Quick tip that helped me with a similar Depop situation: take photos of your closet/items before selling them as additional documentation. The IRS knows you're not running a business if you're just selling random personal items from your closet at a loss.

This thread has been incredibly helpful! I'm dealing with a similar situation where I sold some old designer bags and shoes on various platforms and received multiple 1099-Ks. One thing I want to add for anyone in this situation - don't panic when you see that 1099-K amount! It looks scary but remember it's just reporting gross payments, not your actual taxable income. Like everyone mentioned, if you sold personal items for less than you paid, you're not making taxable profit. I ended up creating a detailed spreadsheet tracking each sale, and even though I estimated most of my original costs (who keeps receipts for shoes from 2018?), I was conservative with my estimates. For example, if I thought I paid around $150-200 for something, I'd estimate $150 to be safe. The key is being able to show these were clearly personal items from your closet, not business inventory. Screenshots of your listings showing the items as "from my closet" or "gently worn" can help demonstrate this too.

I'm a tax preparer and see this question from creative professionals all the time. Here's the straight answer: Spotify CAN be deductible, but only the percentage used for business. The IRS calls this "ordinary and necessary" business expenses. For example, if you use Spotify 80% for work inspiration and 20% for personal enjoyment, you can deduct 80% of the annual subscription cost. BUT - and this is important - you need to be able to substantiate this if audited. Keep a log of how you use it for business, save examples of work inspired by specific music, and document client feedback that mentions how music influences your designs. Be reasonable with your business use percentage. Claiming 100% business use for something like Spotify will raise eyebrows at the IRS since most people also enjoy music personally.

Has anyone actually been audited over something as small as a Spotify subscription? Seems like the IRS would have bigger things to worry about than a $120 annual subscription. I deduct all my streaming services for my event planning business and never thought twice about it.

I used TurboTax last year and it automatically skipped over the 12a DD code when importing my W2. It didn't even prompt me to enter it anywhere, which initially made me worried I was missing something important. But after doing some research (and getting confirmation from an IRS agent), I learned that's exactly how it should work - the software knows that DD codes are informational only and don't affect your tax calculations. FreeTaxUSA and H&R Block work the same way from what I've heard from friends who used those platforms.

This thread has been incredibly helpful! I had the same confusion about Box 12a DD on my W2 and was worried I was missing out on some tax benefit or retirement contribution opportunity. It's such a relief to learn that it's just informational reporting of my total health insurance costs (both my portion and employer's portion) and doesn't affect my tax return at all. I'm definitely going to look into some of the resources mentioned here like taxr.ai for getting clearer explanations of tax forms. The IRS publications are so hard to understand sometimes, and it sounds like there are better ways to get plain English explanations. Thanks everyone for sharing your experiences!

Has anyone considered just adding another partner with a very small ownership percentage (like 1%) just to maintain the partnership status? I ended up giving my spouse a 1% interest in my LP to avoid this whole disregarded entity issue.

This is such a helpful thread! I'm dealing with a similar situation where my LP ended up with just one member after my business partner withdrew last year. One thing I haven't seen mentioned yet is the potential impact on your LP's operating agreement. Even if you treat it as disregarded for tax purposes, you might want to update your partnership agreement to reflect the current ownership structure, especially if you're planning to add partners in the future. Also, regarding the EIN issue - I kept my LP's EIN active by filing a final Form 1065 for the last year it operated as a true partnership, then included a statement explaining the change to single-member status. My CPA said this creates a clear paper trail for the IRS and helps avoid any future questions about why returns stopped being filed under that EIN. Has anyone here had experience with bringing new partners into an LP that was previously treated as disregarded? I'm curious if there are any special considerations when you transition back to partnership status.

One thing to understand about VTSAX and similar index funds is that capital gains distributions can vary significantly year to year. In 2022, VTSAX had higher-than-usual capital gains distributions despite being an index fund because of significant outflows requiring the fund to sell securities. I recommend checking the fund's website near the end of each year when they usually publish distribution estimates. Vanguard, Fidelity, and Schwab all provide estimated capital gains distribution schedules around November.

Does anyone know how the Vanguard ETF version (VTI) compares to VTSAX in terms of capital gains distributions? I'm considering switching from the mutual fund to the ETF for potentially better tax efficiency.