That's a really helpful suggestion! Do you recommend any specific accounting software that handles this separation well? I'm currently just using spreadsheets but thinking of upgrading to something more professional.

QuickBooks Online handles this really well - you can create custom expense categories and even set up automation rules to categorize expenses based on keywords in the descriptions. So if your Fiverr receipts always have "tip" in a certain field, it can auto-categorize for you. FreshBooks is another good option that's a bit simpler and less expensive if you don't need all the features of QuickBooks. Both allow you to attach digital copies of receipts directly to transactions, which is super helpful for keeping everything organized for tax time.

Fiverr treats tips differently because they don't take a commission on the tip portion - it goes 100% to the freelancer. But from a tax perspective for the buyer, it doesn't matter. The IRS sees both the base payment and tip as business expenses as long as they're reasonable and for legitimate business purposes.

That makes sense, thanks for explaining! So essentially Fiverr is just being nice to the freelancers by not taking a cut of the tips, but for my tax purposes as the buyer, I can deduct the whole thing regardless. Good to know the platform's internal policies don't affect my tax treatment.

But doesn't a higher property value also mean better appreciation potential over time? Shouldn't that be factored into the decision too?

Yes, property appreciation is absolutely an important factor in your overall investment return! However, appreciation is completely separate from the tax deduction benefits we're discussing. Higher-value properties (which often have higher property taxes) may appreciate more in absolute dollar terms, but not necessarily at a higher percentage rate. You could have a $300K property that appreciates 5% annually ($15K) while a $500K property might only appreciate 3% annually ($15K). The appreciation rate depends more on location, neighborhood development, and local market conditions than on the property tax amount.

I've used TurboTax for my 3 rental properties for years. It does a good job with the basic Schedule E stuff including property taxes, HOA fees, mortgage interest, etc. Just make sure you're using at least the Premier version which includes the rental property features. The basic versions don't have the rental property support.

Yes! Contributions to your 401(k) qualify for the Savers Credit regardless of whether you actively enrolled or were automatically enrolled by your employer. What matters is that the contributions are going into your qualified retirement account and that you meet the income requirements for the credit. The IRS doesn't distinguish between voluntary and auto-enrollment contributions for this purpose - they both count! Just make sure your AGI is below the limits mentioned earlier, and you should be good to claim the credit.

Definitely worth amending! At your income level you'd qualify for the 50% credit rate, so you could get up to $900 back (50% of your $1,800 contribution). That's a significant amount! You can file Form 1040-X to amend your return.

Thanks for bringing that up! Does the self-employment tax apply even if my W2 job already has Social Security and Medicare taxes taken out? And how do you figure out how much to pay for those quarterly payments?

Yes, self-employment tax applies regardless of your W2 job's withholdings. Your W2 job only covers the taxes on that specific income, not on your self-employment income. The 15.3% consists of both the employer and employee portions of Social Security and Medicare taxes. For quarterly payments, you need to estimate your total tax liability for the year (including income tax and self-employment tax on your business profits) and make four equal payments. The tax software should provide you with estimated payment vouchers for the next year based on your current return. Alternatively, you can increase your W2 withholding to cover the additional tax instead of making separate quarterly payments.

I used Credit Karma last year for my small woodworking business. It worked ok for basic Schedule C but was missing some of the more detailed expense categories I needed. Switched to FreeTaxUSA this year and found it much more comprehensive for business stuff while still being affordable.

Do you have a specific organizational system you recommend for keeping track of all these records? I'm filing for the first time and want to set things up right from the beginning.

I create a digital folder for each tax year (e.g., "2024 Tax Filings") with subfolders for each form type. Inside the 1099-NEC folder, I save PDFs of all submitted forms, the confirmation emails, and screenshots of submission confirmations. I also keep a spreadsheet listing each contractor, when their form was submitted, and confirmation numbers. For physical documents, I have a similar system with labeled folders in a fireproof filing cabinet. Everything gets retained for at least 7 years. It might seem like overkill, but the one time the IRS claimed we hadn't filed some forms, I had everything organized and was able to prove we had submitted them within 5 minutes of getting the notice.

We've used TaxBandits for the past two years for about 25 contractors. Overall pretty good experience. The interface is a bit dated but it gets the job done reliably. They handle both federal and state filings, plus distribute forms to recipients. Cost is reasonable too - I think we paid around $2 per form last year.

Thanks for the feedback! That's helpful. The cost seems reasonable for the convenience factor. I'll probably go with them unless I hear any horror stories. My main concern is just making sure everything gets filed correctly since it's my first time handling this.