Yes, exactly. Was that not clear?
Oregon Department of Revenue : Get free help filing your taxes : Individuals...
Tax preparation assistance. Free tax preparation services are available for low- to moderate income taxpayers. Electronic filing.
Yes, exactly. Was that not clear?
Yes, exactly. Was that not clear?
Which is why our OP should see a pro. Yes, he may not need one next year, but a pro will save him $$- and stress.
Moderating
Since this involves advice and opinion in addition to factual information about taxes, let’s move this to IMHO (from FQ).
Appreciate the back-and-forth discussion here I was on the fence, but after some thought, I’m going to talk to a pro after all.
Which is why our OP should see a pro. Yes, he may not need one next year, but a pro will save him $$- and stress.
For the $200-$300 more it’d cost over using the software, I think it’s worth it:
There is a federally sponsored program called Volunteer Income Tax Assistance (VITA) that gives accounting students the opportunity to learn by helping people file their taxes
Thanks for the tip! Took a bit of searching, but the IRS has a locator for this service: Get Free Tax Prep Help
Sadly, none within 100 miles of my zip code
get a Enrolled Agent to start. Cheaper than a CPA, and better for what I think you need
Hmm, according to the “tax expert directory”, there are a handful in my city. There’s actually a lady right on my street, a few minutes’ walk away, with some good reviews… but no website or email anywhere, just a phone number on Google Maps. Hmm. Should I take the risk, or go with ol’ H&R Block?
My only gripe is that [H&R Block], along with companies like Jackson Hewitt, are a strong lobbying force against simplifying the tax code and free government-provided tax prep.
Yeah, it sucks that the big tax chains all lobby for their own livelihood and help keep the tax system enshittified… but one, I think self-employment situations are complex enough that maybe the IRS can’t/shouldn’t automatically process them like they could for wages; and two, it might just be a “pick my battles” situation. There’s enough financial and economic and political stress this year already, and I don’t think I have the stamina to stomach yet another moral fight right now I’ve avoided Intuit for the last few decades, but H&R block might just win this one unless the EA lady can offer a similar service at a similar price.
Just an FYI - “self-employment” tax is the equivalent of the Social Security and Medicare taxes that would have been paid on your behalf if you had been an employee
Makes sense. I’m not upset about it, I just wish I knew that beforehand. That’s on me… I should’ve talked to a tax pro before embarking on this adventure
To be fair, though, I didn’t actually expect to make enough money to even have to file this year. I was going to school for the first half of the year, but then switched plans and worked a lot more the second half.
Turns out it wouldn’t have mattered either way (I guess you have to report self-employment net income over $400), but I didn’t know that either.
I’m hoping talking to one this year will both make my 2024 taxes cleaner, and prevent similar mistakes in the future.
Thank you all
I retract my earlier advice to DIY. For all the reasons you state, expert advice this time will probably more than pay for itself in dollars, and certainly in worry. And put you in a good place to DIY any future years involving significant self-employment income.
Aside:
It sounds like your income is not evenly distributed throughout the year. If so, there are tax provisions for that. Which affect how much penalty and interest you owe for not having filed the 4 (three already and one next week) estimated tax payments. The fact your income is clustered in the second half of the year will help reduce those.
BUT you need to know to file the relevant forms (2210 last I checked) to give the IRS an accurate picture of your income/expense timeline by quarter. Absent that extra set of forms, IRS will assume that, like a salaried employee, 100% of your income is evenly distributed across the 12 months. And in effect penalize you extra for not paying taxes in the first quarter on money you haven’t earned yet and didn’t know you would! That’s just wrong.
Confusingly, they call this quarterly breakdown process “annualization”, when that’s the one thing it doesn’t do.
IME, at least TurboTax won’t ask about this. It can certainly help you fill out the forms, but only if you know to start doing so. I have to do that most years. Including this one.
like “for the same income, if my client is giving me the choice between becoming an employee and remaining self-employed, are there any clear tax advantages to one or the other?” (and we already discussed some, like the self-employment tax)
So there’s a whole lot involved in this. First and foremost, the IRS has some strict rules about when a business can classify someone as an independent contractor/1099 vs an actual employee/W-2. Here’s a quick bit about it. Businesses want to classify people as independent contractors because it can save them a lot of money in multiple ways - they don’t have to pay any payroll tax, they don’t provide any benefits (no health insurance, retirement plan, short or long term disability plans, etc.), and they can let the person go with no notice and that person is generally not eligible for unemployment or mass layoff protections such as the WARN Act.
In short, will you be able to set your own hours (come and go as you please, work midnight to 5am if you want, etc.), will you provide your own equipment, and can you work for multiple other businesses at the same time if you wanted to? If the answer to any of those is no, there is a real risk that the company is misclassifying you as a contractor when you should be an employee.
Second, if you’re a contractor and getting the same hourly rate as an employee, you are getting substantially underpaid. Your contracting rate should be X% higher than what you want to be paid as a W-2 employee. To figure out how much X% should be, you need to calculate the cost of payroll taxes, how much it now costs you to purchase your own health insurance, how much of an employer match you are missing out on a 401k or other retirement plan, the cost to purchase and maintain your own equipment, etc. And now you’ve got the hassle of needing to work with a tax professional, making quarterly tax payments, and so on - how much is that worth it to you? Add that in too.
Should I take the risk, or go with ol’ H&R Block?
No question, tax professional every time. To work for H&R Block as a “tax preparer” you just need to take an online self-paced course, which I personally think is a ridiculously low bar. I hesitate to send someone with a simple tax return to a business like that, let alone someone in your shoes where this is all new to you and it’s a little more complex. But again, I’m a CPA and a bit snooty about that kind of thing
I say call her, chat a bit and see what you think. I’d call at least two or three people to get an idea of cost. And some may have already stopped accepting new clients for the 2024 tax season so you might need to call more than that.
Thanks for the tip! Took a bit of searching, but the IRS has a locator for this service: Get Free Tax Prep Help
Sadly, none within 100 miles of my zip code
Hey, @Reply , I think there is something wrong with that link. I do taxes for TaxAide (sister org to VITA but we can do slightly more complicated returns). When I type in the zip code of my site, at which I volunteer, it says no services within x miles – I tried the zips of other sites where I know there is service & get the same message.
TaxAide can do Sched C and will efile your Fed and State returns for free. Try using this link (https://taxaide.aarpfoundation.org/) to find a site near you. Make an appt ASAP – slots fill up fast. If you still can’t find a site, we also now offer a remote service whereby a volunteer will coach you through preparing your own return.
So I just tried the AARP TaxAide link (https://taxaide.aarpfoundation.org/) and they are saying the site locator isn’t available yet (which may be why the IRS website isn’t returning any info either). If you don’t want to wait for them to get their act together, either post or PM me your zip code & I will send you a list of nearby TaxAide and VITA locations.
Thank you @bobsmom101 for posting this - I wasn’t aware of this service and it looks like it’s a really good one. I will definitely be passing this info along in the future as part of my solo crusade to take down the TurboTax/H&R Block tax software lobby
@liirogue , yeah making people pay so they can give the government money is the definition of salt in the wound.
My only gripe is that they, along with companies like Jackson Hewitt, are a strong lobbying force against simplifying the tax code and free government-provided tax prep.
I would like to see a cite on the first half here- simplifying the tax code ?
It sounds like your income is not evenly distributed throughout the year. If so, there are tax provisions for that.
Really, really good to know! Add that to the pile of “things I didn’t even know to ask about the tax system”. All the more reason to talk to a pro. Thank you for letting me know.
So there’s a whole lot involved in this. [(choosing between self-employment and being an employee)]
Heh. Want to make it even more complicated? My client (and potential employer) is actually a tiny European company. I am their sole U.S. contractor.
They actually did me a favor by allowing me to take them on as a sole proprietor, because that allowed me to set my own working hours, etc. while I was going to school. They’re doing me another favor by offering to take me on as an employee.
As you can imagine, navigating international employment and tax law would be quite complicated for a small business to take on, so they would use a middleman, an employer of record like remote.com or oysterhr.com (where that middleman would be my employer of record on paper and deal with U.S. taxation and employment benefits and such on behalf of my real employer, for a % of my salary).
Alternatively, I could also just forego a formal employee relationship and continue charging them as a client with a monthly retainer (as opposed to hourly like right now), and buy my own health insurance from the marketplace, etc. Not sure how that would impact things like vacation days, though, or if there would end up being a much higher tax burden this way. Shrug. It’s so much more complicated than just working for a regular US company.
I don’t expect an EA/CPA to know the intricacies of that, but maybe just to help me evaluate the tax differences between the two approaches.
No question, tax professional every time. To work for H&R Block as a “tax preparer” you just need to take an online self-paced course, which I personally think is a ridiculously low bar.
Wait, so if I’m understanding you right… an EA/CPA is actually a HIGHER bar than working for H&R Block? I guess I just kinda assumed H&R Block only hires CPAs, but maybe that was a dumb assumption on my part.
It seems like an EA is a federal IRS license, whereas a CPA is a state thing. Would a good tax professional normally have both, or is one “higher” than the other?
If you don’t want to wait for them to get their act together, either post or PM me your zip code & I will send you a list of nearby TaxAide and VITA locations.
Oh, thanks for letting me know! I live in Bend, OR, zip code 97701. I don’t mind waiting though; there are still a few forms (from third parties) I’m waiting for that probably won’t become available until early February anyway. But if I can book a slot earlier, I’d be happy to.
It’s a service I’m willing to pay for too, albeit with a not-infinite budget (ideally less than $400-$500). My situation might be complicated enough that talking to a paid professional could be worth it (not that there’s anything wrong with volunteers; I’m grateful they offer this service!)
Oh you’ve got a really fun situation going on! That is far beyond my level of experience.
Just off the top of my head (so take that for what it’s worth), I would either go through the middlemen or remain as a contractor. You seem to fit the criteria for a contractor, but at any rate that’s really the company’s problem and they aren’t in the US so they won’t care anyway. Will being employed through the middleman give you access to a US-based healthcare plan or retirement account? It would obviously make your tax situation much easier since you’d get a W2 at that point.
You should be able to find an EA or CPA that’s knowledgeable about working with a foreign company that could give you some guidance. Bend might be too small, but Portland should have someone.
Wait, so if I’m understanding you right… an EA/CPA is actually a HIGHER bar than working for H&R Block? I guess I just kinda assumed H&R Block only hires CPAs, but maybe that was a dumb assumption on my part.
The bar is so low to work for H&R Block as to be laughable. You only need a high school diploma. You take a self-paced online course and pass a test at the end, and I’ve heard it’s incredibly easy. Most of these jobs are seasonal - it’s people picking up a second job during tax time to make extra money.
An EA has to take a 3 part tax test specifically for the IRS and do 16 hours of continuing education each year. As you mentioned, CPA requirements are at the state level, but generally require 150 credit hours of college including a bachelor’s degree, they have to pass a 4 part accounting exam (but not just over taxes, it covers all areas of accounting), and do 40 hours of continuing education a year. EAs & CPAs get these qualifications because it’s what they are going to do full time and make a living at.
Either an EA or CPA is just so much more qualified than most people working for H&R Block.
The bar is so low to work for H&R Block as to be laughable. You only need a high school diploma. You take a self-paced online course and pass a test at the end, and I’ve heard it’s incredibly easy. Most of these jobs are seasonal - it’s people picking up a second job during tax time to make extra money.
Yes but that’s only to be their first level “tax associate” who does basic W-2 returns. If you have a side-hustle, own your own business, have interest income to report, stock sales, etc., then they hook you up with a more experienced preparer who may be an EA or a CPA.
(long) @reply, It really grinds my gears when taxpayers like you feel you have to pay a company to send the government money! Please try Tax Aide if you can get an appointment before you spend any money on a paid preparer! We have volunteers who have worked for H&R Block in the past and who say our training (run by the IRS) beats Block’s by a lot. We also have more experienced counselors who are CPAs or CPA-equivalent to do the more complicated returns. Your return doesn’t even sound that tough, especially compared with UBER or DoorDash drivers!
With an income of about $30,000 you can use either VITA or TaxAide’s services (you don’t have to be retired to use Tax-Aide).
I will try to PM you a worksheet we use for Sched C filers. Total up all your expenditures within the different categories. If you had to use your car at all, record the mileage.
You should receive a Form 1095-A for your health insurance. Bring it to your appointment with the tax counselor.
Well, turns out (if my work is right), I owe some $5.5k in taxes (on $30k income)
IMO, that can’t be right. Even if the entire $30K was taxable income (and it’s not) you are still in the 12% marginal bracket and would only owe about $3000.
Don’t worry about an “underpayment penalty.” If you owe one at all, it will be small. If you continue as a contractor, the tax counselor will help you set up your estimated payments for next year.
As you can imagine, navigating international employment and tax law would be quite complicated for a small business to take on, so they would use a middleman, an employer of record like remote.com or oysterhr.com (where that middleman would be my employer of record on paper and deal with U.S. taxation and employment benefits and such on behalf of my real employer, for a % of my salary).
Alternatively, I could also just forego a formal employee relationship and continue charging them as a client with a monthly retainer (as opposed to hourly like right now), and buy my own health insurance from the marketplace, etc. Not sure how that would impact things like vacation days, though, or if there would end up being a much higher tax burden this way. Shrug. It’s so much more complicated than just working for a regular US company.
It sounds like you will be getting a 1099-NEC (or maybe a 1099-MISC) from your employer. It doesn’t matter that they are an overseas company as long as they send you a US tax form that is properly filled out.
As far as becoming a formal employee with them (vs a contractor) you would have to provide your tax counselor with the details of the employee agreement to evaluate whether it would be beneficial to you. It might be better for you to have the flexibility of being a contractor rather than receiving “benefits” like paid sick leave or vacation time that you don’t really need.
Regarding health insurance: for a young, healthy, single person, it is probably advantageous for you to buy a cheap catastrophic health insurance policy and set up a Health Savings Account. It’s a shame that more individuals in your situation don’t take advantage of them, since they reduce your income, satisfy the health insurance requirement, and convert to an IRA when Medicare kicks in. (Health Savings Account (HSA) - Glossary)
This State of Oregon shows a map of TaxAide sites with 2025 dates, times & phone #s on this web page:
Tax preparation assistance. Free tax preparation services are available for low- to moderate income taxpayers. Electronic filing.
It looks like there are three sites in Bend and one in Redmond. I don’t know how they are getting the info before the AARP posts it, but don’t look a gift horse in the mouth, etc. I don’t see any VITA sites on the map, but they may not be finalized yet (I’d be surprised if there aren’t any in Bend or Redmond).
IMO, get your 2024 taxes done by a professional service (preferably free) and then you can use that return as a template and decide whether to use a service in the future or do your taxes yourself. Your situation is not that complicated or unusual, honest!
Watch for a PM from me & I’ll send you some useful forms & worksheets if I can. Happy to help & answer questions!
Well, turns out (if my work is right), I owe some $5.5k in taxes (on $30k income)
IMO, that can’t be right. Even if the entire $30K was taxable income (and it’s not) you are still in the 12% marginal bracket and would only owe about $3000.
It’s self employment tax that’s $4500+ of the $5.5k. 15% of every dollar from the first one. Some people qualify for EITC that offsets all or part of it.
ETA, the rest of your post is wonderful and I really appreciate it.
It’s self employment tax that’s $4500+ of the $5.5k. 15% of every dollar from the first one.
It’s 15% of his income after expenses. As I understood his post, his gross income is about $30K.
ETA: for example, he gets to deduct (on Sched C) anything he’s paying for health insurance
ETA, the rest of your post is wonderful and I really appreciate it.
Aww, Thanks!
Great post @bobsmom101, and full of really good info!
It sounds like you will be getting a 1099-NEC (or maybe a 1099-MISC) from your employer. It doesn’t matter that they are an overseas company as long as they send you a US tax form that is properly filled out.
I’d like to question this. My understanding is that a foreign company with no presence in the US is not obligated to send a US-based contractor a 1099 (with “no presence in the US” being an important detail and one that may or may not apply here). I’ve done freelance work for companies in Canada, England, and the Netherlands, each above the $600 threshold, and have never received a 1099 from any of them. I would suppose there’s nothing preventing them from sending one if they want to, although I’m not sure what the incentive would be if they feel it’s more trouble than it’s worth. But I was able to file without the 1099.
Admittedly, the most recent was about five years ago, so maybe it’s different now.
Yes but that’s only to be their first level “tax associate” who does basic W-2 returns. If you have a side-hustle, own your own business, have interest income to report, stock sales, etc., then they hook you up with a more experienced preparer who may be an EA or a CPA.
When we made our first foray into Block, that’s what they did. We had an appointment with a guy who was relatively new but undoubtedly qualified to do deal with clients who just had simple stuff. Our situation had a few wrinkles that made it a bit more complex, though, and he realized he was out of his element and referred us to another office where they had someone who specialized in returns for businesses. So kudos to the first guy, who recognized his limitations and acted appropriately, and to the lady at the second office, to whom were were probably insignificantly small (financially) but who got better results than we expected.
I’ve done freelance work for companies in Canada, England, and the Netherlands, each above the $600 threshold, and have never received a 1099 from any of them. I would suppose there’s nothing preventing them from sending one if they want to, although I’m not sure what the incentive would be if they feel it’s more trouble than it’s worth. But I was able to file without the 1099.
Yes, thank you. They don’t have to send a 1099 – they may not even have a US EIN. But in that case the OP would just report his income as “other cash income” under his SSN and use that amount on his Sched C. I’m guessing that’s what you did. The tax liability should be the same.
This whole discussion is very helpful to me too, since tax season begins in about 3 weeks & I need to get some of the cobwebs out of my brain.
IMO, that can’t be right. Even if the entire $30K was taxable income (and it’s not) you are still in the 12% marginal bracket and would only owe about $3000.
The OP may have other income, and there is Self employment taxes. Sick leave. But also expenses which would reduce the Gross taxable on Sch C. Good info, however.
Myself- always go for employee. They pay half of your employment taxes, and your unemployment, too. Not to mention, cheaper health insurance. This is entirely IMHO, but I have been a self employed contractor and I did not like owning the iRS all that $$.