One other thing to consider - some states have different 1099 filing requirements than the federal IRS rules! California, for example, doesn't automatically exempt all corporations from 1099 reporting. I learned this the hard way and got a notice from the state tax board. Definitely check your state requirements if applicable.

Thanks everyone for all the helpful information! I'm dealing with a similar situation but with a twist - I paid an S-corp for marketing services, but they also reimbursed me for some advertising expenses I paid on their behalf. Do I need to issue them a 1099 for the net amount I paid them, or do I calculate it based on the gross service fees before the reimbursements? For example, if I paid them $12,000 for services but they reimbursed me $2,000 for ad spend, do I base the 1099 decision on the $12,000 or the $10,000 net? Since we've established S-corps generally don't need 1099s anyway, this might be a moot point, but I want to understand the principle for future reference with other contractors.

Has anyone used OnLine Taxes (OLT.com)? It's one of the IRS Free File options and I'm considering it since TurboTax dropped out of the program. I have a pretty simple return with just a W-2 and some student loan interest, but I'm nervous about trying something new.

This is such a comprehensive breakdown - thank you! I've been dreading tax season because I got burned by unexpected fees last year. Quick question about the AGI limit for Free File - is that based on last year's AGI or this year's? I had a job change mid-year so my income jumped significantly, but I think I'm still under the $79k threshold. Also, for anyone else dealing with multiple state filings (I moved during the year), make sure to check if your Free File option covers both states. I learned the hard way that some providers charge extra for the second state even if you qualify for free federal filing.

Document EVERYTHING before you make any moves! Save all emails, text messages, take screenshots, keep copies of the incorrect return and any marketing materials they gave you (especially if they "guaranteed" bigger refunds). Take photos of their office/signage too. This will all help your case whether you go to the IRS, small claims, or try to dispute the charge. I learned this the hard way when trying to get my money back from a sketchy preparer.

I'm sorry you're going through this - tax preparer issues are incredibly stressful! You've gotten some excellent advice here. I'd especially emphasize filing that amended return (Form 1040-X) as soon as possible to correct those questionable deductions. The IRS tends to be more understanding when you proactively fix errors rather than waiting for them to find them. One thing I haven't seen mentioned yet is checking if your state has a Taxpayer Advocate Service office. They're independent from the IRS and can help if you're experiencing significant hardship from tax problems. Since you're worried about potential audits and penalties from the preparer's mistakes, they might be able to assist you in navigating the process. Also, when you do report the preparer using Forms 14157 and 14157-A, include as much detail as possible about their practices - especially that comment about "maximizing refunds" by claiming deductions you didn't authorize. That kind of pattern is exactly what the IRS looks for when investigating preparers. Stay strong - you're taking all the right steps to protect yourself!

I'm dealing with a similar UTMA situation right now and this thread has been incredibly helpful! I'm 29 and just discovered my parents set up an account that should have been transferred to me 8 years ago. One thing I'd add is to check if your state has an unclaimed property database. Sometimes when custodians don't transfer accounts at the age of majority, the funds eventually get turned over to the state as unclaimed property. It's worth searching your state's unclaimed property website with your name and SSN just to be sure. Also, for anyone worried about the family relationship aspect - I found that approaching it from an educational standpoint helped. Instead of demanding the transfer, I presented it as "I learned that this is how UTMA accounts work legally" and asked for their help in understanding the tax implications. Made it feel collaborative rather than confrontational. The tax basis issue mentioned above is huge too. My account had reinvested dividends over 20+ years, so establishing the cost basis for all those small purchases was a nightmare. Definitely start gathering those records early in the process!

This is such a comprehensive thread - really wish I had found resources like this when I was dealing with my own UTMA transfer nightmare last year! One thing I'd add that helped me immensely: if you're planning to use the funds for a home purchase, look into whether your state offers any first-time homebuyer programs that might help offset some of the tax impact. Some states have programs that allow you to defer or reduce capital gains taxes if the proceeds are used for a qualified home purchase within a certain timeframe. Also, since you mentioned launching your own business, you might want to consider whether any of the funds could be strategically used for business purposes rather than taking everything as personal income. Business investments and expenses are treated differently for tax purposes and might help manage your overall tax liability. The timing aspect is crucial too - since you're expecting higher income this year, you might want to work with a tax professional to model out different scenarios. Sometimes it makes sense to realize some gains in a lower-income year even if you don't need the cash immediately, just to lock in the lower tax rate. Great job being proactive about this at 27 - many people don't discover these accounts until much later!

The Child Tax Credit can definitely be a significant benefit - up to $2,000 per qualifying child under 17. Since your nephew is 16, he would qualify if you can claim him as a dependent. There's also potentially the Child and Dependent Care Credit if you're paying for childcare while you work. One thing to consider is that these tax benefits can be substantial enough that it's worth having a clear conversation with his parents about who should claim him. If you're providing the majority of his support and he's living with you for more than half the year, you have a strong case. But getting that written agreement beforehand (like others have mentioned) will save everyone headaches later. You might also want to track your expenses carefully - not just obvious things like food and clothing, but also your increased utility bills, transportation costs for getting him to school/activities, and even entertainment expenses. All of that counts toward the support calculation and helps strengthen your position if there are any questions later.

Based on your situation, you should be able to claim your nephew as a dependent! Since he's been living with you continuously since April, that's about 9 months of the tax year, which definitely meets the "more than half the year" residency test. For the support test, you need to consider ALL expenses - not just the cash his parents send. This includes the fair rental value of his room, utilities, food, clothing, medical expenses, school costs, transportation, and even entertainment. The money his parents give you counts as THEIR support contribution, but when you add up housing costs, utilities, food, and everything else you're providing, you're likely well over the 50% threshold. A few important tips: 1) Document everything - keep receipts and track expenses, 2) Get a written agreement from his parents stating they won't claim him (even a simple signed letter works), and 3) File your taxes early to avoid any conflicts if they accidentally try to claim him too. Since he's 16, you'd also qualify for the Child Tax Credit (up to $2,000), which makes this even more worthwhile. Just make sure to communicate clearly with his parents about the arrangement so everyone's on the same page come tax time!