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Quick warning - don't forget to pay self-employment tax on your farm income! Schedule F income is subject to self-employment tax (15.3% covering both Social Security and Medicare). This catches a lot of new farmers by surprise.
Omar, your buddy gave you solid advice! As a newcomer to farm taxes myself, I was confused about this same thing last year. Schedule F business deductions are completely separate from your personal standard deduction - you get both! Think of it this way: your farm is a business entity, so those $3,800 in feed, equipment repairs, and seed costs are business expenses that get deducted on Schedule F. Meanwhile, you as an individual can still claim the standard deduction (or itemize if that's better) for your personal expenses. They don't interact with each other at all. Just make sure you keep detailed records of all your farm income and expenses, and that you're operating with genuine profit intent. The IRS wants to see that this is a real business, not just a hobby. Good luck with your farming venture!
You mentioned a company car - was that during your contract work or only after becoming an employee? If you had it during contract work, there might be tax implications there too.
It was only after becoming an employee. During the contract period, I was using my personal vehicle but the company reimbursed me for mileage. I'm guessing those reimbursements aren't taxable since they were just covering my costs?
If the company properly reimbursed you at or below the standard mileage rate (65.5 cents per mile for 2023), then those reimbursements aren't taxable income. However, you also can't deduct those miles since you've already been compensated for them. But definitely double-check if they reported those reimbursements as income on your 1099-NEC. Sometimes companies incorrectly include reimbursements, and if that happened, you'd want to deduct those expenses to offset that income.
I went through something very similar last year - owing a big chunk because of mixed W-2 and 1099 income. The self-employment tax on that $13,500 is probably what's killing you the most. A few things that helped me: 1. Double-check if your employer reimbursements were incorrectly included in your 1099-NEC income 2. Even small business expenses add up - phone usage, internet, any equipment or supplies 3. Set up quarterly estimated payments for next year to avoid this mess again The underpayment penalty stings, but at least it's relatively small compared to your total bill. I'd definitely recommend seeing a tax pro - they often find deductions that save more than their fee costs. Don't beat yourself up too much, this is a super common situation when transitioning from contract to employee work.
Has anyone considered that exclusive use is sometimes not easy to prove? I use a room that's technically a bedroom as my home office, but it has absolutely nothing in it except office furniture and equipment. Would an IRS agent look at the room layout and decide it's not exclusive use just because it could be a bedroom?
I went through an audit 2 years ago with a similar setup. The IRS actually didn't care about what the room *could* be used for, only what it *is* being used for. I showed them photos of the office setup and explained that 100% of activities in that room were business-related. They accepted it without issue.
That's really helpful, thanks for sharing your experience. I've been paranoid about this for years and have been taking photos periodically to document that the room is only set up as an office. Glad to hear the IRS was reasonable about it during your audit!
One thing I haven't seen mentioned yet is the importance of tracking your actual work hours between locations. Since you mentioned going to the firm office every 2-3 weeks, you should document the time spent at each location throughout the year. The IRS uses this as a key factor in determining your "principal place of business." Keep a simple log showing dates, hours worked from home vs. firm office, and types of activities performed at each location. This becomes crucial evidence if you're ever audited. Since you're working 40+ hours weekly from home and only visiting the firm office occasionally, your documentation should clearly support that your home office is indeed your principal place of business. Also, make sure you're not mixing any personal activities in that dedicated room - no personal computer use, no storing personal items, etc. The exclusive use test is where many people trip up during audits.
This is excellent advice about documentation! I'm just starting out as a freelance consultant and working from home, so I'm trying to get all this set up correctly from the beginning. Do you recommend any specific apps or tools for tracking work hours by location? I want to make sure I'm keeping records that would satisfy the IRS if needed. Also, when you say "types of activities," how detailed should that documentation be?
As a heads up - even if you get this form sorted out, check your first couple of paychecks carefully to make sure they're withholding the right amount. I had a similar confusion with my forms, thought I fixed it, but they still messed up my withholding. Better to catch it early in the year than be surprised at tax time!
Thanks for the tip! I'll definitely keep an eye on my first few paychecks. Is there a specific calculation or percentage I should be expecting to see withheld? I have no idea what's "normal" for someone in my situation.
For someone single with one job, you're typically looking at around 12% for federal income tax withholding, plus 7.65% for Social Security and Medicare taxes. So roughly 19-20% total should be coming out for federal taxes, depending on your income level. The exact percentage will vary based on your salary, but if you see something way off like only 5% or 30%+ being withheld, that's a red flag that something went wrong with your W-4. You can always use the IRS withholding calculator on their website to double-check if the amounts look right once you get your first paystub.
This is such a common issue for new employees! I went through the exact same confusion when I started my first job. The key thing to remember is that you can always update your W-4 later if you realize the withholding isn't right. One thing that helped me was using the IRS Tax Withholding Estimator (it's free on the IRS website). You can input your salary and filing status, and it'll tell you exactly how to fill out your W-4 to get the right amount withheld. It's way more reliable than trying to guess with those confusing company forms. Also, don't stress too much about getting it perfect right away - most people end up adjusting their withholding at least once during their first year as they figure out how everything works. The important thing is that you're being proactive about it!
Thanks for mentioning the IRS Tax Withholding Estimator! I didn't even know that existed. That sounds way more straightforward than trying to decipher these confusing company forms. I'll definitely check that out before I submit anything - seems like it would give me more confidence that I'm doing it right rather than just guessing based on outdated instructions. It's also really reassuring to know that I can adjust it later if needed. I was so worried about messing something up permanently on my very first job!
Ryan Andre
have you tried accessing your account online at irs.gov? sometimes there's info there that doesn't show up on the transcript or wheres my refund. might be worth a try
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Noah Ali
β’I did check there but it just shows the same status as Where's My Refund - "still being processed".
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Niko Ramsey
I'm going through almost the exact same situation right now! Filed in January with EIC and have been stuck with codes 570 and 810 for months. It's so frustrating not knowing what's happening or when it will resolve. From what I've learned lurking in these forums, it seems like the IRS is really cracking down on EIC claims this year, especially with self-employment income. The combination of your high withholding amount compared to your final income plus the substantial EIC is probably what triggered the review. I know it doesn't help much, but you're definitely not alone in this. I've been checking my transcript obsessively every Friday when it updates, hoping to see that magical 571 code show up. The waiting game is absolutely brutal when you need the money for important things like medical bills. Have you considered reaching out to your local Taxpayer Advocate office? I've heard they can sometimes help expedite cases when there's financial hardship involved. Might be worth a shot given your medical situation. Hang in there - from everything I've read, most of these eventually do resolve, it just takes way longer than anyone wants to wait. π
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