshot any online reviews or complaints about this preparer, and keep records of all your attempts to contact them. This paper trail will be crucial whether you pursue small claims court or criminal fraud charges. You've got this! With proper documentation and persistence, you should be able to get those penalties waived and potentially recover your losses.

One thing that hasn't been mentioned yet is timing considerations for 529 distributions. If your parents-in-law took the distribution in 2024 but your daughter's scholarship was awarded for the 2024-2025 academic year, make sure you have documentation showing the scholarship applies to the tax year in question. Also, since they transferred the money to their own account first before gifting it to your daughter, this creates a clear paper trail that they (not your daughter) are responsible for the tax consequences. The 1099-Q should be issued in their names as the account owners who received the distribution. For future reference, if there are leftover 529 funds after a scholarship, consider changing the beneficiary to another family member (sibling, cousin, etc.) who might need education funding. This avoids the non-qualified distribution issue entirely while keeping the tax-advantaged growth intact for education purposes.

Just a heads up for anyone dealing with 529 distributions - make sure you understand the difference between who owns the account versus who the beneficiary is when it comes to tax reporting. In your situation, since your parents-in-law owned the account and received the distribution into their own bank account, they're the ones responsible for reporting the taxable earnings and paying any penalties on their tax return. The fact that they then gifted the money to your daughter is a separate transaction entirely. As long as the gift was under the annual exclusion limit ($17,000 for 2023, $18,000 for 2024), there shouldn't be any gift tax consequences either. One more thing - if your daughter received any scholarship money that was tax-free, make sure your in-laws claim the scholarship exception on Form 5329 to avoid the 10% penalty on up to that scholarship amount. They'll still owe income tax on the earnings portion, but avoiding the penalty can save a significant amount. Keep all scholarship documentation handy in case the IRS has questions later.

As a newcomer to this community, I'm really impressed by how supportive and knowledgeable everyone has been in this thread. I'm actually facing a somewhat similar situation with my small S-Corp - not a missed deadline, but I'm in the middle of switching accountants and feeling overwhelmed by all the paperwork and deadlines. Reading through all these responses has been incredibly educational. I had no idea about things like First-Time Penalty Abatement or that S-Corps without direct tax liability might face minimal penalties for late filing. The resources people have shared (taxr.ai and Claimyr) sound like they could be really valuable for anyone dealing with IRS issues. What strikes me most is how common these situations seem to be, and how the IRS appears to be more reasonable than I expected when there are legitimate circumstances involved. The advice about documenting everything and not rushing to file incorrectly is something I'm definitely going to keep in mind as I work with my new accountant. To the original poster - it sounds like you're getting excellent advice here and you're taking the right steps to resolve this. The community support here is amazing, and it's clear you're not alone in dealing with these kinds of business tax challenges. Thanks to everyone for sharing their experiences and knowledge!

As a newcomer to this community, I'm amazed at how helpful and thorough everyone's responses have been! I'm currently dealing with my first year operating an S-Corp and this thread has been incredibly educational about potential pitfalls I need to avoid. The distinction everyone's made between S-Corps with and without direct tax liability is something I never fully understood before. It's reassuring to know that if you're in a pass-through situation with no corporate-level taxes, the penalties for late filing might be minimal or even zero. That takes a lot of the fear out of the process. I'm also bookmarking the resources mentioned here - taxr.ai for penalty analysis and Claimyr for actually reaching the IRS. As someone who's never had to deal with business tax issues before, knowing these tools exist gives me confidence that if I ever face a similar situation, there are practical solutions available. To the original poster, it sounds like you're getting excellent guidance here and taking all the right steps. The fact that you're being proactive about resolving this shows good business judgment, even if the initial deadline was missed. Best of luck with your new accountant meeting next week!

Quick question for those who know - does anyone have experience with the statute of limitations for unfiled gift tax returns? I'm in a similar boat where I made 529 contributions over several years without filing Form 709. Some of these were over 6 years ago. Should I still file for those older years?

I've been following this thread closely as someone who went through a very similar situation about two years ago. After 15 years of funding our kids' education through various methods, I discovered I had completely missed the gift tax reporting requirements. One thing I learned that might help you: the IRS has a "reasonable cause" provision for late-filed gift tax returns when no actual tax is owed. Since most people are nowhere near the current lifetime exemption limit ($13.61 million for 2024), you typically won't owe any actual gift tax - just need to properly report your use of the exemption. I ended up filing Form 709 for about 8 different years. The process was tedious but not as scary as I initially thought. The key is being thorough and consistent in your documentation. I created a spreadsheet tracking every contribution by year, child, and source (529 vs. direct tuition payments). Also worth noting: if you have good records showing the contributions were legitimate educational expenses, the IRS is generally reasonable about late filings in these situations. They understand that many parents are genuinely unaware of the gift tax implications of funding their children's education.