Side note: Even if your CPA won't budge, YOU are the one signing your tax return, not them. The signature line says "Under penalties of perjury, I declare..." so ultimately it's your responsibility. If you have reasonable basis for your position (which it sounds like you do), you can override your CPA. They work for you, not the other way around. Either they file it the way you want with proper support, or you find someone who will. Just document your reasoning and keep support for your position in case of audit. Tax positions don't have to be 100% certain to be valid - they just need substantial authority.

Miguel, I completely understand your frustration! I went through something very similar last year with my beach condo rental. My CPA was also insisting on Schedule C treatment, but after doing my own research and getting a second opinion, I was able to demonstrate that Schedule E was the correct classification for my situation. The "substantial services" test is really the key here. From what you've described - providing furniture, parking, and basic essentials - that sounds more like typical rental property amenities rather than hotel-like services that would trigger Schedule C treatment. I'd strongly recommend getting that second opinion from a CPA who specializes in rental properties. Bring documentation of exactly what services you provide versus what you don't (no daily cleaning, no meals, no concierge services, etc.). The difference between paying SE tax and not paying it is significant enough to justify the cost of a consultation. Also keep in mind that if you do end up needing to switch CPAs over this issue, it's not necessarily a reflection on their overall competence - some practitioners are just more conservative or less familiar with the nuances of short-term rental taxation. The important thing is getting the classification right based on the actual facts of your situation.

Just a word of caution - if your wife is on F1 and working on campus, her employer might incorrectly continue to treat her as FICA-exempt even after she becomes a resident for tax purposes. Many university payroll systems automatically exempt all F1 students from FICA without checking their 5-year exemption status. If this happens and you know she should be paying FICA (either due to the MFJ election or because she's passed the 5-year substantial presence exemption), you might need to file Form 843 to pay those taxes separately. Otherwise, you could face penalties later if the IRS catches this discrepancy during an audit.

This is a great discussion with lots of helpful insights! I wanted to add one more consideration that hasn't been mentioned yet. If your wife does end up being considered a resident alien (either through the substantial presence test as Javier mentioned, or through the MFJ election), make sure to also consider the impact on any tax treaty benefits she might currently be claiming. Many tax treaties have provisions that exempt students from US tax on certain types of income (like fellowship or scholarship income), but these benefits are typically only available to nonresident aliens. Once she becomes a resident for tax purposes, she may lose access to these treaty benefits. This could be particularly important if she receives any scholarship money beyond tuition and required fees, as that income might become taxable when she transitions to resident status. You'll want to factor this into your overall calculation of whether MFJ makes financial sense. Also, don't forget that if you do make the MFJ election, you'll need to continue making it every year until you formally revoke it or her status changes naturally. It's not a year-by-year choice once you start.

Has anyone actually been audited over this? I've been deducting my gym membership for years as a 1099 dance instructor and never had a problem. I figure as long as it's not a crazy amount and I'm not claiming other suspicious deductions, the IRS has bigger fish to fry.

Thanks for sharing your experience, Jasmine - that's exactly the kind of real-world outcome people need to hear about. For anyone considering this deduction, it's worth noting that even if you have a legitimate business case, you need to be prepared to defend it with solid documentation if audited. The fact that fitness is required for your job doesn't automatically make gym memberships deductible - the IRS still applies the "personal benefit" test pretty strictly. If you do decide to take this deduction, I'd recommend: 1) Keep a detailed log showing gym usage specifically for work-related fitness (not general health) 2) Document any specific fitness requirements in your referee contracts 3) Consider whether you'd have the membership anyway for personal reasons 4) Maybe consult with a tax professional if the deduction is substantial The potential tax savings might not be worth the audit risk and hassle for everyone, especially if it's a borderline case.

Has anyone actually been audited over this specific issue? I'm wondering if the IRS even cares which schedule we use as long as we're accurately reporting all income and paying the appropriate taxes? Seems like so much anxiety over something that might not matter to them...

I've been dealing with this exact same confusion for my vacation rental property! After reading through all these responses, I'm leaning toward trying one of the tools mentioned here to get some clarity. The thing that's really frustrating me is that I've talked to two different CPAs and gotten completely opposite advice. The first one said Schedule E because "it's just a rental property," but the second one said Schedule C because I provide amenities and spend significant time managing it. What really concerns me after reading Sadie's comment is the self-employment tax difference. That 15.3% extra on Schedule C income is huge - for someone like Heather with $38,000 in rental income, that could be an extra $5,814 in taxes! But if you're supposed to file Schedule C and don't, the penalties could be even worse. I think I'm going to try reaching out to the IRS directly using that Claimyr service Muhammad mentioned. Getting it straight from the source seems like the only way to avoid all this conflicting advice from tax professionals who can't seem to agree on basic interpretations of the same IRS publications. Has anyone else noticed that this whole debate seems to have gotten more confusing in recent years? I swear when I first started renting my place out 3 years ago, everyone just used Schedule E without question.

This is frustrating but unfortunately pretty common right now. The IRS has been having major processing issues this year. A few things to check: 1. Log into your tax software account and download/view your actual filed return (not just the transcript). Confirm line 4 shows "Head of Household" is checked. 2. If your filed return shows HOH but the transcript shows Single, this is definitely an IRS processing error that needs to be corrected. 3. You have two options: call the IRS directly (good luck with that) or file Form 1040X to amend. The amendment route is more reliable but takes longer. 4. Make sure you have documentation ready - school records, medical records, anything showing your son lived with you for more than half the year. The difference in refund between Single and HOH can be substantial, so it's definitely worth fighting. Don't let them keep your money! Document everything and keep copies of all correspondence.

This exact thing happened to me two years ago! Filed as Head of Household, got my confirmation, then my transcript showed Single and my refund was about $1,200 less than expected. After weeks of trying to call the IRS (literally got hung up on 15+ times), I finally got through to someone who explained that their system had flagged my dependent verification and automatically changed my status. Here's what worked for me: I gathered ALL my documentation - school enrollment records, pediatrician records showing my address, daycare receipts, basically anything proving my son lived with me more than half the year. Then I filed Form 1040X with a detailed letter explaining the situation and attached all the supporting docs. It took about 16 weeks total, but I eventually got the full difference plus interest. The key is being thorough with your documentation and keeping copies of everything you send. Also, track your amended return online using "Where's My Amended Return" on the IRS website - it actually updates more reliably than calling. Don't give up! You're entitled to that money if you legitimately qualify for HOH. The IRS processing errors this year have been absolutely ridiculous.