Do these free tax prep services handle back taxes from previous years? I thought they only did current year returns during tax season.

You're right that many VITA and TCE sites focus primarily on current year returns during the regular tax season. However, some locations do offer assistance with prior year returns, though this varies by site. You'd need to call specific locations to ask about their services for back tax returns. If free services aren't available for prior years in your area, consider a low-cost tax professional instead of the major chains - often local enrolled agents or CPAs will handle back taxes for much less than the big tax preparation companies, especially for straightforward returns.

I got one of those last year. It's scary but doesn't mean they're immediately coming for your stuff. You usually have 30 days to respond, and if you call them and show you're trying to fix the situation by filing and setting up payments, they'll often put a hold on collection activities.

Just be careful with this approach. The IRS looks closely at family businesses that suddenly put family members on payroll, especially kids in college who aren't clearly providing services. Make sure you have solid documentation showing actual work being performed, regular payments (not just lump sums), and pay that's comparable to what you'd pay a non-family member.

This is extremely helpful! We're paying about $42,000 per year for her tuition and housing. If we pay the school directly, that wouldn't count toward the gift tax limits at all? And we could still give her additional money up to the $36,000 combined annual exclusion for living expenses?

Exactly! Direct payments to educational institutions for tuition are completely exempt from gift tax. However, note that only tuition qualifies - not room and board, books, etc. Those would still fall under your annual gift exclusion. So yes, you could pay her tuition directly to the school (let's say $30,000) with no gift tax implications, PLUS give her up to $36,000 ($18k from each parent) for other expenses. That's a total of $66,000 you could transfer for her benefit without any gift tax reporting requirements.

Thanks for the detailed breakdown on the depreciation schedule! I definitely had the wrong percentages in mind. Do these figures account for bonus depreciation too or is that something separate?

The percentages I listed are just for regular MACRS depreciation without any bonus depreciation factored in. Bonus depreciation is separate and would actually allow you to deduct a significant portion upfront, similar to Section 179 but with different rules. For 2024, bonus depreciation is at 60% (it's been phasing down from 100%). So you could potentially deduct 60% of the cost in year 1 through bonus depreciation, and then apply the regular MACRS percentages to the remaining 40%. This is another option if Section 179 doesn't work for some reason.

There's no minimum cost to use Section 179, but your business needs to have enough income to offset the deduction. For something small like $800, you can definitely use Section 179 to write it off completely in year 1. Honestly, for that amount, even if you depreciated it over 5 years, the difference isn't huge, but might as well take the full deduction now if you can.

That's a really good suggestion. I do still have the same bank account I used back then, so I'll call them tomorrow and see if they can provide statements from that period. I think I used PayPal for most of my eBay transactions too so I'll definitely check there. Did you just manually go through each statement and categorize everything? How did you handle things like inventory where you might have purchased it in a different year than you sold it?

I did go through each statement manually and created a spreadsheet to categorize everything. It was time-consuming but gave me solid documentation. For inventory timing issues, I made my best estimate of which inventory was sold in which year based on my sales patterns. Since you're doing this retroactively, what worked for me was calculating my overall profit margin across all sales and then applying that same margin to each year's known revenue. For example, if I determined I generally made 40% profit after all costs, I would apply that to each year's total sales figure. The IRS is generally reasonable about reconstructed records as long as your approach is consistent and logical.

Not OP but sometimes people switch tax preparers or maybe they used software that year instead of a professional. I've been in a similar situation where I used TurboTax one year and then couldn't access the account years later because I had changed email addresses and couldn't verify my identity to recover the account.

Thanks for sharing! I'm going to check my transcript to make sure everything's correct. I really don't want to spend this money and then find out later I need to pay it back with interest. Just nervous because it's such a big difference from what I expected.

Definitely get confirmation before spending it. The transcript will show exactly what changes they made. It should list specific credits or adjustments with the amounts. One other thing to check - sometimes refunds include interest if the IRS took too long to process your return. That interest is actually taxable on next year's return, so keep that in mind if that's part of the increase.

That's actually really good advice. Better safe than sorry when it comes to the IRS. Six months seems like a long time though?