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Former tax preparer here. The shady stuff is WAY more common at those budget tax prep chains than people realize. They hire seasonal workers with minimal training, pay them based partly on refund size, and push them to process as many returns as possible. I quit after my manager kept pressuring me to "find" additional deductions that clients clearly didn't qualify for. When I refused, they'd reassign my clients to more "flexible" preparers. The worst was claiming business expenses for people who were clearly W-2 employees or creating fake charitable contributions. Not all preparers are bad, but the industry has serious problems. Find someone who asks lots of questions and explains everything they're doing. If they promise a specific refund amount before even seeing your documents, RUN.
Is there any way to report these places? I'm pretty sure the guy who did my brother's taxes last year put a bunch of fake business expenses that got him an extra $3000 in refunds.
Absolutely - you can report suspected tax preparation fraud to the IRS using Form 14157 (Complaint: Tax Return Preparer). There's also Form 14157-A if you believe your own tax return was prepared incorrectly. The IRS takes these reports seriously as part of their efforts to combat preparation fraud. For your brother's situation, he should be aware that even if the preparer put fake information on the return, the taxpayer is ultimately responsible for what's submitted under their signature. It might be worth having a professional review that return to see what was claimed and possibly filing an amended return to correct it before the IRS catches it themselves.
My neighbor bragged about getting $8k back using some "tax wizard" when I only got $1200. I make more than him! So I asked what his secret was, and he admitted his guy claims he has a business with massive losses every year. No actual business! Just fake expenses! The crazy part? He's been doing this for SEVEN years with no audit! Makes me feel like a sucker for reporting everything honestly. But then I remember my cousin who got caught in an audit and ended up paying back $15k plus penalties. Not worth the stress honestly.
18 Your tax preparer was being unprofessional and alarming you unnecessarily. I've been doing tax work for years, and while certain things do increase audit risk, a simple income increase from a new job isn't one of the major red flags unless there's something else going on. Common actual audit triggers include: 1) Claiming home office deductions incorrectly 2) Reporting business losses for multiple years 3) Claiming unusually large charitable donations relative to income 4) Math errors or inconsistencies between forms 5) Unreported income that gets reported on 1099s Unless you have some of these issues, I wouldn't lose sleep over it.
1 Thank you for this list! The only thing that might apply to me is that I did start doing some side gig work and claimed a few business expenses, but nothing major - maybe $1,200 total on a side income of about $8,000. Could that be what she was referring to? Or is that ratio pretty normal?
18 That expense-to-income ratio is completely reasonable for side gig work and wouldn't raise any red flags by itself. 15% expenses on self-employment income is actually quite conservative by most standards. What's more likely is that your preparer may have been using scare tactics to justify their fee or to encourage you to purchase audit protection services, which is unfortunately common practice among some tax preparation businesses. Some preparers use audit warnings to upsell clients on representation services they likely won't need.
22 Did your tax preparer try to sell you "audit protection" after warning you about the audit risk? That's a common tactic some tax prep chains use - scare you about audit risk then conveniently offer protection services for an additional fee. It's borderline unethical.
1 Oh my god, she actually did! She mentioned their "audit defense package" for $79 right after making those comments, but I declined because I was already paying quite a bit for the preparation. I didn't even make the connection until you mentioned it. That makes me feel both better and worse at the same time - less worried about an audit but annoyed I was manipulated.
Something else to consider: you might not need a full CPA if your situation is relatively straightforward. When I was making about $30k in 1099 income, I found a tax preparer (not a CPA) who specialized in self-employment taxes and charged about half what CPAs were quoting me. Ask potential tax pros specifically about their experience with your type of work. A CPA who mostly does corporate taxes might not be as helpful as a regular tax preparer who does dozens of freelancer returns every year.
What's the actual difference between a CPA and a regular tax preparer when it comes to handling 1099 income? Is one riskier than the other if you get audited?
The main difference is credentials and scope of expertise. CPAs have to pass rigorous exams and maintain continuing education in all areas of accounting, while tax preparers specifically focus on tax preparation and might have more specialized experience with certain types of returns. For audit protection, what matters more is whether they offer audit assistance/representation, not their title. Many non-CPA tax preparers offer excellent audit support. Just make sure whoever you choose has a PTIN (Preparer Tax Identification Number) from the IRS and ask specifically about their experience with 1099 income situations like yours.
One thing to ask about in your consultations: whether you should be making quarterly estimated tax payments. At $20k+ in 1099 income, you're probably supposed to be doing this already, and the penalties can add up if you wait until April to pay everything. This was a painful lesson I learned last year.
Have you checked if there's a Volunteer Income Tax Assistance (VITA) site near you? Many offer special assistance with international student tax situations. I used to volunteer for one, and we had specialized training for handling status changes, 1042-S forms, and treaty benefits. The 1042-S you received is probably for scholarship money that exceeded your qualified education expenses or for a specific payment made while you were still on F-1. If you bring all your forms (W-2, 1098-T, 1042-S) to VITA, they can help you file for free and make sure everything's reported correctly.
I think there is one on campus, but I heard they don't take complicated situations involving status changes. Is that true? And wouldn't I need special forms that they might not have?
It depends on the specific VITA site. Some standard VITA sites might not handle international tax situations, but many universities have specialized VITA sites with additional training for international student issues - these are sometimes called VITA-International. You don't need special paper forms - VITA sites use software that can handle 1042-S reporting. Just call ahead and specifically ask if they handle status changes and 1042-S forms. If your campus site doesn't, they can usually refer you to one that does. Be sure to bring your immigration documents too (passport, visa, I-94, green card) as they'll need those to determine your tax residency for the split year.
Does anyone know if TaxSlayer handles 1042-S? Their website says they do, but when I tried to enter mine last year, the software kept crashing. Ended up having to use H&R Block which was way more expensive.
TaxSlayer technically "supports" 1042-S but does it poorly. It has space to enter the info but doesn't guide you through it correctly if you have status changes mid-year. H&R Block and TurboTax handle it better, but even they sometimes struggle with splitting the year between nonresident and resident status.
GalaxyGuardian
2 Don't forget about improvements! If your aunt or you made any major improvements to the property (new roof, renovation, addition, etc.), those can be added to your basis and reduce your capital gains. You'll need receipts though!
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GalaxyGuardian
•1 I actually did replace the HVAC system about 6 months after inheriting it. Would that count? It cost around $9,000. I should have the receipt somewhere in my email.
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GalaxyGuardian
•2 Yes, that absolutely counts! A new HVAC system is considered a capital improvement, not just a repair. Make sure to add that $9,000 to your stepped-up basis. Any significant improvements that extend the life of the property or add value can be included. Just make sure you have that receipt handy in case of an audit.
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GalaxyGuardian
3 Has anyone used a tax professional for this kind of situation? My tax software is confusing me with all these basis questions and I'm worried about making a mistake.
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GalaxyGuardian
•20 I used a CPA last year for my inherited property sale. Cost me about $350 but worth every penny for the peace of mind. Regular tax preparers at chain places were clueless about stepped-up basis rules.
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