Don't forget about the home office deduction if you're working from home! Since you're using that laptop and equipment in a home office, you might qualify for the simplified home office deduction of $5 per square foot (up to 300 sq ft) if you have a dedicated space used exclusively for business. Between equipment deductions and home office, you can offset a good chunk of that small income and potentially create a loss to offset your W2 income.

Great question about Section 179! I went through something similar with my freelance photography business. Here's what I learned: First, you absolutely can deduct business equipment on Schedule C even if your income is low, but documentation is key. For Section 179, you need >50% business use to qualify for immediate deduction. If you don't meet that threshold, regular depreciation over 5 years (for computers/phones) is still available. The fact that you only made $375 from one gig but invested $4000+ in equipment isn't automatically a problem - many legitimate businesses have startup costs that exceed initial income. What matters is showing genuine profit motive and business necessity. A few practical tips: - Keep detailed logs of business vs personal use percentages - Document why you needed this specific equipment for your work - Save all purchase receipts and business communications - Consider combining all your similar freelance activities (Fiverr, Upwork, etc.) on one Schedule C if they're related services The business loss you create can offset your W2 income, which is completely legal. Just be prepared to justify the business purpose if ever questioned. Many successful businesses operate at a loss initially while building up their client base and investing in necessary equipment.

My accountant told me most software engineers aren't SSTBs unless your primarily doing consulting. He said to track hours for each type of work. Anybody using Quickbooks for this? How do you categorize your services?

I've been dealing with this exact issue for the past two years with my software engineering business. What really helped me was creating a simple tracking system where I log my activities daily - either "Development" (coding, testing, implementation) or "Consulting" (meetings, architecture discussions, recommendations without implementation). The IRS looks at the substance of what you're actually doing, not just your job title. If you're spending most of your time writing code and building solutions, you're likely in the clear for QBI. But if you're mostly in meetings giving advice without actually creating the software yourself, that could be problematic. One thing that caught me off guard - even project management and client communication can blur the lines. I now make sure my contracts explicitly state that I'm being hired to "develop and implement software solutions" rather than just "provide software consulting services." The language matters more than you'd think. Have you considered restructuring how you bill clients? Breaking out development work separately from any advisory work could help establish a clear pattern that most of your business is non-SSTB.

I think there's a fundamental misunderstanding in the original post. An inherited IRA and a partnership interest (which generates a K-1) are completely different things. 1. Inherited IRA: You receive distributions reported on a 1099-R form 2. Partnership interest: You receive a Schedule K-1 (Form 1065) The "at risk" rules only apply to the partnership interest, not the IRA. Is it possible you're involved in a partnership that owns an IRA as one of its assets? That would be unusual, but might explain the confusion.

Great to see this got sorted out! Just wanted to add one important point for anyone else dealing with inherited partnership interests: make sure you get a stepped-up basis for tax purposes. When you inherit a partnership interest, your basis is typically "stepped up" to the fair market value at the date of death (that $15,000 you mentioned). This is different from your "at risk" amount, but it's crucial for calculating gains/losses if you ever sell the partnership interest. Also, since you inherited both an IRA and partnership interest, you might want to consult a tax professional to make sure you're handling the required minimum distributions from the inherited IRA correctly - those have their own complex rules and deadlines that are completely separate from your partnership tax reporting. Glad the community could help untangle this confusion!

Not sure if you're aware, but this is actually a classic dark pattern that TurboTax has been doing for YEARS. They've even been sued over it. They intentionally advertise free filing but design the system to force almost everyone into paid upgrades. Simple things like student loan interest (which is super common) trigger their "you need to upgrade" messages.

This is exactly why I switched to doing my own taxes with the IRS Free File Fillable Forms a couple years ago. Yes, it's more work and you need to be comfortable reading tax instructions, but at least there are no surprise upgrade fees or dark patterns. For your situation with just a W-2, student loan interest, and basic savings interest, you'd probably only need Form 1040 and maybe Form 8917 for the student loan interest deduction. The IRS provides all the forms and instructions for free, and you can e-file directly through their system. I get that it's intimidating at first, but honestly once you do it once, simple tax situations like yours are pretty straightforward. Plus you learn way more about your taxes than you would clicking through TurboTax's guided questions. Just another option to consider if you want to avoid the upgrade trap entirely!

Just wondering has anyone actually called the IRS directly about this? When my brother got divorced, he contacted the IRS and requested what's called "innocent spouse relief" which can separate the tax liability in certain situations.

One thing that hasn't been mentioned yet is that you can actually request an IRS Form 8857 (Request for Innocent Spouse Relief) even during divorce proceedings if you believe your spouse's actions or errors caused the majority of the tax liability. Since your ex was working two jobs without proper withholding coordination, this could potentially qualify as "erroneous items" that you weren't aware would cause such a large tax bill. The IRS will review whether it would be unfair to hold you liable for tax resulting from your spouse's income reporting or withholding decisions. Even if innocent spouse relief doesn't fully apply, the analysis the IRS does for Form 8857 can provide documentation showing which spouse's income and withholding decisions contributed most to the joint liability. This official IRS determination could be very valuable in your divorce settlement negotiations, as it's an objective third-party assessment rather than just dueling calculations from attorneys. Worth discussing with a tax attorney who specializes in innocent spouse cases - many offer free consultations for divorce situations.