I wouldn't recommend waiting for a CP2000. They add penalties and interest from the original due date, and it could affect your credit if you don't respond promptly. Also looks bad if you're ever audited in the future since it shows a pattern of underreporting.

That's a fair point about the penalties and interest. I should have mentioned those potential costs. The penalties would likely be small on such a small amount of unreported income, but they do exist. You're right that responding to a CP2000 notice could be more stressful than just filing an amendment proactively. And while a single CP2000 notice doesn't automatically trigger an audit, multiple reporting discrepancies could potentially increase your chances of scrutiny in the future.

No, they won't just "note your account" or anything like that. You need to file the 1040-X amendment. They're very specific about following proper procedures for corrections.

That's good to know! My spouse works part-time at a coffee shop but doesn't qualify for benefits, so I think I'm still eligible. But would this rule still apply if my spouse was offered insurance but it was super expensive? Like if their employer offered coverage but wanted $800/month for a family plan?

You're in a good position since your spouse doesn't qualify for benefits at their part-time job. That means you're still eligible for the self-employed health insurance deduction. If your spouse was offered insurance but it was very expensive, you'd still be disqualified from taking the deduction. The IRS doesn't consider the cost when applying this rule - simply the fact that coverage was available through a spouse's employer disqualifies you. It's a frustrating rule that affects many self-employed people with working spouses, regardless of how unaffordable that employer coverage might be.

I got this wrong too! I kept trying to put it as a business expense on Schedule C and couldn't figure out why my numbers weren't matching up with what TurboTax was calculating. Also, remember that this deduction reduces your AGI but not your self-employment tax.

Wouldn't tax-loss harvesting just create more capital losses though? I'm already trying to use up my existing losses, not create more. Or am I misunderstanding something?

You're right, I should have been more clear. Tax-loss harvesting would indeed create more capital losses, which wouldn't help your current situation where you're trying to use up existing losses. I was thinking more long-term about tax efficiency once you've used up your carryover. For your current situation, you'd want to focus on generating capital gains. Consider looking at appreciated positions you might have in other accounts that you could sell to realize gains that would be offset by your losses. Or as others suggested, investing in assets likely to appreciate that you could sell later this year for short-term gains.

Zero coupon bonds are a bit more complicated than that. With most zero coupon bonds, including Treasury STRIPS, the built-in interest (the difference between what you pay and face value) is actually taxed as interest income each year as it accrues, even though you don't receive the cash until maturity. This is called "phantom income." Municipal zero coupon bonds are generally exempt from federal income tax, so they wouldn't generate taxable income or gains that you could offset with your capital losses.

Can you explain more about the accountable plan option? I have an S-Corp for my online business and my CPA never mentioned this as a possibility. Currently not taking any home office deduction at all because I was told I couldn't.

An accountable plan is basically a formal arrangement where your S-Corp reimburses you for legitimate business expenses you incur personally - including home office expenses. The key benefit is that the reimbursements aren't considered taxable income to you, but the corporation can still deduct them. You'll need to document the business use of your home (square footage calculations, exclusive use, etc.), calculate the expenses properly, and have formal documentation showing the corporation approved this arrangement. The business would then reimburse you periodically based on actual expenses. This avoids the "rental payment" situation your tax preparer was concerned about. Many CPAs aren't familiar with this approach, so it might be worth finding one who specializes in small business/S-Corp taxation.

I got audited in 2021 specifically for my home office deduction! They wanted proof that the space was used exclusively for business. I had to provide photos, a floor plan with measurements, and receipts for business equipment in that room. They also asked for a written explanation of business activities conducted in the space.

Thanks for this suggestion! I'll definitely let him know about the EITC. Do you know what the minimum income requirement is to qualify? And would it matter that it's gig work rather than W-2 employment?

For the 2024 tax year (filing in 2025), a single person with no children needs at least $1 of earned income but cannot exceed around $17,640 to qualify for EITC. Yes, self-employment income (like from Doordash) does count as earned income for EITC purposes. The issue is that with only $230 in income, the credit would be very small, but still worth claiming if eligible.

Not a stupid question! There is a filing threshold. For self-employment income like Doordash, you need to file if you made $400 or more. Since the brother made less than that ($230), he technically isn't required to file a tax return at all unless he has other reasons to file.