This has been such an enlightening thread to read through as someone who's always wondered about this exact question! As a newcomer to this community, I'm really impressed by how thoughtfully everyone has approached what initially seemed like a simple calculation. What strikes me most is how the discussion has evolved from "do I pay more than I receive?" to understanding our role in a system that works across generations. I never really considered how much I benefited from public investments before I was contributing significantly - the schools I attended, the roads that enabled my family's economic mobility, the legal protections that make contracts and business possible, even the basic research that led to technologies I use daily. The lifecycle perspective makes so much sense. We benefit from public investments when young, contribute during our prime earning years, and may receive more support again later in life. Rather than being a flaw, this seems like exactly how a sustainable system should function. For someone earning $87k as a contractor, you're almost certainly a net contributor right now. But your ability to reach that income level was built on a foundation of public investments. Being a "net taxpayer" during your working years isn't about being taken advantage of - it's evidence that the system worked for you and is now working through your contributions for others. This discussion has completely changed how I'll approach tax season - from viewing it as money being taken away to seeing it as investing in the systems that created my opportunities and ensuring they remain strong for future generations.

This has been such a comprehensive and thought-provoking discussion! As someone who's been following along and learning from everyone's insights, I wanted to add my perspective as a newcomer to really understanding the "net taxpayer" concept. What I find most valuable about this conversation is how it's moved beyond the simple math of "taxes paid minus benefits received" to explore the deeper question of how we participate in a system that creates opportunity across generations. The lifecycle approach that multiple people have highlighted really resonates - we start as beneficiaries through public education and infrastructure, hopefully become contributors during our working years, and may need more support again later in life. As someone in a similar situation to the original poster - working professional, decent income, no major government benefits currently - I've come to understand that my "net taxpayer" status right now is actually evidence that previous public investments worked. The schools I attended, the roads that connected my community to opportunities, the legal frameworks that protect my work as a contractor - all of that was funded by people who came before me. The economic multiplier research mentioned throughout this thread is particularly compelling. Understanding that investments in education and infrastructure can generate returns of 7:1 or more helps explain why this system of collective investment creates value that extends far beyond what any individual directly receives. Rather than viewing tax season as money being taken from me, I can now see it as contributing to the foundation that made my success possible and ensuring similar opportunities exist for future generations. This perspective has made me feel much more positive about my role in the tax system - not as someone being unfairly burdened, but as someone participating in something that builds shared prosperity over time. Thanks to everyone who has shared their expertise and experiences here - this discussion has been incredibly educational for understanding both the practical and philosophical aspects of being a "net taxpayer"!

This is really helpful information! I'm in a similar situation as the original poster - just set up my S-corp and trying to figure out the health insurance piece. Based on what everyone is saying, it sounds like the consensus is: S-corp pays premiums directly → gets added to W-2 as wages (Box 1 only, no FICA) → then I take the self-employed health insurance deduction on my personal return. This seems counterintuitive at first but makes sense from a tax perspective. I'm curious about the timing though - do I need to have the corporate resolution in place before I start paying premiums this way, or can I document it retroactively? Also, for those using Gusto, when you select "company contribution" and check the >2% shareholder box, does it automatically handle the W-2 reporting correctly at year-end? Thanks for sharing your experiences - this is exactly the kind of real-world guidance that's hard to find elsewhere!

This thread has been incredibly helpful! I'm also a new S-corp owner dealing with the same health insurance questions. One thing I want to add that hasn't been mentioned yet - make sure to consider the timing of when you implement this change during the year. I switched from paying my health insurance personally to having my S-corp pay it mid-year, and my CPA explained that I need to be consistent about the treatment. You can't have some months where you pay personally and claim it as a business expense, and other months where the S-corp pays it and you take the self-employed deduction. For anyone making this switch mid-year like I did, you'll need to calculate the amounts carefully on your tax return. The months you paid personally won't qualify for the self-employed health insurance deduction (since you weren't receiving it as W-2 income), but the months your S-corp paid will qualify. Also, don't forget that this same treatment applies to your family's health insurance premiums too if you're covering dependents - it all gets the same S-corp shareholder treatment.

This thread has been incredibly helpful for understanding the health insurance premium exception! I'm dealing with a similar situation from 2023 and wanted to add one point that might help others who are still sorting through their documentation. If you had family coverage while unemployed, make sure you're tracking the full family premium amount, not just the individual portion. The IRS allows you to count the entire family health insurance premium that you paid out-of-pocket while receiving unemployment compensation. This was a pleasant surprise for me because my family premium was significantly higher than what I withdrew from my IRA, so I was able to apply the exception to my full distribution amount. Just make sure your records clearly show that you were responsible for the family coverage payments during your unemployment period. Also, for anyone using multiple sources to pay premiums (like savings, unemployment benefits, etc.), remember that the IRS doesn't care which specific money went where - they just want to see that you were unemployed, receiving compensation, and actually paying qualifying premiums during the eligible timeframe. The "money is fungible" point that Amara made in the original post is exactly right! Keep those records organized and don't stress too much about tracing individual dollars. Focus on documenting your unemployment status, the timing of your withdrawal, and your premium payment history.

This has been such an informative discussion! I wanted to add something that might help others who are in the middle of this process right now. When you're calculating your qualifying health insurance premiums, don't forget to include any dental and vision coverage you paid for separately while unemployed. The IRS considers these qualifying medical expenses as long as they were standalone policies you purchased to maintain coverage during your unemployment period. I initially only counted my major medical premium when calculating my exception amount, but my tax preparer pointed out that my separate dental policy ($45/month) and vision coverage ($15/month) also qualified. It wasn't a huge difference in my case, but every bit helps when you're trying to maximize your penalty exception. Also, for anyone who had a gap in coverage and paid COBRA continuation premiums retroactively, those payments can still count as long as they were for coverage periods when you were unemployed and receiving compensation. The timing of when you actually made the payment matters less than the coverage period the payment was for. The documentation for supplemental coverage is usually pretty straightforward - just keep the same types of records (premium statements, payment confirmations) that you'd keep for your main health insurance. Most dental and vision insurers provide monthly statements just like major medical carriers do.

This is exactly the kind of thorough advice I was hoping for! Reading through everyone's experiences and suggestions has given me much more confidence in setting up proper mileage documentation. I'm particularly grateful for the clarification about home-based businesses and the "principal place of business" rule. I was genuinely worried that having only one client might somehow disqualify my trips as legitimate business miles, but understanding Revenue Ruling 99-7 puts that concern to rest. The Excel spreadsheet structure that Douglas outlined is perfect - I'm going to implement that format right away. I especially appreciate the tip about taking odometer photos at the beginning and end of each year. It's such a simple step that I completely overlooked, but it's clearly essential for demonstrating the business use percentage. For my immediate situation, I think I'll go with the standard mileage rate since my trips are consistent and straightforward. I'll use Google Maps to calculate the exact distance for my standard route and document that methodology in my records. One follow-up question: since I sometimes make multiple trips in a single day (pickup in the morning, delivery in the afternoon), should I log these as separate entries in my spreadsheet, or can I combine them into a single entry for the day's total business miles?

This thread has been incredibly helpful! I'm in a similar situation as an independent contractor and had been putting off claiming mileage deductions because I wasn't sure my documentation would hold up. The clarification about home-based businesses being able to deduct travel to client locations (even with just one client) is huge - I had the same concern about it being considered "commuting." Understanding that Revenue Ruling 99-7 specifically addresses this gives me the confidence to move forward. I'm definitely going to implement that Excel format with separate entries for each trip purpose. The idea of photographing odometer readings at year-end is brilliant and so simple. I wish I had known about that requirement earlier, but I'll start tracking it properly going forward. One thing I'm still uncertain about: if I occasionally stop for gas or lunch during a business trip, does that affect how I should calculate or document the mileage? Should I subtract those personal stops from my business miles, or is the total round-trip distance still deductible as long as the primary purpose of the trip was business?

I'm confused about something - if the government knows ur making illegal money isn't that just admitting to a crime?? like if i put $50,000 in "other income" and I don't have a job, isn't that basically telling them im doing something illegal?

This is such an important topic that I think gets overlooked. I've been dealing with a similar situation where I had some cash income from freelance work that wasn't reported by the clients (they paid under the table). I was terrified about how to handle it properly. What I learned from talking to a tax professional is that the key is being proactive about reporting ALL income, even if the source might raise questions. Like others mentioned, you can use broad categories without getting into specifics that might be self-incriminating. The bigger risk is trying to hide income entirely - that's where people get into serious trouble with tax evasion charges. The IRS has gotten very good at detecting unreported income through data matching and lifestyle audits. It's much better to report everything and deal with any questions that come up than to try to fly under the radar. One thing I'd add is that if you're in this situation, it's really worth consulting with both a tax attorney and a CPA who understand these issues. The consultation fee is nothing compared to the potential consequences of handling it wrong.