Protip: If you connect your Coinbase account to Koinly or CoinTracker, they can automatically import all your transactions and generate the tax forms you need. Much easier than trying to track everything manually. I think they both offer free plans if you have fewer than 100 transactions.

Just wanted to add some clarity here since I see people getting confused about what forms to expect. For 2023 tax year, Coinbase stopped sending 1099-B forms for most retail traders. They only send 1099-MISC if you earned over $600 in rewards/staking income. However, they still report your transaction data to the IRS behind the scenes, so you absolutely must report everything even without receiving a physical form. The key is using Coinbase's own tax reporting tool in your account settings - it's free and gives you all the data you need. Don't risk not reporting just because you didn't get a form in the mail. The IRS has been getting much more aggressive about crypto enforcement, and they have ways of matching unreported crypto income to your SSN. Better safe than sorry!

I switched from S-corp back to Sched C last year. For me it was a no-brainer since I only made like $35k profit and was paying almost $2k for tax prep plus that $800 CA fee. My accountant showed that I was LOSING money with the S-corp structure at my income level.

The threshold question is really key here. From what I've seen with my own consulting business, the S-corp structure typically becomes worthwhile when you're consistently hitting $40k+ in profit, but it also depends heavily on your state fees and accounting costs. At $30k profit, you're right on the borderline. The self-employment tax savings could be around $1,500-2,000 annually if you structure the salary/distribution split correctly, but that California $800 fee plus professional tax prep costs can easily eat into those savings. One thing to consider is the trend of your business - if you expect to grow beyond $40k profit in the next year or two, it might be worth keeping the S-corp structure in place. Converting back and forth between entity types can be more costly and complicated than just maintaining the structure through a lower-profit year. Have you calculated your total annual costs for maintaining the S-corp (state fees, accounting, payroll processing if applicable)? That's really the number you need to compare against your potential self-employment tax savings to make this decision.

Don't forget to look into college financial aid too! When my daughter started college, we discovered that how we claimed her on taxes affected her FAFSA application. Sometimes the tax benefits vs. financial aid benefits can be a tradeoff.

I'm going through this exact transition right now with my oldest! One thing that really helped me plan was creating a simple spreadsheet to compare the financial impact year by year. For 2024 taxes (filed in 2025): You'll still get the full Child Tax Credit since she's 17 at year-end. For 2025 taxes (filed in 2026): No more Child Tax Credit, but if she's in college full-time, you can still claim her as a dependent AND potentially get the American Opportunity Tax Credit (up to $2,500 for the first 4 years of college). The key thing is that "providing more than half her support" - keep track of what you spend on her (tuition, room/board, food, medical, etc.) vs. any income she earns. As long as your support exceeds 50% of her total support for the year, you can claim her. Also, don't forget that claiming her as a dependent might affect her eligibility for certain financial aid, so definitely talk to the college financial aid office before making decisions. Sometimes it's better for the student to file independently depending on the aid packages available. The transition definitely stings financially, but the education credits can help bridge some of that gap if she goes to college!

This entire discussion has been incredibly enlightening! As someone who's been collecting unemployment for the first time this year, I was completely confused about how it affects my tax credits. I had no idea that unemployment benefits don't count as earned income for EIC purposes - I honestly thought all income was treated the same. Reading through everyone's experiences and explanations really helped me understand that the IRS makes a clear distinction between money earned from actual work versus benefits received when you can't work. I was worried I wouldn't qualify for any credits since I was unemployed for several months, but now I realize that my earnings from the beginning of the year before my layoff should still qualify me for EIC. I'm definitely going to follow the advice about double-checking the EIC worksheet in my tax software to make sure it's only counting my W-2 wages and not including my unemployment compensation. It's reassuring to know that even in a difficult year with job loss, there are still tax benefits available to help families get by. Thanks to everyone who shared their knowledge and experiences - this community is incredibly helpful for navigating these confusing tax situations!

This has been such a comprehensive discussion! As someone who works in tax preparation during filing season, I see this exact confusion come up constantly. What I find helpful is explaining to clients that the IRS essentially has different "buckets" of income for different purposes. For the Earned Income Credit, they're very strict about what goes in the "earned income" bucket - it has to be compensation you received for actually working. Unemployment compensation, even though it's taxable, goes in a different bucket because it's a government benefit program, not payment for services performed. Beatrice, your instinct was absolutely correct to question your tax software. While most modern tax programs handle this correctly, it's always smart to verify. With your $16,500 in wages and two qualifying children, you should receive a substantial EIC - likely in the $5,000+ range based on current tables. One final tip for everyone: if you're ever unsure about these distinctions, Publication 596 from the IRS has detailed explanations and examples of what counts as earned income for EIC purposes. It's surprisingly readable for an IRS publication and can help you feel confident about your calculations.

I'm in a similar situation with a shared apartment but hadn't thought about the exclusive use requirement that Sofia mentioned. Since you mentioned the second bedroom is "exclusively used" for your business, make sure you can truly prove that if audited. One thing I'd add to the great advice already given - keep detailed records of everything. Take photos of your office setup, save all rent receipts, and document that 13% square footage calculation with measurements and a floor plan sketch. The IRS loves documentation, especially for home office deductions. Also, double-check your state tax rules too. Some states have different requirements or don't allow the federal home office deduction, so you might need to calculate things differently for state vs federal returns. For your van parking expense, definitely keep that separate on Schedule C as others suggested. That $125/month adds up to $1,500 annually, which is a solid business deduction you don't want to dilute by mixing it into your home office calculation.

One additional consideration for your situation - since you're splitting rent 50/50 with your partner, make sure you're clear on who can claim what if your partner also works from home or has any business use of the apartment. Only one person can claim the home office deduction for a specific space, so if there's any overlap in business use areas, you'll need to coordinate to avoid both of you claiming deductions for the same square footage. Also, keep in mind that if you ever move or your living situation changes, you'll need to recalculate everything based on your new space and rent amounts. The 13% calculation is specific to your current apartment layout and rent split. For record-keeping, I'd recommend creating a simple spreadsheet tracking your monthly rent payments, the calculated office percentage, and your van parking expenses separately. This makes it much easier when tax time comes around and you need to total everything up for the year. Plus having organized records like this can be a lifesaver if you ever face an audit. The advice about checking state tax rules is crucial too - some states like New York have specific limitations on home office deductions that differ from federal rules, so definitely verify what applies in your state.