


Ask the community...
Have you considered filing for an extension with your employer? When I was in a similar situation, I explained to HR that I was actively working on resolving my tax situation but needed more time. I showed them proof that I had contacted a tax professional and was gathering documents, which bought me an additional 30 days. Most companies just want to see that you're being responsible and taking action, not necessarily that everything is completely resolved within their initial deadline. Maybe prepare a simple timeline showing the steps you've taken and when you expect to have everything filed.
Thank you for this suggestion. I did actually meet with HR yesterday and showed them that I've started the process. They were more understanding than my direct manager and said they mainly need to see proof that I've engaged with a tax professional and have a concrete plan. Did you use a special type of tax person for your situation? I'm wondering if I need someone who specializes in delinquent returns.
I used an Enrolled Agent who specialized in tax resolution and delinquent returns. They tend to be more affordable than CPAs while still having full representation rights with the IRS. The key is finding someone who regularly handles past-due filings rather than just normal tax prep. I recommend asking specifically about their experience with employment verification issues and their typical timeline for preparing delinquent returns. My EA was able to provide a formal letter stating I had retained their services and outlining our filing plan, which satisfied my employer while we completed the actual work. Most tax pros who work in this area understand the employment implications and can help document your progress for HR.
Don't forget to file your state returns too! I learned this the hard way - got my federal returns caught up but completely overlooked state taxes. Then got hit with a state tax lien that showed up on my credit report and caused even more problems with my employer. If you moved between states, you'll likely need to file part-year resident returns for both states for the year you moved. Each state has different requirements and deadlines for past due returns.
This is so important! I had the same issue with state taxes being overlooked. And if you had self-employment income, some cities and local jurisdictions also require tax filings. For example, I had to file a city income tax return for my freelance work that I didn't even know existed until I got a notice.
Don't forget you might need to pay state taxes on that unreported income too! The IRS typically shares this information with your state tax authority, so you might get a similar notice from them in a few months.
Make sure you respond by the deadline even if you don't have all your documentation yet! You can send a partial response explaining that additional documentation is coming. If you miss the deadline without any response, they may assess the full tax amount automatically. I had a CP2000 for unreported stock sales last year, and the key was keeping communication open with the IRS. They're actually pretty reasonable if you're responsive and can explain your situation.
That's really helpful, thanks! If I tell them I'm waiting on more documentation, do you know approximately how much extra time they typically give?
In my experience, they usually give an additional 30 days if you ask for an extension and explain why. Be very specific about what documents you're waiting for and when you expect to receive them. I included a line in my response letter that said "I am awaiting final documentation from XYZ Casino which they have confirmed will be sent by [specific date]. I respectfully request an extension until [date + 1 week] to provide this final documentation." They approved my extension request without any issues. The key is being specific rather than vague about what you're waiting for and when it will arrive.
I went through a similar situation last year. For 2021-2023, most current software works fine, but for 2017-2020, I had to get creative. I ended up using a combination of approaches: - For 2021-2023: Used current version of FreeTaxUSA (their premium version handles Schedule C well) - For 2018-2020: Found prior year versions of TaxAct Business - For 2017: Had to use an accountant since it was so old One tip: before you start, download all your bank statements for those years and create a simple spreadsheet to track income and expenses by category for each year. Makes the actual tax prep go much faster.
How much did TaxAct charge for each prior year? And did you have any issues with the 2017 filing from the accountant?
TaxAct charged around $60-70 per year for their business editions when I used them, though prices may have changed. I found it reasonable considering the alternatives. For the 2017 return, the accountant charged me $350, which was actually less than I expected. There weren't any issues with the filing itself, but they discovered I had been calculating depreciation incorrectly on some equipment, which affected the subsequent years. This meant I had to make some adjustments to my 2018-2020 returns as well. If you have depreciating assets, make sure you're tracking them consistently across all tax years - that's something the software won't necessarily flag for you.
Quick question - has anyone tried UltraTax for old business returns? My friend recommended it but it seems expensive.
One "loophole" that's actually legitimate is setting up a Solo 401k with mega backdoor Roth capabilities. I contribute $22,500 as employee deferral, then my S corp contributes up to 25% of my salary as employer contribution, AND I can make after-tax contributions that immediately convert to Roth. Totally legit strategy that lets me put away over $60k/year in tax-advantaged accounts. Also, don't overlook that you can potentially deduct 20% of your qualified business income through the QBI deduction, though phase-outs start at higher income levels.
Can you explain more about the mega backdoor Roth through an S corp? My accountant mentioned this but didn't explain how it actually works with the S corp structure specifically.
Sure thing. The key is setting up your Solo 401k plan with the right provisions. Your plan needs to specifically allow for both after-tax contributions (beyond the normal $22,500 employee limit) and in-plan Roth conversions. With an S corp, you wear two hats - employee and employer. As employee, you contribute up to the standard limit ($22,500 for 2023, plus catch-up if over 50). As employer, your S corp can contribute up to 25% of your W-2 wages. Then, if your plan allows it, you can make additional after-tax contributions up to the total annual limit ($66,000 for 2023 combining all sources), then immediately convert those after-tax dollars to Roth. This gives you way more Roth conversion potential than just the standard backdoor Roth IRA.
Don't forget about the home office deduction! I write off 22% of my home expenses (based on square footage) including utilities, internet, mortgage interest, property taxes, and even depreciation. You do need a space used "regularly and exclusively" for business, but if you have that, it's totally legit and can save thousands. My S corp also pays for my cell phone (I document business use at 80%), internet (70% business), and even streaming services I use for research. The key is proper documentation - keep a log of business use percentage.
Ivanna St. Pierre
Just wanted to add my two cents as someone who's been using the trust/LLC structure for several Amazon businesses for years. The "chain of disregarded entities" explanation from earlier comments is correct. Here's how I handle it on my returns: 1. I include a statement with my 1040 explaining the structure 2. I file two Schedule Cs (one for each spouse) since we both work in the business 3. I make sure to include the LLC's EIN on both Schedule Cs (even though it's disregarded) 4. I title the Schedule C business name as "[My Name] SOLE PROP DBA [LLC Name]" I've been audited once, and this approach was accepted without issue. The key is documentation and consistency. If you're still uncertain, check out Revenue Ruling 2004-77, which specifically addresses disregarded entities in situations like yours.
0 coins
Freya Ross
β’This is super helpful! I like your approach with the business name format. One follow-up question - when you split the Schedule Cs between spouses, do you also split the expenses proportionally? Or can one spouse claim certain categories of expenses while the other claims different ones?
0 coins
Ivanna St. Pierre
β’I split both income and expenses proportionally based on our work contribution percentage. So if we're doing a 60/40 split, each Schedule C shows that percentage of both the revenue and expenses. You could technically allocate specific expense categories to each spouse if those expenses directly relate to their specific duties, but that gets messy and might invite more scrutiny. The proportional approach is simpler and generally easier to defend if questioned.
0 coins
Elin Robinson
Has anyone considered that Rev. Proc. 2002-69 might apply here? It specifically addresses situations where husband and wife own an entity through a living trust.
0 coins
Leslie Parker
β’Rev. Proc. 2002-69 is specifically about community property states, which OP mentioned they're not in. It allows married couples in community property states to treat their wholly-owned LLC as either a disregarded entity or partnership. Since OP is in a non-community property state, this wouldn't apply directly to their situation.
0 coins