Has anyone used any particular tax software that handles this 941 deduction well for small business owners? I tried using TurboTax Small Business last year and it was super confusing with my payroll taxes.

Great question! I just went through this exact situation with my LLC last year. Yes, the employer portion of your 941 payroll taxes is definitely deductible on Schedule C. Here's what I learned: You can deduct the employer's share of Social Security (6.2%), Medicare (1.45%), FUTA, and any state unemployment taxes you paid. For your $2,100 in quarterly taxes, a good chunk of that should be deductible - just make sure you're only counting the employer portion, not the employee withholdings. I put mine on Line 23 "Taxes and licenses" on Schedule C. One thing that helped me was creating a simple spreadsheet to track the employer vs employee portions each quarter, since the 941 form shows everything together. Your payroll service should be able to give you a breakdown if you don't already have one. Also, don't forget about any state payroll taxes you paid - those are deductible too if they're the employer portion. Just keep good records of all your payroll tax payments and forms in case the IRS ever asks for documentation.

Anyone know if this affects social security and medicare withholding too? Or is that the same regardless of which state you're in?

This is a frustrating situation but definitely fixable! I went through something similar when my company incorrectly classified me as a California resident while I was actually living in Nevada. A few key things to prioritize: 1. **Document everything** - Save all your pay stubs showing the NY withholding, any emails with payroll, and proof of your Tennessee residency (lease, utility bills, etc.) 2. **Push for W-2c forms** - Don't let payroll just fix it going forward. You need corrected W-2c forms for 2022 and 2023 to properly file amended returns and get your money back. 3. **File non-resident returns** - You'll need to file NY non-resident returns showing $0 NY income to get refunds of the withheld taxes. Since Tennessee has no state income tax on wages, you should get back everything that was withheld. 4. **Check your federal filing status** - The fact that they also changed you from Married to Single could have affected your federal taxes too. Make sure that gets corrected on your W-2c forms. The good news is Tennessee's lack of state income tax makes this cleaner than it could be. You're not dealing with reciprocity agreements or partial credits between states. Just document everything and be persistent with payroll - they created this mess and need to fix it properly.

Not sure if this helps, but I bought a patent last year and my tax guy told me the key thing is whether you aquired any "goodwill" along with it. Since my patent was for a completely different industry than my business operates in, it was clearly just an asset purchase and not part of aquiring any business operations. I was able to amortize it over its useful life (10 yrs in my case) instead of the 15-year 197 schedule.

Based on everything discussed here, it really sounds like your patent purchase wouldn't qualify as a Section 197 intangible. The fact that you bought it as part of a liquidation sale with no transfer of business operations, goodwill, or customer relationships is key. One thing I'd add is to make sure you have proper documentation of the patent's remaining useful life for your amortization calculation. Since you mentioned it has 12 years left, you'll want to support that with the original patent filing date and term. The IRS sometimes challenges useful life determinations, so having the USPTO records showing the exact expiration date will be helpful. Also, since you paid $87,000 for the patent "along with some other property," make sure you properly allocate the purchase price between the patent and the other assets. You can only amortize the portion specifically attributable to the patent itself.

Anyone have experience with using TurboTax for reporting a small 1099-MISC like this? I'm wondering if it's worth paying for the upgraded version just for one small form.

Just want to add that you should also check if the company issued any corrected versions of the 1099-MISC. Sometimes companies realize they made errors and send out corrected forms (1099-MISC-C) but people miss them or they get lost in the mail. Since you found the payment in your bank statements, you're all set to report it normally. But if you're still unsure about anything, the IRS has a pretty good FAQ section on their website about 1099-MISC reporting that covers most common scenarios like delayed payments and corrections. Way easier than trying to get them on the phone during tax season!

Question about the property value - has anyone considered the potential for further appreciation during the 2-year rental period? If the property is already worth $1.8M and continues to appreciate while being rented, wouldn't that affect the calculations?

Great discussion everyone! I'm dealing with a similar situation and wanted to add a few considerations that might be helpful. One thing I learned from my tax attorney is that the "step transaction doctrine" mentioned earlier can be tricky with family arrangements. The IRS might look at the entire sequence - converting to rental, renting to family, then selling and exchanging - as one integrated transaction rather than separate steps. To avoid this, your parents should establish clear business motivations for each step. Also, regarding the depreciation point that Carmen mentioned - this is crucial. Once your parents start renting the property, they'll be required to take depreciation deductions (even if they don't claim them, the IRS assumes they did). This creates "depreciation recapture" that must be paid even in a 1031 exchange - it can't be deferred like capital gains. For the gift situation, consider having your parents charge you market rent but then help you in other ways that are clearly separate from the rental relationship - maybe contributing to a down payment fund for your future home purchase, but do this well before or after the rental period to avoid any appearance of connection. Finally, make sure to document everything meticulously. Keep records of comparable rents in the area, maintain the property like any other rental (repairs, maintenance, etc.), and treat it as a true business relationship even though it's family.