So here's a weird question... my bedroom is huge (like 400 sq ft) and I have a clearly defined office area in one corner with my desk, file cabinet, printer, etc that I use ONLY for my business. It's about 80 sq ft. The rest of the room is normal bedroom stuff. Can I claim that specific area, or does the fact that the rest of the room is a bedroom disqualify the whole thing?

Great question! I went through this exact same situation when I was doing freelance graphic design from my parents' house. The good news is that you absolutely CAN claim the simplified home office deduction even when you're not paying rent or mortgage. The IRS Publication 587 is super clear on this - the simplified method ($5 per square foot up to 300 sq ft) is based on exclusive business use of the space, not on whether you're personally responsible for housing costs. As long as your basement corner is used ONLY for business and it's your principal place of business, you qualify. This applies to military housing too. I have a buddy who's stationed overseas and runs a small e-commerce business from his base housing - he takes the simplified deduction without any issues. Just make sure you document everything well (photos of the space, measurements, records showing it's business-only) in case you ever get audited. The exclusive use test is what matters, not who's paying the bills!

Speaking from experience running my S Corp for 10 years, the key here is understanding the DUAL roles you have in your S Corp: 1. As an EMPLOYEE receiving a salary (reported on W-2) 2. As an OWNER receiving distributions of profit (reported on K-1) Your accountant is right that the $40k salary doesn't create a business loss on the 1120-S. BUT, that money had to come from somewhere! In your example, since there's no revenue, the $40k is effectively coming from your beginning cash balance, which represents retained earnings from previous years. This is why the S Corp basis tracking is so important - it follows the money through the business and to the shareholders correctly.

This is a great example of why S Corp taxation can be so confusing! Your accountant is absolutely correct, and I think the confusion comes from mixing up cash flow with tax reporting. Here's what's actually happening in your scenario: **Cash Flow Reality:** Your business started with $100k, paid out $40k in salary, and ended with $60k cash. The $40k definitely left the business account. **Tax Reporting Reality:** On Form 1120-S, that $40k salary is NOT treated as a business expense that reduces income. Instead, it's reported on your W-2 as wages. The business also pays employer payroll taxes on that salary. The reason this makes sense is that S Corps have a unique "dual taxation" structure. The salary portion gets taxed as regular W-2 income (with payroll taxes), while business profits flow through to your personal return via Schedule K-1. Think of it this way: if S Corp salaries reduced business income dollar-for-dollar, you could theoretically pay yourself a huge salary and create artificial business losses. The IRS prevents this by requiring "reasonable compensation" as salary (subject to payroll taxes) and treating the rest as distributions. Your $100k starting balance represents retained earnings from previous profitable years. When you pay salary from that money, you're essentially converting prior-year profits into current-year wages - which changes how it gets taxed but doesn't create a new business loss.

This is such a common source of confusion! I went through the exact same situation with our revocable living trust and rental property last year. The good news is that for most married couples with a standard revocable living trust, you're dealing with a grantor trust under IRC Section 671, which means no Form 1041 is required. You'll report the rental income directly on Schedule E of your Form 1040, just as if the property wasn't in the trust at all. The fact that the property was originally your wife's separate property before marriage doesn't necessarily change the tax reporting if you're filing jointly and the trust doesn't have specific separate property provisions. Most living trusts treat all assets as joint property for tax purposes once they're transferred in. However, I'd echo what others have said about checking your specific trust language. Look for any sections about "separate property character" or "commingling of assets" - these could affect how you handle the income reporting. One practical tip: when you report the rental income on Schedule E, you can list the property owner as either your names or the trust name followed by your SSNs. The IRS just needs to be able to trace the income back to you as the grantors. If you're still uncertain after reviewing your trust document, consider getting a quick consultation with a tax professional who specializes in trusts - it's usually worth the peace of mind for these situations!

I've been following this thread with great interest as I'm dealing with a very similar situation with our family trust and rental properties. One aspect I haven't seen mentioned yet is the importance of consistent reporting year over year. When we first set up our revocable living trust and transferred our rental property into it, our CPA emphasized that once you establish how you're reporting the income (whether on Schedule E with your SSN or with a trust EIN), you should maintain that same approach consistently unless there's a significant change in the trust structure. The IRS can get suspicious if you're switching back and forth between reporting methods without clear justification. So if you decide to report the rental income on Schedule E using your SSNs this year (which sounds like the right approach for a grantor trust), plan to continue doing it that way in future years. Also, don't forget to update your property insurance and any property management agreements to reflect the trust as the owner, even though you're reporting the income on your personal return. This helps maintain the legal separation between personal and trust assets, which can be important for liability protection purposes. The documentation trail is just as important as getting the tax reporting right!

idk why everyone makes this so complicated lol just use taxr.ai - it literally tells you everything you need to know about filing old returns. Best $5 I ever spent no cap

Just wanted to add that you should also check if you had any stimulus payments you might have missed in 2021 - those Recovery Rebate Credits can be claimed on your return too! I filed a late 2021 return last year and got an extra $1400 I forgot about. Also make sure to use certified mail when you send it in so you have proof of delivery 📮

Friendly reminder that if you owe taxes for other years, the IRS will automatically apply any refund from 2020 to those outstanding balances. So if you're expecting a refund but have tax debt from other years, don't count on seeing that money.

Just want to echo what others have said about the May 17, 2024 deadline - you really need to act fast! Since you can't e-file 2020 returns anymore, make sure you're using the actual 2020 tax forms (not 2024 forms) which you can download from the IRS website under "Prior Year Products." One thing I haven't seen mentioned yet - if you had health insurance through the marketplace in 2020, make sure you have your 1095-A form to reconcile any advance premium tax credits. Missing this could delay your refund processing significantly. Also, double-check that you're mailing to the correct IRS processing center for your state. The address for paper returns is different from where you'd normally send correspondence, and using the wrong address could cause delays that might push you past the deadline. Good luck getting your refund!