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Just adding some clarity on this whole W-2 vs 1040 thing: - W-2: This is given to you by your employer showing your annual income and tax withholdings. Your employer also sends a copy to the IRS. - 1040: This is your actual tax return that you need to submit (either yourself or through a preparer). The information from your W-2 goes onto your 1040. You definitely need to make sure your 1040 was filed, either electronically or by mailing the paper form. If your tax preparer gave you a paper copy but didn't confirm he e-filed it, you need to ask him directly or check with the IRS.
THANK YOU ALL for explaining this! I feel so dumb now lol. I guess I need to call my tax guy again to see if he actually submitted the 1040 for me or if I need to do it myself. Makes so much more sense now that the W-2 is just info FROM my employer and the 1040 is what actually gets sent TO the government. Definitely gonna be more careful next year and maybe try one of these tools you guys mentioned instead of using my uncle's church friend...
Don't feel dumb at all! Tax forms are confusing and nobody teaches us this stuff. When you talk to your tax preparer, specifically ask if he e-filed your 1040 and ask for confirmation of the submission. Most tax software or professionals can provide an acknowledgment when the IRS accepts your return. If you can't reach him, calling the IRS directly is your best bet to see if a return has been filed under your Social Security number for this tax year.
This happened to me last year...my "tax guy" gave me copies of everything but never actually filed! I only found out when I didn't get my refund and the IRS had no record of my return. Now I always use tax software that gives me a confirmation when the IRS accepts my return.
Anyone have experience with how this works if you e-file? TurboTax keeps giving me errors when I try to remove transactions I entered by mistake.
Make sure you're clear about the legal structure of your business (sole prop, LLC, S-Corp, etc) as that affects how you'll report this income. For example, if you're a sole proprietor, you'll report on Schedule C, but S-Corp would be different. With the commission structure + referral bonuses, you're looking at some complexity.
I'm currently operating as a sole proprietor, but considering forming an LLC soon as the business grows. Would that change how I need to document these transactions?
As a sole proprietor, you're currently reporting everything on Schedule C. If you form an LLC but remain a single-member LLC with no special tax election, you'll still file the same way (Schedule C with your personal return). If you elect S-Corp status for your LLC (which many small business owners do to potentially save on self-employment taxes), then you'll need to file Form 1120-S and issue yourself a W-2 as an employee. In that case, the record-keeping becomes more complex because you need to separate owner compensation from business profits. The 20% commission structure remains a business income/expense issue, but you'll need more formal accounting.
Just want to add that you should keep meticulous records of WHEN each transaction happens. I do something similar and got audited because my records didn't clearly show which tax year some transactions belonged to. The 80% you're giving back could span different tax years if collected in December but paid in January.
This is so important! I use Quickbooks and make sure to enter the actual transaction date rather than the date I'm entering it. Also, do you use cash basis or accrual accounting for this kind of business?
Remember that refund size isn't everything! You need to look at your total tax LIABILITY not just the refund amount. If you were withholding differently, the refund numbers would change even if your actual tax obligation stayed the same. Compare line 24 (total tax) from your 1040 across the different scenarios. That's the true measure of which filing status is better. Also check if you're losing any deductions when filing separately. Some tax benefits are only available to joint filers, like student loan interest deductions, some education credits, and child/dependent care credits.
We looked at the total tax liability too, and it's still higher when filing jointly. I think the issue is that combining our incomes is pushing us into higher phase-out ranges for the child tax credit. What deductions specifically should I be looking for that we might lose by filing separately?
You're right that the phase-outs for child tax credit could be causing this if your combined income is pushing you into that range. For deductions you might lose when filing separately, check specifically: 1) Student loan interest deduction is completely unavailable when filing separately. 2) Child and Dependent Care Credit is generally not available when filing separately (with some exceptions). 3) Earned Income Credit cannot be claimed when filing separately. 4) Education credits like the American Opportunity Credit and Lifetime Learning Credit are not available when filing separately. 5) The income threshold for IRA contribution deductions is much lower for separate filers. Double check if any of these apply to your situation as they might offset what you're seeing with the child tax credit phase-out.
Did you use the same tax software to calculate all three scenarios? Different software can give different results. I'd run all three options (you claiming kids, spouse claiming kids, filing jointly) through the same program to make sure you're getting consistent calculations. Also, check if you qualify for Head of Household status when filing separately - that could make a big difference but you have to meet specific requirements.
Head of Household isn't available if they're married unless they've been living apart for the last 6 months of the year. Married people generally have to choose between married filing jointly or married filing separately.
Olivia Garcia
Just want to share my experience - I tried deducting my patio renovation as a business expense because I host client meetings there. Got audited. It was not fun. The IRS agent basically said home improvements that add value to your property are almost never deductible as business expenses, even if you sometimes use them for business. What DID work for me was claiming a portion of my utilities and internet as business expenses based on the percentage of my home used exclusively for business. That's the key word - "exclusively.
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Noah Lee
β’Did you try writing off the furniture for the patio instead of the construction? Like outdoor tables or chairs used for client meetings? Wondering if that would be treated differently.
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Olivia Garcia
β’Yes, I was able to deduct the outdoor furniture since it was clearly business-related and doesn't add permanent value to the home. The IRS treats movable business assets differently than permanent improvements. The agent actually suggested keeping a log of client meetings to demonstrate business use of those assets. Furniture is typically depreciated over 7 years for business use, but depending on cost you might be able to use Section 179 to deduct it all in one year. Definitely different than trying to deduct the actual construction of the deck or patio.
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Ava Hernandez
Has anyone successfully used the home office deduction? I'm trying to figure out if it's worth claiming or if it's an audit red flag. I've heard both.
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Isabella Martin
β’I've claimed it for 3 years without issue. Just make sure the space is exclusively used for business. Take pictures too. Mine is about 12% of my total square footage and I deduct that percentage of utilities, insurance, etc.
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