Slightly off topic but congrats on having six figures in savings! That's impressive. Just make sure that money is working for you efficiently. At current high yield rates that's great, but you might want to look into I-bonds or CDs for portions of it if you don't need immediate access to all of it. Some CDs are paying even higher rates than savings accounts right now and the tax treatment is the same.

Great question Sofia! I went through something similar when my savings account started earning significant interest. One thing that really helped me was setting up automatic transfers to move a portion of my interest earnings into a separate "tax savings" account throughout the year. For your $5,500 projected interest, you're probably looking at owing around $1,100-1,400 in additional federal taxes depending on your bracket. I'd recommend adjusting your W4 withholding as others mentioned - it's much easier than remembering quarterly payments. Also, keep detailed records of all your interest statements throughout the year. While the bank will send you a 1099-INT, it's good to track it yourself monthly so there are no surprises. Some high-yield accounts compound daily so the actual amount can vary from projections. One last tip: if you're consistently earning this much interest, consider whether you need all $120k immediately accessible. You might want to ladder some CDs or Treasury bills for better rates while still maintaining liquidity for true emergencies.

Anyone using a CPA to handle their ERTC claims? I'm nervous about doing this myself since there's so much money at stake. My restaurant could qualify for around $150k across all quarters, and I don't want to mess anything up.

I'm in a similar boat - filed my 941X for Q2 and Q3 2020 ERTC credits back in March and still haven't heard anything. The uncertainty is killing me because I need to plan my cash flow for the rest of the year. One thing I learned is that you can request a copy of your account transcript by calling the business tax line or mailing Form 4506-T. It won't tell you exactly when you'll get paid, but it will at least confirm that the IRS has received and processed your filing. Sometimes amended returns get lost in the system, so it's worth checking. Also, make sure you kept detailed records of everything - payroll records, documentation of business impact from COVID, etc. I've heard some people are getting additional requests for documentation months after filing, which obviously delays things even more.

Something important no one has mentioned yet - the QBI deduction! If your wife stays as a sole proprietor, she can potentially take a qualified business income deduction of up to 20% of her net income from the 1099 work. This deduction is available to pass-through entities (sole props, S-corps, etc). The calculation gets complicated at higher income levels, but it's worth considering in your analysis of whether to incorporate. Sometimes the QBI benefit can outweigh the SE tax savings of an S-corp, depending on your specific numbers.

I'm dealing with a very similar situation as a freelance video editor in the film industry. One thing that really helped me was setting up quarterly estimated tax payments once I understood my new income level. The IRS has a safe harbor rule - if you pay 110% of last year's tax liability through estimated payments, you won't get hit with underpayment penalties even if you owe more at filing time. For the home office deduction, I'd strongly recommend documenting everything with photos and measurements. I use about 200 sq ft of my 2000 sq ft home exclusively for equipment storage, maintenance, and editing. That's 10% of my home, so I can deduct 10% of eligible home expenses (mortgage interest, utilities, insurance, etc.). Keep detailed records of what equipment is stored there and how you use the space. Regarding incorporation, I stayed as a sole proprietor for now because my equipment rental income is around $65k. My CPA showed me that the S-corp benefits don't really kick in until you're closer to $80-100k due to the additional costs and complexity. But definitely run your own numbers - every situation is different!

Quick question for anyone who knows - does the vehicle have to be new to qualify for deductions, or can it be used? Looking at a 3-year old SUV that would be perfect for my client visits.

As someone who works in tax preparation, I want to emphasize the importance of keeping meticulous records during your 1099 contractor period. Since you're receiving mileage reimbursements that exceed the IRS standard rate, you'll need to report the excess as taxable income. Here's what I'd recommend: Start tracking ALL your vehicle expenses immediately - gas, maintenance, insurance, registration fees, etc. Also keep a detailed mileage log separating business vs personal use. This gives you the data to calculate both methods (standard mileage vs actual expenses) and choose whichever saves you more money. One thing people often miss: when you transition to W-2 employee status mid-year, your tax situation changes completely. Employee business expenses are generally no longer deductible, so make sure you're maximizing deductions during your contractor months. Given the complexity of your situation with the mid-year status change and above-standard reimbursement rates, I'd strongly suggest consulting with a tax professional before making any major vehicle purchase decisions. The wrong choice could cost you thousands in missed deductions or unexpected tax liability.

I actually went through this exact situation with my eco-friendly t-shirt company. Ultimately, I chose to create a hybrid model - I have an LLC for the business operations, but I also created a separate nonprofit foundation that receives a portion of profits as donations. This gives me flexibility while still achieving the charitable mission. The LLC allows me to take a reasonable salary and cover all business expenses, while the nonprofit foundation handles the charitable giving. Just be prepared for some setup costs with the nonprofit side (~$800 for 501c3 filing) and ongoing compliance requirements.

This is such a common dilemma for social entrepreneurs! I went through something similar with my tutoring business where I donate a percentage to education nonprofits. One thing that hasn't been mentioned yet is the timing strategy for charitable deductions. Even if you're stuck with pass-through taxation on your LLC profits, you can potentially bunch your charitable donations in alternating years to exceed the standard deduction threshold and maximize your itemized deductions. For example, instead of donating $10K each year, you could donate $20K every other year and take the standard deduction in the off years. This can significantly reduce your overall tax burden over time. Also, consider documenting everything meticulously from day one - contemporaneous records of your charitable intent, board resolutions if you have multiple LLC members, and clear separation between business and personal expenses. This will be crucial whether you stick with the LLC structure or eventually transition to a nonprofit. Have you thought about what happens if your sticker business grows beyond what you initially expected? It might be worth planning for different revenue scenarios now rather than having to restructure later.