Just FYI - I work at a tax firm and we're seeing TONS of errors with these 1099-Ks from payment apps. Even if u don't meet the threshold, some companies are sending them anyway. And they're including personal transfers as if they were income. Whoever designed these reporting systems clearly didn't think about how ppl actually use payment apps irl. My advice is to keep rly good records of ALL ur transfers and what they were for. Take screenshots of convos showing "here's my half of dinner" etc.

This is really helpful information everyone! I've been dealing with a similar situation with my adult kids - I send them money for textbooks, groceries, etc. and they pay me back for things like car insurance. Probably $400-500/month back and forth. Based on what everyone's shared, it sounds like I don't need to worry for 2024 taxes since the threshold is still $20k AND 200 transactions. But I'm definitely going to start keeping better records just in case. The screenshot idea is brilliant - I usually just send money with a pizza emoji or whatever, but adding actual descriptions makes way more sense. One question though - if these payment apps are making so many mistakes with the 1099-Ks, shouldn't there be some kind of penalty for them when they report personal transfers as income? Seems like they're creating a lot of unnecessary work for taxpayers and the IRS.

Just want to add that you should also keep detailed records of any expenses related to preparing the books for sale - things like cleaning, minor repairs, or professional grading if you had any done. These can be deducted as selling expenses along with the auction house commission, which will reduce your taxable gain. Also, if any of the books were particularly valuable (say over $5,000 each), you might want to consider getting a formal appraisal even now for your records. While it won't establish the stepped-up basis for tax purposes, it can help document the reasonableness of your basis calculations if the IRS ever questions them. Many rare book appraisers can provide retroactive valuations based on market conditions at the time of inheritance. One more thing - make sure to keep copies of the auction catalogs and any condition reports the auction house prepared. These documents can be invaluable for supporting your tax reporting and demonstrating that you've made good faith efforts to properly value the inherited items.

Great advice from everyone here! I went through something similar when I sold my grandmother's coin collection through Heritage Auctions. One thing I learned that might help - if you're having trouble establishing the stepped-up basis value, check if the auction house has any records of similar items they sold around the time you inherited the books. Many auction houses keep detailed sales databases and can provide comparables if you explain it's for tax purposes. Also, regarding the 1099-K threshold - even if you don't receive one, the IRS can still see payment processor records if they audit you, so definitely report everything. I made the mistake of only reporting what was on my 1099 forms my first year dealing with auction sales and got a notice later when they cross-referenced with payment data. One last tip: if you plan to sell more books in the future, consider spreading sales across multiple years to manage your tax bracket, especially since collectibles are taxed at that higher 28% rate. Sometimes timing can save you quite a bit in taxes!

Here's a quick cheat sheet for Form 5329 and Roth distributions that might help: 1. Qualified Roth distribution (over 59½ + 5-year rule met) = No Form 5329 needed 2. Early distribution with exception (education, first-time home buyer, etc.) = Form 5329 needed to claim exception 3. Early distribution with no exception = Form 5329 needed to calculate 10% penalty 4. Contribution issues (excess contributions) = Different part of Form 5329 Hope this helps!

Don't forget that you might need Form 8606 even if you don't need Form 5329! Form 8606 is used to track the basis in your Roth IRA and to determine how much of a distribution is taxable if it's not fully qualified.

Has anyone had issues with FreeTax USA not calculating state taxes correctly? I downloaded my return last year and when I reviewed it months later, I noticed some discrepancies with my state calculation. Customer service was no help.

Great question about local backups! Yes, FreeTax USA definitely allows you to download your completed return as a PDF. Once you finish your return, look for the "Print/Download" or "View/Print Return" section - it should be pretty prominent in your account dashboard. One thing I learned the hard way is to download both the PDF version AND the raw data file (usually has a .tax extension with the year). The PDF is great for viewing and printing, but the data file is what you'll need if you ever want to import your information into next year's return or transfer to different software. I totally get your paranoia about cloud storage - I do the same thing after losing some important files years ago. I keep my tax returns in multiple places: local computer, external drive, and encrypted cloud backup. Better safe than sorry, especially with something as important as tax documents!

Don't forget to track ALL your business expenses as a contractor! I do photography on the side with my regular job and the deductions make a huge difference. You can write off a portion of your home for office space, equipment, software, mileage for business travel, professional development, health insurance premiums, and retirement contributions.

Actually, business deductions for self-employment are completely separate from the standard deduction decision! Even if you take the standard deduction on your personal taxes, you still get to deduct all your legitimate business expenses on Schedule C against your 1099 income. So tracking your business expenses is definitely worth it - things like your design software subscriptions, computer equipment, portion of your home office, professional courses, etc. These reduce your self-employment income before calculating both income tax and self-employment tax, which can save you quite a bit. The key is keeping good records and making sure expenses are legitimately for your graphic design business. I use a simple spreadsheet to track everything monthly - takes maybe 30 minutes but usually saves me hundreds or even thousands come tax time.