Great question! I went through this same confusion when I hit 73 last year. As others have confirmed, RMDs are definitely taxed as ordinary income - so you'd pay that 12% rate, not the 15% capital gains rate. One thing that really helped me was setting up automatic tax withholding on my RMDs. Since you mentioned you're budget planning, I'd suggest having your IRA custodian withhold taxes directly from the distribution - maybe start with 15% to be safe since your RMD will add to your other income and could potentially bump you up a bracket. You can always adjust the withholding percentage for future years once you see how it affects your overall tax situation. Also, don't forget to factor in state taxes if your state has income tax. The withholding approach saved me from having to make quarterly estimated payments and worrying about underpayment penalties.

One thing I'd add that might be helpful for your planning - since you mentioned you're 73 and this is your first RMD year, make sure you're aware of the timing rules. You actually have until April 1st of the year after you turn 73 to take your first RMD (so April 1, 2025 for you). However, if you wait until next year to take your first RMD, you'll also have to take your second RMD by December 31, 2025, which could push you into a higher tax bracket for that year since you'd be taking two distributions in one tax year. Most people find it better to take their first RMD before December 31st of their first RMD year to spread the tax impact over two years instead of bunching it all into one year. Given that you're in the 12% bracket now, this timing strategy could help you stay in that lower bracket for both years rather than potentially jumping up to 22% if you take both distributions in 2025.

Someone mentioned this above, but it's worth emphasizing: INTENT is absolutely critical in how these contributions are treated. If you're audited, the IRS will look at whether the transaction was intended as a loan from the beginning. If there's no documentation, no interest, no repayment schedule, and no actual repayments being made, they'll likely recharacterize it as a capital contribution regardless of how you reported it. One approach I've seen work well: Do a combo where part is clearly designated as a capital contribution (perhaps the proportional amounts based on ownership) and the excess is structured as a formal loan with proper documentation, reasonable interest, and an actual repayment schedule that you follow.

As someone who went through a similar situation with my S-Corp, I'd recommend being very careful about retroactively creating loan documentation without contemporaneous evidence of loan intent. The IRS looks for substance over form. In your case, since you have $30,700 from the 51% owner and $1,800 from the 49% owner, one clean approach might be to treat the first $16,575 from the majority owner as a capital contribution (proportional to their 51% ownership of the total $32,500), and document the remaining $14,125 as a shareholder loan with proper terms going forward. This way you have a reasonable business justification for the split - the proportional part as equity investment, and the excess as debt financing. Just make sure any loan documentation includes a realistic repayment schedule that you actually intend to follow, market-rate interest, and treat it like a real loan with regular payments when cash flow allows. The key is being able to demonstrate genuine loan characteristics from this point forward, not just having a piece of paper that says "loan" without the substance to back it up.

I'm surprised nobody's mentioned this yet - having a negative basis of -50k when your profit/loss/capital percentages are all 16.8% suggests the partnership as a whole might have done a significant refinancing or cash-out refi and distributed proceeds to partners. That's a common way basis goes negative while capital accounts stay positive. Do you remember receiving any large distributions in the past few years? Partnership refinances often create exactly this situation - your capital account stays intact for book purposes but your basis gets reduced by the distributions.

This is actually a really common situation that trips up a lot of partnership investors. The key thing to understand is that your capital account and your outside basis serve completely different purposes and are calculated using different rules. Your capital account (the 120k on your K-1) is like your "book value" share of the partnership - it's what you'd theoretically get if the partnership liquidated everything at book value today. Your outside basis (the -50k your CPA mentioned) is your tax basis in the partnership interest, which determines things like how much loss you can deduct and what happens when you sell or receive distributions. The reason your basis went negative while your capital account stayed positive is likely due to cash distributions you received over the years that exceeded your initial investment plus your share of partnership income. When you receive distributions, they reduce your basis dollar-for-dollar but don't necessarily reduce your capital account the same way. Given that you have 63k in partnership liabilities allocated to you (6k + 57k), your actual "at-risk" basis for loss limitation purposes would be your -50k basis plus the 63k in liabilities, which gives you 13k of basis to absorb losses. This is why tracking partnership basis gets so complex - there are multiple layers of limitations and calculations. I'd strongly recommend getting a detailed basis calculation from your partnership's tax preparer (not just your personal CPA) showing how you got to -50k. You have a right to that information as a partner.

As someone who's been navigating the nanny tax world for a while now, I wanted to add a few practical tips that might help based on what I've learned through trial and error: First, regarding quarterly estimated taxes - if you do end up properly classified as self-employed (which is less likely based on the working relationships described here, but possible), don't forget that your first quarterly payment for 2025 isn't due until April 15th. However, if you're earning significant income, it's smart to start setting aside money immediately rather than waiting until the deadline. Second, I've found it helpful to create a simple "work agreement" document with any family I work for, even if they don't require it. Nothing fancy - just a one-page summary of hours, duties, payment schedule, and who provides what supplies. This protects everyone and makes the employment relationship crystal clear from day one. Finally, for those worried about having "the conversation" with families - I've found that mentioning the potential tax benefits they can claim (like the Child and Dependent Care Credit) often makes them much more receptive to proper classification. When they realize that doing things correctly might actually save them money, suddenly payroll taxes don't seem like such a burden. The peace of mind that comes from knowing you're fully compliant is absolutely worth any initial awkwardness. Good luck to everyone starting new positions!

This thread has been absolutely incredible! I've been lurking here as someone who just started babysitting regularly and was completely confused about whether I need to worry about taxes since the family pays me through Venmo. Reading through everyone's experiences has made me realize I need to figure out my situation ASAP. The family I work for has me come every Tuesday and Thursday after school, plus some weekends. They tell me exactly when to be there, what activities to do with the kids, and provide all the supplies. Based on everything discussed here, it sounds like I'm probably an employee even though they're paying through an app. I'm definitely going to check out those tools mentioned (taxr.ai and Claimyr) to get a proper assessment. The success stories about having productive conversations with families give me hope that this doesn't have to be as scary as I thought. One question - for those of you who successfully transitioned from app payments to proper payroll, how long did it take to get everything set up? I want to approach the family with realistic expectations about timeline and what's involved on their end. Thank you all for sharing so openly about your experiences - this community is amazing and has probably saved me from making some serious mistakes!

This thread has been incredibly helpful! I'm also self-employed and had no idea I could deduct the portion of premiums I pay out-of-pocket after marketplace credits. I've been missing this deduction for two years now. One question I haven't seen addressed: if I started my business mid-year and was employed for the first half of the year (with employer health insurance), can I still take the self-employed health insurance deduction for the months I was paying for marketplace coverage while self-employed? Or does having employer coverage for part of the year disqualify me entirely? I switched to marketplace coverage in July when I left my job to go full-time freelance, so I've been paying out-of-pocket premiums for 6 months of the year. Want to make sure I can claim this before I file!

Really appreciate everyone sharing their experiences here! As someone who's been self-employed for about 5 years, I want to emphasize how important it is to understand this deduction properly. One thing I'd add is that if you're just starting out as self-employed, don't assume you can't take this deduction because your business income is low. Even if you only made a few thousand dollars in self-employment income, you can still deduct health insurance premiums up to that amount of profit. Every little bit helps when you're building your business! Also, for those considering amending previous returns - it's definitely worth doing if you missed this deduction. I amended my 2022 return after discovering I could deduct my out-of-pocket premiums and got back about $800. The process was easier than I expected, and the IRS processed the amended return in about 8 weeks. One last tip: if you're unsure about any of this, consider keeping detailed notes about your specific situation and consulting with a tax professional who specializes in self-employment taxes. The peace of mind is often worth the cost, especially in your first few years of being self-employed when everything feels complicated!