Could use some tax guidance after a weird year

February 15, 2017 9:15 AM

Even setting aside all of the current-events stuff that happened, 2016 was a damned weird year for my wife and me. I left a job in June, taking a buyout package equal to half a year's salary. I did several contracting gigs over the summer. I worked as a subcontractor through a recruitment firm. My wife left a job in October and subsequently did some similar subcontracting work.

I've always done my own taxes (with TurboTax), but I'm concerned that this situation is complicated enough that I should get professional help. Should I? And if so, bonus question: what should I look for when looking for help? Super-bonus question: can you recommend anybody in Minneapolis?

posted by the phlegmatic king to Work & Money (7 answers total)

Even though Turbo Tax could mostly guide you through this, a tax professional could not only give you more confidence that you were doing everything right but also give you information on best practices for tax year 2017 which would be helpful. After my father died and I had to deal with a bunch of random shared-with-sister financial stuff (including a shared house and some other things) I started getting my taxes done professionally (by an individual accountant guy not someone with a larger company) and have never looked back. He's available during the year for me to email questions which is super important. What I look for is

- good reviews on Yelp or Angie's List of you're in a place where that sort of thing matters
- responsiveness to initial queries (this is a busy time of year for them but you should still get some sort of response from them
- accessibility on email (this is essential to me, you might not care) so I can do most of my business with them that way

I prefer someone who is independent and not with H&R Block or whatnot but YMMV on stuff like that.
posted by jessamyn at 9:30 AM on February 15, 2017 [6 favorites]

I worked as a consultant for several years (not a tax consultant), and unless there are complications you haven't mentioned, I don't think it's that hard. W-2 income goes on the 1040. 1099 earned income (i.e. not interest or dividends) goes on form SE. Best have separate SEs for wife and self, especially if you contribute to IRS. Business deductions go on the SE.

If you have depreciation or other complications, then there is more need for an expert.
posted by SemiSalt at 9:57 AM on February 15, 2017

I'm not a tax lawyer, but from an employment law perspective, I had clients who needed to structure their buyout/severance packages to disburse over several years, in order to keep as much taxable income in a lower bracket as possible. I worked with their accountants to get the right language in the buyout agreements so that the IRS would smile upon it. If your package gets paid over time, you might look into this.

The converse may also be important--if you are getting your buyout payment all at once, the IRS may have rules that let you spread its "accrual" or "recognition" out over several years to minimize your exposure to income at a higher tax bracket. That's the sort of thing an accountant might be able to help you with.

But yeah to SemiSalt, W-2 and 1099 income are easy in TurboTax, and it sounds like all your other income will come through one of those two tax forms.
posted by radicalawyer at 10:11 AM on February 15, 2017

Last year, my taxes were complicated. I tried doing them myself (using Free Tax USA), but gave up. So you could try using TurboTax and see if you can manage it, then seek outside help if it doesn't work out.

I ended up going to H&R Block. I was not impressed. I actually had to pull up the IRS site to show the preparer that she was wrong about a rule (and of course, since they charge by the hour, I was charged for the time I spent doing this). This year I am planning to contact a CPA recommended by a friend.

I have used Angie's List for other recommendations, but they weren't super helpful for tax preparation in my city. The value of Angie's List is very dependent on your locale. In general, though, I find it more useful than Yelp.
posted by FencingGal at 10:38 AM on February 15, 2017 [1 favorite]

Agreed that it's probably not that complicated, but there might be things you're not thinking about; allowable business expenses are one area that can be complicated. Ideally, you would do the taxes yourself, then sit down with an accountant for an hour to review them. I'd guess that you'd have more luck finding someone willing to do that if you got a personal recommendation.
posted by Mr.Know-it-some at 10:55 AM on February 15, 2017

W-2 income goes on the 1040. 1099 earned income (i.e. not interest or dividends) goes on form SE.

I think fine-tuning is needed on this answer. (Am self-employed. Regularly do own taxes using H&R Block software.)

Form SE is used to calculate Self-Employment Tax after you have calculated your Net Income from self-employment. That calculation is done by entering your 1099 income and deductible business expenses on Schedule C.

Most DIY tax software will walk you through this process with little or no difficulty. As suggested above, an accountant or tax preparer might be helpful in identifying deductible business expenses you hadn't thought of. This could be particularly useful advice if you're unaccustomed to the world of self-employment and the myriad ways one can stretch the definition of "business expense."
posted by John Borrowman at 11:58 AM on February 15, 2017

I don't know how the buyout will work (so that may warrant consulting a professional), but dealing with contracting/self-employment is relatively easy and straightforward with the tax software. I have found that TaxAct has much better prices than TurboTax for the self-employed. It is just as easy to use, possibly easier.
posted by ktkt at 1:22 PM on February 15, 2017