This is really concerning. I'll definitely be talking to our payroll department. Do you know if there's a specific IRS publication or something I can reference when I talk to them? I feel like they might push back since they've been doing it this way for a while.

There's no single IRS publication since this is a state tax issue, not federal. But each state's department of revenue has employer withholding guidelines. For example, Minnesota's website clearly states employers must withhold MN tax from nonresidents who perform services within Minnesota. I'd suggest a different approach: ask your payroll department for their specific policy on multistate withholding and request documentation on how they determine which states to withhold for. If they can't provide this, mention that you're concerned about potential personal liability for unpaid state taxes. That usually gets their attention since they don't want employees filing complaints with state agencies.

This is terrible advice. The states absolutely do care and their systems are increasingly sophisticated at catching non-filers. I work in state tax compliance and see audits triggered all the time for multistate workers who failed to file. Just because you haven't been caught yet doesn't mean you won't be. The statute of limitations for non-filers can be unlimited in some states!

Thanks for mentioning this! Is the $250,000 threshold based on the balance at the end of the year, or is it at any point during the year? And do you have any recommendations for providers that offer good flexibility without charging an arm and a leg?

The $250,000 threshold is based on the total assets in the plan at the end of the year (December 31st). So you'll need to file Form 5500-EZ by July 31st of the following year if your balance is $250,000 or more on December 31st. As for providers, I'm using Fidelity for my Solo 401(k) and have been happy with them. Their plan documents allow for both traditional and Roth contributions on the employee side, and they don't charge any setup fees or annual maintenance fees. E*TRADE and Vanguard are also popular options, but Vanguard doesn't offer Roth options for their Solo 401(k) last I checked. Charles Schwab is another good option with no fees, but they don't accept rollovers from other plans if that's something you might need in the future.

I did this calculation last year. For me (33% marginal tax bracket), contributing $30k to my Solo 401k saved about $9,900 in taxes immediately. Even factoring in that I'll pay taxes on withdrawal later, the tax-free growth over 25+ years makes a HUGE difference in the final amount. Plus having that $9,900 working for me now instead of going to the IRS is a big advantage.

That makes sense, thanks for the numbers! I guess I need to consider my time horizon too. I'm probably 20 years from retirement so that tax-free growth would compound significantly. Do you have a recommendation for how much self-employment income makes it "worth it" to set up a Solo 401k? I'm only making about $25k from my side gig right now.

That's really helpful to know! Do you happen to know if VITA volunteers can help with Schedule C for self-employment? That's the main complication in my return this year.

Most VITA sites can handle simple Schedule C filings, especially if your business doesn't have employees, inventory, or losses. However, there are limitations - if your business expenses exceed $35,000 or you have more complex situations like home office deductions or depreciation, some sites might not be able to help. I'd recommend calling your local VITA site directly to ask about their specific capabilities regarding self-employment income. Some sites have specialized volunteers who can handle more complex returns, while others stick to simpler cases. You can find the nearest location by using the VITA Locator Tool on the IRS website or calling 800-906-9887.

Is there any quality control at these places? I thought tax preparers had to pass some kind of test or certification. It's scary to think someone with minimal training is handling something as important as taxes.

Did they at least help with setting up your books initially? That's what I'm most worried about - getting started with the right systems.

They did provide initial setup help with QuickBooks, which was somewhat useful. They created a chart of accounts specific to my industry and showed me how to categorize expenses properly for a SMLLC. They also helped set up integration with my business bank account. The issue I ran into was more with ongoing support and inconsistent advice after the initial setup. For just getting your books set up correctly from the start, they might be okay, but you could probably find a local bookkeeper to do that initial setup for much less than their full package price.

I used TurboTax Self-Employed for my single-member LLC last year. It worked fine for me, but my business is pretty simple - just consulting services with minimal expenses. The software walked me through Schedule C and self-employment tax calculations. If your business has inventory, employees, or more complex deductions, you might want more help than just tax software. Also, TurboTax doesn't help with quarterly estimated payments during the year - you'll need to figure those out yourself.

Smart approach! Did you have any issues with the Free File program? I heard they ask fewer questions than the paid versions, which makes me nervous about missing deductions.

I found the Free File program through the IRS site asked all the important questions for my situation. They do have a slightly more basic interface than TurboTax or H&R Block, but all the essential deductions and credits were covered. For someone with a straightforward W-2 job and maybe some basic investment income or student loan interest, it works perfectly. I did notice it might be less intuitive for self-employment or rental property situations, so in your case with the side gig, you might want to evaluate if your potential deductions would exceed the cost of the paid software.

Which app did you use? I tried one last year (can't remember the name) and it kept crashing when I tried to upload my W2.

This is actually brilliant. The psychological barrier of "sitting down to do taxes" is what causes me to procrastinate. Definitely trying the mobile approach next year!