It was a traditional IRA at PenFed. And yes, it was a direct trustee-to-trustee transfer - I never touched the money. The confirmation paperwork even says "Direct Rollover" at the top.

Thanks for clarifying! So here's the situation: You did a direct Roth conversion from a traditional IRA. This is 100% taxable but not subject to the 10% early withdrawal penalty. The fact that it was trustee-to-trustee is good - it means you don't have to worry about the 60-day rule. The "Direct Rollover" terminology on your paperwork is a bit misleading since technically this was a conversion, not a rollover. This is common though - many financial institutions use the terms interchangeably even though they have different tax implications.

Just checked my 1099-R and box 7 has code "2" in it. What does that mean exactly for my situation?

Did your CPA suggest you form an LLC or S-Corp? I've heard that can save on self-employment taxes but not sure if it's worth it at my income level (around $70k).

My CPA actually advised against forming an LLC at first since it wouldn't provide tax benefits by itself - it's mainly for liability protection. However, once I hit about $80k consistently, she suggested an S-Corp structure which has saved me thousands in self-employment taxes. At $70k, you're right at the threshold where it might make sense. The basic concept is that with an S-Corp, you pay yourself a "reasonable salary" which is subject to self-employment taxes, but can take the rest as distributions that avoid those taxes. However, there are additional costs like payroll processing and more complex filing requirements. My CPA said generally it doesn't make sense until you're netting at least $60-70k after expenses.

I did exactly this last year! Cost me $125 for the review which was way cheaper than the $350+ for full preparation. The CPA found two mistakes - I had categorized some software subscriptions incorrectly and missed a home office deduction. Saved me about $800 in taxes for a $125 investment.

This is really helpful! Did you have to wait long to get an appointment at the IRS office? I'm worried about the timing with my March 31 deadline.

When I went last year, I called on a Monday and got an appointment for Thursday that same week, but this varies dramatically by location. Some offices have a 2-3 week wait, especially during tax season. Call the appointment line (844-545-5640) ASAP to check availability in your area. If appointments are too far out, get creative - I've had colleagues who contacted their state representative's office for help expediting IRS matters when professional licenses were at stake. Their constituent services staff can sometimes work miracles with government agencies.

This is so important! Each state has different requirements for professional licenses. Some states have a "certificate of good standing" or "tax clearance" process specifically for license renewals that can be expedited.

My cousin tried claiming he was a professional gambler and got absolutely destroyed in an audit. They disallowed all his loss deductions and hit him with penalties. What kind of documentation would someone actually need to make this work?

The documentation requirements are extensive and the burden of proof is entirely on you. Your cousin's experience is unfortunately common. To successfully claim professional gambling status, you'd need: - Detailed daily logs of every bet with documentation for all sessions - Business plan showing your gambling strategy and profit approach - Records showing you treat it as a business (separate bank accounts, business methods) - Documentation of time spent (30+ hours weekly is often considered minimum) - Evidence of skill development (courses, books, analytics subscriptions) - History of consistent activity rather than sporadic betting - Profit in at least 3 of 5 consecutive years Even with all this documentation, it's still one of the most audited tax positions because the IRS is very skeptical of these claims. For most people, it's not worth the risk.

Thanks everyone for the responses. I think I get it now - basically I can't deduct gambling losses against my regular income, only against gambling winnings. Since this would be my only bet, a loss wouldn't help me tax-wise at all. I'm starting to think maybe I should reconsider this bet or at least view it purely as entertainment with no tax advantages. Might look into other ways to use that $3000 that could have better tax treatment if things don't go as planned.

That's a great suggestion about the photos! Do you think it's also helpful to have something in writing from my boyfriend acknowledging that the room is exclusively for business use? And should I be taking new photos periodically to show consistent business use?

Having some documentation from your boyfriend acknowledging the exclusive business use isn't necessary but could be helpful supporting evidence. A simple email or signed statement could work. Yes, I recommend taking new photos quarterly to show consistent business use over time. Date-stamped photos showing the same dedicated setup throughout the year creates a strong paper trail. I also keep a simple log of business activities conducted in the space - this has been incredibly valuable documentation during a previous review of my returns.

For utilities like internet, you actually have options. You can either use the same square footage percentage (the 13% in OP's case) OR you can track actual business usage if you have a reasonable method of calculating it. If you can document that 80% of your internet usage is truly for business (like through time logs of business calls/uploads vs personal use), you can potentially deduct that larger percentage. Just be prepared to substantiate the higher percentage if asked. I use a simple spreadsheet tracking business vs personal internet hours and it's worked fine for my deductions.