Has anyone tried switching from TurboTax to a different tax software? I had this exact problem last year and found that H&R Block's software actually explained the earned income calculations better and showed me why my Schedule C income wasn't qualifying.

This is a really common confusion point! I went through the exact same thing last year. The key issue is that when you enter 1099-NEC income as Schedule C business income, TurboTax calculates your self-employment tax (15.3% on 92.35% of your net profit), and then it uses your NET earnings from self-employment for the earned income credits - not your gross 1099 amount. So if you received $5,000 on your 1099-NEC, after self-employment taxes and the deduction for half of SE tax, your actual "earned income" for credit purposes might only be around $4,200-$4,300. This reduced amount could be pushing you below the income thresholds needed to qualify for maximum credits. When you mistakenly entered it as W-2 income, TurboTax treated the full amount as earned income without any SE tax deductions, which is why you got different credit amounts. Make sure you're entering it correctly as Schedule C income - the credits should still apply, but the net amount after SE taxes is what counts toward your eligibility calculations.

Just a warning - I messed this up last year and got a notice from the IRS! Don't just guess at this calculation. If ur ERTC was for Q1-Q3 of 2021 and your trying to claim the FICA tip credit for all of 2021, you need to separate out Q4 (when maybe you didnt get ERTC) from the earlier quarters. The IRS specifically looks at this interaction between credits because a lot of restaurant owners accidentally double dip. Get help from someone who knows what there doing!!!

This is such a common issue for restaurant owners right now! I went through this exact same situation with my deli last year and it was incredibly confusing at first. The key thing to remember is that you can't claim the same tax dollars twice - once through ERTC and again through Form 8846. But the good news is that you don't have to give up the entire FICA tip credit, just the portion that overlaps with your ERTC refund. Here's what worked for me: I went quarter by quarter and looked at which employees received tips during each period when I also claimed ERTC. Then I calculated what portion of the ERTC was specifically for the employer FICA taxes on those tips (not regular wages). That's the amount I had to reduce my Form 8846 credit by. With $87,000 in reported tips and $42,000 in ERTC, you'll definitely want to be precise about this calculation. The IRS has been paying close attention to restaurants claiming both credits, so having detailed documentation is crucial. I'd recommend creating a spreadsheet that shows your work - it'll be invaluable if you ever get questioned about it. Don't stress too much though - once you understand the relationship between the two credits, it's just a matter of careful record-keeping and math!

Quick question - I'm using TurboTax for my business and it's asking me about bonus depreciation for my commercial property. Is there a simple way to figure this out or do I need professional help at this point?

Great breakdown from everyone here! As someone who went through this exact decision process with a similar multi-building commercial property, I want to emphasize a few key points: The depreciation recapture situation is crucial to understand upfront. When you sell in 20-30 years, you'll pay 25% tax on ALL depreciation claimed (including bonus depreciation), plus capital gains on any appreciation above your depreciated basis. This isn't necessarily bad - you're essentially getting an interest-free loan from the government - but plan for it. With your $260k W2 income, you might hit passive activity loss limitations. Since you're not a real estate professional, your ability to deduct passive losses against your active income is limited to $25k annually (and phases out completely at higher income levels). Any excess losses carry forward, but this affects the timing of your tax benefits. Consider a 1031 exchange strategy for your eventual exit. This lets you defer both capital gains AND depreciation recapture by rolling into another like-kind property. Given your 20-30 year timeline, you could potentially do multiple exchanges and never pay the recapture tax. One more thing - make sure you're allocating the purchase price correctly between land and improvements. The IRS expects this to be reasonable based on local assessments and appraisals. Too aggressive an allocation toward improvements can trigger scrutiny.

Don't overlook the cashflow implications of going all-in on retirement contributions your first year. I made this mistake with my S-Corp. I maxed out my solo 401(k) contributions in year one ($22,500 employee deferral + 25% of my salary as employer contribution), then realized I hadn't left enough operating capital for quarterly estimated taxes and business investments. I had to take a personal loan to cover obligations, which was stressful and cost me interest. Consider building a 3-6 month operating expense cushion before maxing out retirement contributions, especially if you're projecting strong growth that will require capital reinvestment.

Great thread! As someone who recently went through a similar transition from employee to S-Corp owner, I wanted to add a few practical considerations that took me by surprise: 1. **Payroll complexity**: Once you set up your S-Corp, you'll need to run actual payroll for yourself (including withholdings, quarterly 941s, etc.). This isn't just about calculating the "reasonable salary" - you need systems in place. I use Gusto, which costs about $40/month but handles all the compliance automatically. 2. **Timing of contributions**: Unlike when you were an employee with automatic 401(k) deductions, you'll need to manually coordinate your employee deferrals with your payroll. The IRS requires employee contributions to come from actual paychecks, not just business transfers. 3. **State considerations**: Depending on your state, S-Corp elections might have different implications for state taxes and retirement contributions. Some states don't recognize federal S-Corp elections, which could complicate your planning. The mega backdoor Roth strategy is definitely worth pursuing if your income supports it, but make sure you have the operational infrastructure in place first. I'd recommend starting with a basic solo 401(k) setup in year one to get comfortable with the mechanics, then upgrading to the specialized providers mentioned above once your business is more established. Also consider working with a tax professional who specializes in S-Corps - the peace of mind is worth the cost when you're dealing with both business formation and complex retirement planning simultaneously.

I was in your exact situation last year. Bought a condo, had some side income, and was trying to figure out retirement accounts. I ultimately chose to use a CPA and it was 100% worth it. They found property tax deductions I didn't know about, helped me set up a proper tracking system for my wife's freelance work, and guided me through the backdoor Roth process. The way my CPA explained it, the biggest value wasn't just for that tax year but in setting up a system that would benefit us for years to come. They helped us understand what expenses to track for the freelance work and how to structure things optimally. The peace of mind was worth the $350 I paid.

Has anyone used TurboTax for handling a new home purchase? I'm wondering if their deluxe or premier version can handle all these situations without needing a CPA.