3 Don't forget the state-specific costs! Here in California, we pay $800 minimum franchise tax regardless of whether we're profitable or not. Made my S Corp totally NOT worth it until I was clearing six figures consistently. Check your state's fees first!

I've been researching S Corp conversion for my consulting business and want to add a few hidden costs that haven't been mentioned yet: - Registered agent fees ($100-300/year in most states) if you don't want to use your home address - Business insurance premiums often increase for corporations vs sole props - Credit card processing fees sometimes have higher rates for corporate accounts - If you travel for business, corporate expense documentation requirements are much stricter One thing that really helped me was creating a spreadsheet comparing my current sole prop costs vs projected S Corp costs over 3 years. At $87K revenue like the OP, you're right at the borderline where it might not make sense initially, but could pay off as you grow. The key is being realistic about ALL the ongoing compliance costs, not just the obvious ones. Also worth noting - if you mess up the corporate formalities or payroll requirements, you can lose the tax benefits retroactively, which would be costly.

You should also look into tracking your business expenses better for next year. I do DoorDash too and deduct mileage (58.5 cents per mile for 2024), part of my phone bill, insulated bags, car maintenance, etc. This lowers your net self-employment income which reduces what you owe in SE tax.

This is a really common confusion for new gig workers! The key thing to understand is that there are actually TWO separate tax calculations happening: 1. **Income Tax** - This is what the standard deduction applies to. Since your AGI of $7,600 is below the $12,490 standard deduction, you owe $0 in federal income tax. 2. **Self-Employment Tax** - This is completely separate and kicks in when you have more than $400 in net self-employment earnings. It's essentially your Social Security and Medicare contributions (15.3% total) that would normally be split between you and an employer. So even though you don't owe any income tax, you still owe self-employment tax on your ~$6,500 in 1099 income. That's where your $350 tax bill is coming from. The good news is you can reduce this by tracking all your business expenses - mileage for delivery driving is usually the biggest deduction. Also definitely look into the Earned Income Tax Credit that others mentioned, as it could help offset some of what you owe!

This whole situation is exactly why I tell people to be extremely cautious with online gambling promotions. The tax implications are rarely explained clearly by the platforms, and most players have no idea what they're getting into until tax season hits. What's particularly frustrating is that the current tax code treats gambling completely differently from other forms of investment or entertainment. If you go to a movie and pay $15 for a ticket, that's just entertainment expense. But if you put $15 into a slot machine and win $10 back, suddenly you have "gambling income" to report. I've been dealing with this professionally for years, and I always recommend that recreational gamblers either stick to cash games in person (easier to track net results) or avoid promotions with complex rollover requirements entirely. The "free" bonus money ends up costing more in tax compliance than it's worth for most people. The saddest part is that Congress could easily fix this by allowing gamblers to report net winnings instead of gross winnings, similar to how day traders can elect mark-to-market accounting. But there's no political will to make gambling taxes more reasonable, so we're stuck with this byzantine system that punishes honest reporting.

This is absolutely maddening and highlights a fundamental unfairness in our tax system. I'm a newcomer here but dealing with almost the exact same situation - about $38,000 in reported "winnings" from online casinos when my actual profit was only around $600. What really gets me is how the casinos market these bonuses as "free money" without any disclosure about the tax nightmare they create. I accepted what seemed like generous deposit matches from multiple platforms, not realizing that the playthrough requirements would generate tens of thousands in taxable "wins" that were really just my own money being recycled through their system. The worst part is feeling like I'm being punished for trying to do the right thing and report everything accurately. I've spent weeks organizing transaction records and will likely end up paying more in taxes than I actually won. Meanwhile, people who just ignore the reporting requirements probably face minimal consequences since enforcement seems limited. It's particularly frustrating that other forms of investment get much more reasonable tax treatment. If I traded stocks with the same frequency and ended up with a small net gain, I'd only owe taxes on that gain - not on every individual profitable transaction along the way. Thanks for sharing your experience - it's oddly comforting to know others are dealing with this same bureaucratic nightmare, even though the system desperately needs reform.

Has anyone considered the De Minimis Safe Harbor election? If your business has applicable financial statements and an accounting procedure in place on the first day of the tax year, you can expense items up to $5,000. Without AFS, it's $2,500 per item. So a $3k espresso machine would need to be capitalized unless you have AFS, but a $2k one could potentially be fully deducted in year 1 under the safe harbor.

I've been dealing with similar home office expense questions for my consulting LLC. One thing I'd suggest is considering the "exclusive use" test more carefully. Since you mentioned keeping it in your designated home office space that you're already claiming, that helps establish business purpose. However, I'd recommend documenting a clear business justification beyond just "I need coffee to work." For example, if you're doing long video editing sessions that require sustained focus, or if the machine helps you avoid interrupting work to go out for coffee during billable hours, that creates a stronger case. Also consider this: instead of one $3,000 machine, what about a $1,500 commercial-grade setup that still meets your needs? It's easier to justify as "ordinary" for a business, falls under common de minimis thresholds, and still provides the quality you're looking for. The IRS tends to scrutinize luxury items more heavily, regardless of the business justification. Keep detailed records of how it's used exclusively for business purposes, and maybe track your productivity improvements or time savings to strengthen your position if questioned.

This has been such an informative thread! I'm actually a CPA who works with families on tax planning, and I wanted to add a few practical points that might help others in similar situations: **For immediate next steps with your father-in-law:** Consider asking him to provide you with the account statements and details about what specific investments he chose. This will help you estimate the potential annual tax impact and decide if any adjustments are needed. **Regarding the kiddie tax calculation:** Remember that it's not just about the $1,200 threshold - the way the tax is calculated can be tricky. If your daughter's unearned income exceeds that amount, you'll need Form 8615, and the tax is calculated using the parents' marginal tax rate. This can result in a much higher tax than if the income were just taxed at the child's rate. **State tax considerations:** Don't forget that some states have different rules for taxing minor's income. A few states don't have kiddie tax provisions at all, while others might have different thresholds or calculations. The suggestions about 529 conversions and grandparent-owned accounts are excellent. I've helped several families restructure these arrangements, and while it requires some planning, it's usually worth the effort for both tax efficiency and financial aid optimization. Great discussion everyone - this is exactly the kind of comprehensive information families need when dealing with these well-intentioned but complex gifts!

As someone who's been through a similar situation, I can really relate to your confusion about the tax responsibilities! My parents set up a UTMA for my daughter without much discussion either, and I was initially stressed about the potential tax burden. What I learned is that while the technical tax responsibility belongs to your daughter (using her SSN), the practical reality is that you'll likely be the one preparing her tax returns and potentially paying any taxes owed through the kiddie tax rules if the account generates significant income. One thing that helped me was requesting a detailed breakdown from the custodian about what investments were chosen and their expected annual income/growth. This helped me estimate whether we'd actually hit that $1,200 threshold that triggers more complex tax filing requirements. I'd also echo what others have said about having a conversation with your father-in-law about investment strategy. Since you're the one who'll be dealing with the tax paperwork, it's reasonable to have input on whether the investments are generating a lot of current taxable income versus long-term growth that won't create tax headaches until much later. The good news is that $15,000 invested conservatively probably won't create major tax complications in the near term, but it's smart that you're thinking about this proactively. Best of luck with the conversation with your father-in-law!