That sounds perfect! Do they have good support if I get confused about something? And is it really just $15 total as opposed to TurboTax's crazy $275?

Yep, it's really just $15 for state filing - federal is completely free regardless of how complicated your return is. They do have customer support, though it's not as hand-holding as TurboTax. But for something simple like reporting a small crypto gain, you definitely won't need much help. They have a pretty straightforward section for capital gains where you just enter your info. I've filed everything from W-2 income to crypto gains to self-employment and rental income with them without issues. For your situation with just a small gain, it'll be super easy.

Seriously? The IRS is going to come after someone over what would amount to like $8 in taxes on a $43 gain? They have bigger fish to fry. The audit rate is at historic lows, and they're not wasting resources on tiny amounts like this.

I didn't have any unemployment, but I think you might be onto something with the tax credits. I took a closer look at last year's return and I had qualified for a partial education credit that I didn't get this year since I'm done with school. It wasn't a huge amount but it might explain part of the difference. I'm also going to check if my employer changed their withholding calculations like someone else suggested. Looking at my final pay stub vs my W-2, the numbers match, but maybe the percentage they're withholding has changed.

That education credit would definitely explain part of it! Those can be worth hundreds depending on which one you qualified for. And the withholding percentage is definitely worth checking too - employers sometimes adjust that based on updated IRS guidance without employees noticing. One other thing - you mentioned your AGI was around $31,500. Did you have any pre-tax deductions that changed from last year? Things like 401k contributions, HSA deposits, or health insurance premiums? If those changed, they can affect both your AGI and how much tax is withheld.

That's such a good point! I've used TurboTax for years and the question flow definitely changes. Last year they asked about home office deductions right up front, but this year it was buried in some "other expenses" section I almost skipped. The UI changes can make a huge difference in what deductions you end up claiming.

Can you elaborate on how you handle this in your books? Do you track these special allocations through the capital accounts or do you have separate tracking outside the partnership accounting?

We track these allocations through our partnership capital accounts initially, showing equal distributions to maintain equal ownership percentages. Then we have a separate ledger for tracking reimbursements between partners outside the partnership. Our operating agreement specifically states that these reimbursements don't affect partnership interests or profit/loss allocations. It's essentially treated as a separate business arrangement between the partner entities that's documented but kept distinct from the partnership accounting.

That might work for some businesses but could be terrible tax-wise for others. The S-Corp structure allows for payroll tax savings on distributions that exceed reasonable compensation. Dissolving them could significantly increase self-employment taxes.

That's a good point! I went back through the whole interview process again and did find something weird. Last year I had checked that I had health insurance for the full year (which I did through my job), but somehow that setting didn't carry over correctly. After I fixed that, my amount owed went down by about $250! Unfortunately I still owe around $550, which seems to be because of the withholding issue others mentioned. But at least it's better than $800. No 1099s or anything like that - just my regular W-2.

Glad you found at least part of the issue! That health insurance question can definitely impact your taxes in some states. The withholding change is likely the main culprit for the remaining amount you owe. For the future, I recommend checking your pay stubs quarterly to make sure enough tax is being withheld. You can also use the IRS Tax Withholding Estimator midway through the year to see if you're on track. That way you won't get any unpleasant surprises at tax time!

I switched from TurboTax to FreeTaxUSA two years ago and would never go back. It's just as accurate but WAY cheaper. Federal filing is free and state is only $15. TurboTax was charging me $120+ for basically the same service. The interface isn't quite as pretty but it gets the job done and asks all the same questions.

Did your cousin also file amended returns for other years? I'm wondering if doing that proactively helps show good faith or if it just opens you up to more scrutiny for years that weren't being audited.

Yes, she did file amended returns for the two previous years after discussing it with her new CPA. Her accountant said it was much better to proactively fix the issues rather than wait for the IRS to find them. It definitely helped show good faith effort in her case. The IRS agent specifically mentioned that her voluntary correction of prior years was viewed favorably when determining penalties. There were still some penalties applied, but they were reduced because of her cooperation and initiative. The agent told her that if they had discovered those other years' problems themselves through expanded audits, the penalties would have been substantially higher.

That's a really good point about the state taxes that I hadn't even thought about. We're in California, which I'm guessing will definitely follow up once the federal audit is complete. I'm going to start gathering our state returns too. I did save all the emails where he suggested we lie to the IRS, and I have the records showing he tried to divert our refund to his account. Hopefully that helps show we were victims rather than accomplices in this.

California will absolutely follow up - they're actually more aggressive than the IRS in many cases. Having those emails ready for both federal and state authorities will be incredibly helpful. One more thing I forgot to mention - if your preparer was licensed (CPA, EA, etc.), report them to their professional board as well, not just the IRS. My preparer had his license suspended after I reported him to the state board of accountancy, which helped prevent him from doing this to others.