Something nobody has mentioned yet - make sure you have a clear business plan and documentation showing your intent to make a profit! If you claim business losses for too many years, the IRS might reclassify your business as a hobby, which would disallow your deductions. This isn't an issue in your first year at all, but keep good records showing efforts to generate revenue, marketing attempts, business development, etc. The IRS generally looks for profitability in 3 out of 5 years for most businesses (5 out of 7 for horse-related businesses, oddly enough).

I'm dealing with a similar situation with my new consulting LLC! Reading through all these responses has been incredibly helpful. One thing I want to add from my recent experience - when you do file your Schedule C with losses, make sure you keep EXCELLENT records of everything. I just went through this process and learned that the IRS is particularly interested in seeing that new businesses are legitimate profit-seeking ventures, not hobbies. Beyond just keeping receipts, document things like: - Your business plan and revenue projections - Marketing efforts (even if unsuccessful initially) - Time logs showing hours worked on the business - Any client outreach or networking activities Even though you're totally allowed to claim losses in year one (despite what that H&R Block preparer told you!), having this documentation ready shows the IRS you're running a real business. It also helps if you ever get questioned about the hobby loss rules that others mentioned. The equipment expenses you mentioned should definitely be deductible - either through Section 179 immediate expensing or regular depreciation. Don't let anyone tell you otherwise!

As a CPA who works with family businesses, I want to emphasize the importance of getting your business structure clarified first. Since you mentioned you have an LLC in California, you need to determine how your LLC is taxed - as a sole proprietorship (default for single-member), partnership (if multi-member), S-Corp, or C-Corp election. This matters because the payroll tax treatment is different for each structure. If your LLC is taxed as a sole proprietorship or partnership, you're generally exempt from FICA taxes when hiring your own children under 18. However, if you've elected S-Corp or C-Corp taxation, you'll need to pay FICA taxes on their wages. Also, California has specific requirements for employing minors, even in family businesses. You'll need to obtain a permit to employ minors from the California Division of Labor Standards Enforcement, and there are restrictions on hours and types of work for children under 12. Make sure you understand these state-specific requirements in addition to federal tax considerations. The strategy can absolutely work, but getting the structure right from the beginning will save you headaches later. Consider consulting with a local CPA who understands both the tax implications and California labor law requirements.

This thread has been incredibly helpful! I'm in a very similar situation with my 8-year-old who already helps with basic tasks around my home-based marketing business. One thing I haven't seen addressed much is the psychological impact on kids. Has anyone found that paying their children for work changed their motivation or attitude toward helping out in general? I'm excited about the financial education aspect, but I'm also wondering about potential downsides. Also, for those who've gone through the California permit process that Keisha mentioned, did you find any resources that made the application easier? The Division of Labor Standards Enforcement website seems pretty dense, and I want to make sure I don't miss anything important. Finally, I'm curious about record-keeping software. Are you all just using basic spreadsheets, or has anyone found payroll software that works well for this type of family employment situation? It seems like having everything automated and properly documented from the start would be worth the investment.

Don't forget about state-specific requirements! I'm in California and there are additional state payroll tax requirements for S Corps that weren't obvious when I first started. Each state has different rules about unemployment insurance, disability insurance, etc. Make sure whatever payroll system you choose handles your specific state's requirements.

This is exactly the situation I went through 8 months ago when I converted to S Corp! The learning curve is steep but totally manageable once you get the basics down. A few key points that helped me: 1. **Payroll frequency matters**: Don't wait until year-end - I do monthly payroll which keeps things simple and looks legitimate to the IRS. Set a consistent schedule and stick to it. 2. **Reasonable salary research**: For software development, I used sites like Glassdoor, PayScale, and Bureau of Labor Statistics to document what similar roles pay in my area. I keep this documentation in my tax files as backup. 3. **Start simple**: You don't need an expensive payroll service right away. I started with a basic one that handles the 941 quarterly filings and W-2s automatically. The peace of mind is worth the monthly cost. 4. **State requirements vary**: Check your state's specific rules - some have additional requirements beyond federal. I almost missed registering for state unemployment insurance in my state. The tax savings definitely outweigh the complexity once you're set up. Just budget for the payroll service cost when calculating your overall S Corp savings. Feel free to ask if you have specific questions about any part of the process!

Dude, I've been writing off my entire internet bill for years as a 1099 worker and never had an issue. As long as your primary use is for work, you're good. Don't overthink this... the IRS isn't going to come after you for a few hundred bucks in internet bills lol.

As a 1099 contractor myself, I can confirm that both the hotspot device and monthly data plan are deductible business expenses. The key is proper documentation and accurate business use percentage calculation. For your situation, since you're using the hotspot exclusively for work (8+ hours daily), you should be able to deduct 100% of both costs. However, I'd recommend keeping detailed records showing: 1. Purchase receipt for the hotspot device 2. All monthly service bills 3. A simple log documenting work hours/usage for at least one sample month 4. Any emails or documentation from your employer about remote work requirements The expensive data plan you mentioned is actually a positive for your deduction - it shows the business necessity since regular plans wouldn't meet your work requirements. Just make sure to save everything and be prepared to justify the business use percentage if ever questioned. Don't let fear stop you from claiming legitimate business expenses - just document everything properly!

Has anyone here used the free IRS Volunteer Income Tax Assistance program for help with partnership returns? My local place said they don't do business returns but then another volunteer said they sometimes help with simple partnerships.

Daniel, you've gotten some good advice here already! Just wanted to add a couple of practical tips from when I helped my sister with her dissolved LLC filing last year. Make sure you're consistent with how you report the dissolution date throughout all your forms - use the same date on Form 1065 and all the K-1s. The IRS gets picky about date inconsistencies. Also, since you mentioned you had cloud servers and software subscriptions, double-check that you've accounted for any prepaid expenses that might need to be prorated. If you paid for annual subscriptions but only used them part of the year before dissolving, you might be able to deduct the full amount since the business ceased operations. One last thing - keep really good records of all this. Even though the LLC is dissolved, the IRS can still come back with questions for up to 3 years, and partnership audits can be particularly messy if your documentation isn't solid.