Great question! I was in the exact same situation when I started my freelance consulting business. Here's the key difference that helped me understand: **Schedule C** is for your business - so all that income from selling your handmade crafts online goes here, along with any business expenses like materials, shipping costs, packaging supplies, etc. This directly affects your self-employment tax too. **Schedule A** is for personal itemized deductions - your medical expenses and charitable donations would go here, but only if the total of all your itemized deductions exceeds the standard deduction (which is pretty high these days). For your craft business, definitely keep detailed records of everything - receipts for supplies, mileage to craft fairs, even a portion of your internet bill if you use it for the business. These all reduce your taxable business income on Schedule C. One tip: consider setting up a separate bank account for your craft business if you haven't already. Makes tracking so much easier come tax time!

This is such a great question and one that trips up so many new business owners! I went through the exact same confusion when I started my consulting practice. The simplest way I explain it to people is: - **Schedule C** = Your BUSINESS money (income from crafts, business expenses like materials, shipping, etc.) - **Schedule A** = Your PERSONAL deductions (medical bills, charity donations, mortgage interest, etc.) For your craft business, you'll definitely need Schedule C to report that income and claim business deductions. Whether you need Schedule A depends on if your itemized personal deductions (medical expenses + charitable donations + other qualifying expenses) add up to more than the standard deduction for 2024, which is $14,600 for single filers. Pro tip: Keep those business and personal expenses completely separate from day one. I learned this the hard way when tax time came and I was scrambling through bank statements trying to figure out what was what! A separate business checking account or even just a dedicated credit card for business purchases makes life so much easier. The business deductions on Schedule C are especially valuable because they reduce both your regular income tax AND your self-employment tax. Every receipt for craft supplies, packaging materials, or business-related travel is money back in your pocket!

Has anyone actually tested this liability protection in real life? I have a similar structure but my attorney warned me that courts can sometimes "pierce the veil" if the businesses aren't truly operated as separate entities.

This thread has been incredibly helpful in clarifying the S-Corp owning LLCs structure. I'm in a similar situation with multiple business ventures and was also confused about the terminology. One thing I'd add based on my research is that you'll want to consider the state-level implications too. While federally the LLCs owned by your S-Corp will be treated as divisions, some states have different rules for state tax purposes. For example, some states require separate LLC tax filings even when they're federally disregarded entities owned by an S-Corp. Also, regarding the liability protection discussion - make sure you understand that while the LLC structure protects between business lines, it doesn't protect you personally from professional liability in businesses where you're directly involved. If you're providing professional services through any of these LLCs, you'll still have personal exposure for your own actions, regardless of the entity structure. The holding company approach with an S-Corp owning multiple LLCs is definitely a solid strategy for what you're trying to accomplish, just make sure your implementation covers all the operational details mentioned in the comments above.

Has anyone dealt with the "14 day rule" along with the family rental situation? I'm planning to use my rental property occasionally throughout the year (less than 14 days) while also renting to my nephew. Not sure if this complicates the 80% FMV requirement.

Something else to keep in mind is that the IRS also looks at the terms of your rental agreement when determining if it's a legitimate rental. Even if you're charging 80% of FMV, if your lease agreement with your family member is too informal or doesn't include standard rental terms (like security deposits, maintenance responsibilities, eviction clauses), the IRS might still question whether it's truly a rental arrangement. I'd recommend drafting a formal lease agreement that you'd use with any tenant - specify the monthly rent, security deposit requirements, who's responsible for utilities and maintenance, lease duration, and termination conditions. Treat it like a business transaction even though it's family. This documentation will support your position that it's a legitimate rental if you're ever audited. Also, make sure you're actually enforcing the lease terms. If you let your family member skip payments or don't follow through on lease provisions, that could undermine your argument that it's a true rental property.

Just to add a potentially useful resource - publication 556 "Examination of Returns, Appeal Rights, and Claims for Refund" has detailed information about the limitations on refund claims. The key section for your case would be the "Time for Filing a Claim for Refund" portion. Also look into "protective claims" which are sometimes allowed even after limitations periods have passed if there were special circumstances. Not sure if your situation qualifies, but worth investigating. If you filed during COVID, there were also special extensions to some filing deadlines that might potentially apply to your situation. The IRS issued several notices extending various deadlines.

I'm really sorry you're going through this - $75K is an enormous amount to lose to a technicality. While the statute of limitations rules are unfortunately strict, there might be some avenues worth exploring given the amount involved. One thing that stands out to me is that you consistently elected to keep overpayments with the IRS rather than taking refunds - this shows a clear pattern of intending to maintain credit balances for future tax obligations. Some courts have distinguished between different types of payments and credits in similar cases. Have you looked into whether any of the COVID-related relief provisions might apply to your timeline? The IRS issued numerous deadline extensions and special procedures during 2020-2021 that could potentially affect limitation periods. Also, consider whether there were any IRS processing delays or errors that contributed to this situation. If you can document that the IRS failed to properly process your returns or apply your payments in a timely manner, that might provide grounds for an exception. Given the amount involved, I'd strongly recommend consulting with a tax attorney who specializes in statute of limitations cases before accepting this outcome. Many offer free consultations and could quickly assess whether you have viable options for recovery. Don't give up yet - $75K is worth fighting for, and there are specialized advocates who deal with exactly these types of IRS disputes.

Something people don't realize about the refund statute - if you file your amended return even ONE DAY after the 3-year window closes, the IRS is legally required to reject your refund claim. The tax code gives them zero flexibility on this. I work in a tax office and see people heartbroken when they miss the deadline by just a short time. The most painful one was a client who mailed their amendment on the last day but didn't use certified mail, so there was no proof of timely filing. The IRS received it 4 days later and denied a $7,800 refund. Don't take chances with these deadlines!

I just went through this exact situation last year with my 2020 taxes! The stress is real when you realize there might be money on the table. Here's what I learned: First, don't panic - if you filed your 2020 return by the extended deadline (May 17, 2021), you actually have until May 17, 2024 to file an amended return. That means you likely still have time if you're just discovering this now. The key thing is to act fast once you know about it. I procrastinated for months thinking "I'll get to it eventually" and almost missed my deadline. File Form 1040-X as soon as you can gather all your documentation for those business expenses you missed. One tip - make sure you have really solid documentation for those business expenses. The IRS will scrutinize amended returns more carefully, especially for business deductions. Keep receipts, invoices, and any records that prove the expenses were legitimate and business-related. $3,200 is definitely worth pursuing! Don't let the IRS keep money that's rightfully yours just because of paperwork anxiety. You've got this!