Just be careful about claiming too many business expenses if your business isn't showing a profit yet! The IRS has a "hobby loss rule" where if you don't show a profit in 3 out of 5 years, they might classify your business as a hobby and disallow all your deductions. I learned this the hard way when my crafting business got audited. Make sure you're keeping good records and can show that you're running things in a businesslike manner with the intention to make a profit.

Great question! I've been through this exact situation with my consulting business. For your laptop, you're absolutely right that you can only deduct 75% since that's your business use percentage - keep a log of this usage pattern in case you're audited. The chair and desk are 100% deductible since they're used exclusively for business, and it doesn't matter that they're in your living room rather than a dedicated office. The key is exclusive business use, not location. One tip that saved me money: consider whether to use Section 179 expensing to deduct everything in year one, or depreciate the items over time. For your laptop at $1,800, you could deduct $1,350 (75%) immediately, or spread it over 5 years. Since you're new to self-employment, immediate expensing might help offset your business income better. Also, don't forget about other potential deductions like business use of your home internet, cell phone, or any business-related software subscriptions. These smaller items add up quickly!

Has anyone successfully had the IRS accept retroactive loan documentation? My accountant says its too late for me since my business has already made several "repayments" over the last 2 years without proper documentation. Now she wants me to pay capital gains on all of it!

I went through this exact same nightmare last year! My LLC (S-Corp election) had been "repaying" my initial capital injection for two years before I realized I never created proper loan documentation. My CPA initially wanted to treat everything as taxable distributions. Here's what saved me: I worked with a tax attorney to create a formal loan agreement that matched what had actually been happening (reasonable 4% interest rate, quarterly payments). We filed Form 8275 with my amended return explaining the documentation was being formalized to properly reflect the original intent of the transactions. The IRS accepted it without issue. The key was showing that the loan terms were reasonable and consistent with actual business practice. I had to pay tax on the interest portion going forward, but the principal repayments were correctly treated as non-taxable return of my loan. Don't let your CPA take the easy way out by just calling everything capital gains. If you genuinely loaned money to your business with the intent to be repaid, you can usually fix the documentation issue. Just make sure any loan terms you create are commercially reasonable and match what you've actually been doing.

Have any of you had luck with the Taxpayer Advocate Service? My cousin was in a similar situation but much more severe. They really helped him, and it's totally free!

I've been through something very similar with my elderly father who also had significant tax debt and language barriers. Here are a few additional thoughts based on what worked for us: Definitely go with Form 2848 as others have suggested - the full power of attorney is essential when dealing with complex cases like this. When you fill it out, I'd recommend being very broad with the tax years (maybe 2010-2024) and tax matters you're requesting authority for. This gives you maximum flexibility to address any issues that come up. One thing that really helped us was getting a complete Account Transcript from the IRS once the 2848 was processed. This shows every transaction, payment, penalty, and interest charge on the account going back years. It helped us identify some penalties that shouldn't have been applied and gave us the full picture of what we were dealing with. Also, don't overlook the possibility of an Offer in Compromise if your mom truly can't pay the full amount and is unlikely to be able to in the future. Given her age, fixed income, and the size of the debt, she might qualify to settle for much less than the full amount owed. The key is getting that 2848 filed first so you can start gathering information and exploring all the options available to her.

This entire discussion has been incredibly helpful! As someone new to both this community and 401k planning, I was feeling overwhelmed trying to understand why my W2 Box 1 didn't match my mental calculations. What I've learned from reading everyone's experiences is that the answer to "Does Box 1 include 401k contributions?" is actually "It depends on what TYPE of 401k contributions you're making." Traditional 401k contributions are excluded from Box 1 (reducing your taxable income), but Roth 401k contributions are included in Box 1 since they're made with after-tax dollars. The key takeaways for anyone else in this situation: - Check your 401k provider's website for traditional vs Roth contribution breakdown - Don't forget OTHER pre-tax deductions like health insurance, HSA, parking benefits - Compare your final paystub YTD totals to your W2 rather than doing manual calculations - Look for auto-escalation features or mid-year changes to contribution rates - Remember that employer matching doesn't affect Box 1 but shows up in Box 12 I'm planning to set up a tracking spreadsheet for next year and be more intentional about understanding my benefit elections during open enrollment. Thanks to everyone who shared their experiences - this community is incredibly knowledgeable and helpful!

This has been an incredibly thorough and educational thread! As someone who just joined this community and is dealing with my first 401k, I was initially frustrated trying to figure out why my Box 1 amount seemed "wrong." Reading through everyone's experiences has made it clear that this is actually a very common confusion point, and there are so many variables beyond just "did my 401k contributions get deducted or not." The traditional vs. Roth contribution split that many people discovered they had without realizing it seems to be a huge factor. I really appreciate how everyone shared their specific numbers and problem-solving approaches. The step-by-step detective work that several people outlined (checking 401k provider websites, comparing final paystub YTD totals, accounting for ALL pre-tax deductions) gives those of us new to this a clear roadmap to follow. The spreadsheet tracking idea for next year is something I'm definitely implementing, along with being more careful during open enrollment to understand exactly what types of contributions and deductions I'm signing up for. Thanks to this community for turning what felt like an impossible puzzle into something manageable!

This is a complex situation that definitely requires careful handling. Based on what others have shared, here are a few additional points to consider: **Documentation is key**: Make sure you keep every piece of paperwork from the raffle organization, including any materials that describe how they determined the $62,500 value. This could be important if you need to dispute the valuation later. **Consider the timing of your sale**: Since you're selling immediately, you might want to get multiple purchase offers to document that $59,000 is indeed the fair market value. Having 2-3 offers around the same price range could strengthen your position. **Don't forget about self-employment tax**: Depending on how the IRS classifies this income, you might also be liable for self-employment taxes on top of regular income tax. This is less common with prize winnings, but worth confirming with a professional. **State registration considerations**: Even though you're in Texas with no state income tax, you'll still need to consider vehicle registration and title transfer costs. These aren't deductible but are real expenses that eat into your proceeds. The advice about setting aside 35% seems prudent given all the potential tax implications. Better to overestimate and have money left over than scramble to find additional funds at tax time. Good luck with this situation - winning should be exciting, not stressful!

I've been following this thread and there's some really solid advice here, but I want to add a few practical considerations that might help: **Get everything in writing from the raffle organizers**: Before you do anything, ask them for a detailed breakdown of how they arrived at the $62,500 valuation. Was it MSRP, dealer invoice, or actual market research? This documentation could be crucial if you need to challenge the amount later. **Consider the timing of your quarterly payments**: Since you won recently, your first estimated payment would likely be due January 15th for Q4 2024. But given the size of this income, you might want to make a payment sooner to avoid underpayment penalties. The IRS generally expects payments within the quarter you receive the income. **Don't overlook AMT implications**: With a sudden $62,500 income spike, you might trigger Alternative Minimum Tax calculations. This is another reason why professional help is worth the cost - AMT can add unexpected complexity to your tax situation. **Document EVERYTHING**: Keep records of all costs associated with this situation - appraisal fees, tax preparation costs, even storage or insurance costs while you arrange the sale. While most won't be deductible, having detailed records shows you're handling this professionally. The 35% cash reserve recommendation is spot-on. This situation has enough moving parts that professional guidance isn't just helpful - it's essential for protecting yourself from costly mistakes.