Accountant help with IRS taxes ~ if you're on a tight budget

“Do you any CPAs/accountants who can help me file IRS taxes? I’m a single-member LLC/PLLC on a budget….”

Or ”…I’m a Sole Proprietor on a budget.”

Hi Friends,

This is probably the #1 most common question I get via email. And it’s a little complex to answer. Short answer ~ Not really, but I can still help you!

Please read on for some context, then options for you.

Context

  • Great accountants cost a little money. The ones I know generally charge $900 - $3000 for filing IRS taxes, with good reason. A great accountant is easier to work with, good with people, they will answer questions, they use robust software, and can advise you on decisions. And if you’re asking for a CPA, certified public accountant, they are more spendy because they have extra certifications and answer to a higher standard.

  • Here’s a list of accountants I know, and a few other finance folks.

  • Many self employed people - do not need an accountant. If your taxes are simple, you can file directly. Filing software is excellent at prompting us for what to report.

  • Also….if your taxes are simple, all the accountant is doing is entering it into their software. Without any value-add! A great one will look it over. Many of the cheaper-priced accountants simply enter it into the software for you. By the time you’ve given them all the info, you could have filed your own taxes.

  • Reasons to get an a great accountant:

    • You have tricky taxes: investments, rentals, more than one home, etc.

    • You’re filing as an S-corp

    • You have employees

    • To help you with decisions

    • They lead you through the process of prepping your business info

    • They answer questions in a friendly way

  • Reasons to get an a cheaper accountant:

    • You like the deadline of getting all your forms + numbers to them

    • It gives you peace of mind, it feels more official

    • It’s part of your annual ritual

Options / to get accountant help on a budget

The most affordable way is to use tax software, and access the accountants / tax pros they offer!

  • Work with H&R Block. You can go into an H&R Block center, or get help online. I think you still enter everything into the computer, and for an extra fee, you can get a real person to help you with it.

  • Use TurboTax with “Live Full Service”. Or file yourself, using the Live Chat for questions.

  • Try Tax Slayer. Their standard package includes access to tax pros.

Friendly Reminder

No matter who you file with, you still have to do all of the prep work! It’s still on you to find all of the tax forms. And to collect all your business numbers. The “Filing” step is putting all of that info into the software. It’s the easier part…. Check out this newsletter for a few tools to help you with the prep step. If you like it, please leave a tip in the Tip Jar!

Good luck, you got this!
♡ Jenny

Finding Your IRS Numbers - Notes and FAQs

This is a brand new post … I’ll keep adding to it throughout March 2023


Some General Notes

  1. The IRS taxes you on profit.

  2. To formula to finding this is: GROSS SALES - Biz EXPENSES = PROFIT

  3. To show this work, the IRS asks us to fill out a Schedule C, a type of “Profit or Loss Form”.

  4. The Schedule C is only 2 pages, and not that hard!

  5. In reality, we don’t fill out the form … if we file ourselves, we’ll enter the numbers into software or a website (like TurboTax, FreeTax, H&R Block).
    OR, we’ll give our numbers to our tax preparer.

  6. The Schedule C gets added to your personal IRS taxes. You don’t have to do a separate tax return. (Isn’t that great?)

  7. Did you know … your business doesn’t pay any IRS taxes? You are paying personal taxes … on the money you earned from your business.

  8. When you are self-employed, you’ll be paying 2 types of tax. Income tax (what you’ve been paying your whole life) and Self-Employment tax.

  9. Business deductions, write-offs, business expenses - all mean the same thing.

What can I write-off? / What can I claim? / What is a business expense or deduction?

Almost everything you spend on your business - can be a deduction. It’s just a matter of what amount, and what category. The IRS uses the phrase, “ordinary and necessary”.

Quote from the IRS:

“To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.”

What about something that is part for business, party for personal … like my cell phone, or my laptop?

These are referred to as Shared Use items. The basic strategy is to calculate - or decide - on what percentage is for business, and claim that amount. The default is 50/50, though you can split them other ways as well.

So, if you buy a new computer for $1800, and claim 50% for business, you would claim $900 as a business expense.

Let’s say your phone bill is split between your business, personal, and 2 other people. You could say that 25% is for business. Then take 25% of the total phone bill for the year as a deduction.

Does it matter what category I put things in?

Sorta no, sorta yes.
As long as you claim things only one time, you’re generally fine. The category doesn’t change the taxable amount. And if you’re paying the right amount of tax, you’re good.

Putting things in the reasonable categories does help though! Part of the risk factor for getting audited - is - do these expenses line up for this type of work.

What if I don’t see a category that fits?

You can either pick the closest category, that might make sense.
OR, make an “Other” category, and give it a label.

For example, I have checking account fees, for $84 a year. I could maybe put it into the “Office” category, though it’d be a stretch. So instead, I put it into “Other - Bank Fees”.

How do I handle mileage?

answer coming soon

What about a home office deduction?

Sometimes you can take a deduction for your Home Office. Additionally, you can deduct furniture and items used in your office. (Note, very often, the home office deduction doesn’t add up to that much. The simplified method generally yields a savings of $100 - $300 when all said and done.)

 A – Home Office Deduction.

First, check to see if you meet the criteria:

  • Used exclusively for business – meaning no other activities take place there

  • Used on a regular basis

  • For the purpose of making a profit

  • Principle place of business

If yes, there are two methods:

Simplified Method: Calculate the square footage of your home office. Add this number when filing (with software or accountant.) Generally, you’ll get $5 per square foot as a deduction.

Actual Expenses Method: This is complex, and beyond my scope. The basic idea is that you calculate the percentage of your home that is your office. Say it’s 8%. Then, you add up all home expenses – mortgage/rent, utilities, insurance, etc. – then take 8% of those costs. I think.

 B - Furniture and items

All or most things you buy for your office can be deducted – like chairs, rug, couch, artwork.

What do I do with the 1099 forms I received? What’s a 1099-NEC? And 1099-K?

1099 forms are a family of forms that track - whenever we get paid. There are different suffixes, here are some examples:

  • 1099-INT … interest you earned from a bank or investment

  • 1099-DIV … dividends you earned

  • 1099-NEC … income from “Non-employee compensation”

  • 1099-MISC … income from “Miscellaneous source”.

These are the forms you get PAYERS, and are straightforward to work with.

  • 1099-NEC (non-employee compensation)

  • 1099-MISC (miscellaneous)

These might come from businesses that hired you, programs you’ve contracted with, insurance companies, people you supervise. You’ll need to input all the data from these forms into the tax software, or give to your accountant. These count as part of tallying up your gross sales.

You may also get 1099-Ks, these come from payment PROCESSORS:

You might get these from Square, Stripe, Venmo, PayPal, etc. These are a little trickier, as the amount reflected in the 1099-K may overlap with other income. Be sure to get guidance on how to enter these when filing.

What if I didn’t receive a 1099 form?

Short answer: You still report the income, whether or not you received the form.

Longer answer: Ask the person/business if they sent one. Or look up on online. If they submitted one to the IRS, it can be a problem if you don’t report it. If they did NOT submit one, you’re in the clear. It’s the responsibility of the Payer to complete the form….