Yes, the QBI deduction could potentially apply here. If your LLC is making a profit from the construction and sale, and it qualifies as a business rather than an investment activity, you might be eligible for that 20% deduction. However, there are income thresholds and other limitations.

You're technically correct that single-member LLCs can use the owner's SSN for tax purposes, but getting an EIN is still highly recommended and it's free from the IRS website. Here's why: most banks require an EIN to open business accounts, many contractors and suppliers prefer it for their records, and it helps establish that separation between personal and business activities. For the business vs. hobby documentation, I kept detailed records showing profit motive and business-like operations: a written business plan (even a simple one), time logs of hours spent on the project, records of research into market conditions and comparable sales, professional contractor agreements, and evidence of marketing efforts when selling. I also maintained separate business banking and accounting records from day one. The key is demonstrating that you approached this as a legitimate business venture seeking profit, not just a personal project or hobby.

Great questions! While you technically CAN use your SSN for a single-member LLC, getting an EIN is still highly recommended for several reasons. First, it adds another layer of separation between your personal and business activities. Second, most banks require an EIN to open business accounts. Third, you'll need it anyway if you ever add partners or elect different tax treatment. It's free and takes about 10 minutes online, so there's really no downside. For the business vs. hobby documentation, I kept detailed records of: time logs showing hours spent on the project (even planning and research time), all business-related communications and meetings, evidence of profit motive (market research, comparable sales data), business plans and budgets, and separate business banking records. I also documented my construction experience and any relevant education or training. The key is showing you approached this professionally with genuine profit intent, not just as a casual side project.

Thanks for mentioning this! My company does offer an HSA but I never signed up because I didn't really understand it. Would I still be able to open and fund one for this year's expenses, or is it too late?

For this year's expenses, it's unfortunately too late to use an HSA or FSA since those need to be set up during your open enrollment period. But you should definitely look into setting one up during your next open enrollment for future medical expenses. HSAs are particularly valuable because they have a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. Plus, unlike FSAs, HSAs don't have a "use it or lose it" rule - the money stays in your account year after year.

I tried claiming medical mileage last year and my tax software flagged it as an "audit risk" item. Is there some specific way we're supposed to document this? Do we need anything beyond a personal log of trips?

For medical mileage documentation, the IRS doesn't require anything super complex, but you do need to keep a written record. A simple log showing the date, destination (doctor's office, pharmacy, etc.), purpose of the trip, and miles driven is sufficient. You can use a notebook, smartphone app, or even a spreadsheet. The key is being consistent and contemporaneous - don't try to recreate months of trips from memory at tax time. Many people use apps like MileIQ or even just the notes app on their phone to track this. Your tax software flagging it as "audit risk" is probably just because it's a commonly overlooked deduction that sometimes gets inflated. As long as you have proper documentation and reasonable mileage amounts, you should be fine. The IRS expects people to claim legitimate medical travel expenses.

Thanks, this is super helpful! Do you know if there's any way to filter or screen investments specifically to avoid ones that issue K-1s? I'm thinking about making some new investments soon but honestly, the K-1 hassle makes me want to just avoid any that will generate more tax forms.

Absolutely! Many brokerages actually have screening tools where you can filter out MLPs and other partnership investments if you want to avoid K-1s. For example, in Fidelity's stock screener you can exclude MLPs specifically. For ETFs that give exposure to sectors that typically involve K-1s (like energy infrastructure), look for ones labeled as "C-corporation" structure or that specifically advertise "no K-1s" as a feature. Examples include some energy infrastructure ETFs that are structured to provide 1099s instead of K-1s. These funds often mention this benefit in their marketing materials since many investors specifically seek to avoid K-1 complications. Just be aware that different tax treatment might impact overall returns compared to direct MLP investments.

Filing an extension is definitely easier than amending a return later. An extension is very simple to file (Form 4868) and gives you until October 15 to submit your final return. Just remember that an extension gives you more time to file, not more time to pay. You'll need to estimate what you owe and pay that amount by the April deadline to avoid penalties. If you're expecting K-1 income, make a reasonable estimate based on previous years or any information you have about the current year. It's better to slightly overpay and get a refund later than underpay and owe penalties.

Definitely go with the extension if you know a K-1 is coming late! I learned this the hard way after amending returns multiple times. Filing an extension is literally a 5-minute online process, while amending a return can take weeks to prepare and months to process. One thing to add to what Natalie said - if you've received K-1s from the same partnerships in previous years, you can use that income as a baseline for estimating your payment. Most partnerships have relatively consistent distributions year over year, so last year's K-1 income is usually a decent approximation for your extension payment calculation. @f014fc63b237 is spot on about the payment timing - the extension only extends your filing deadline, not your payment deadline.

Wouldn't the approach of not reporting as a guaranteed payment cause other issues though? Like wouldn't it mess up the partner's self-employment tax calculation? The guaranteed payment affects both SE tax and QBI.

You're absolutely right - that workaround would indeed cause SE tax issues by understating the guaranteed payments subject to self-employment tax. I shouldn't have suggested that approach. The correct method is definitely to report the health insurance as a guaranteed payment on the 1065 and then override the QBI calculation on the 1040 to prevent the double reduction. It's frustrating that we have to manually fix software issues, but at least it's a straightforward override.