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Something nobody's mentioned yet - make sure your employer is classifying you correctly! Just because they want to switch you doesn't mean it's legally appropriate. The IRS has specific tests for employee vs contractor classification. If you're doing the same job, same hours, same supervision as before, this might be misclassification which is illegal. Companies sometimes do this just to save on their payroll taxes and benefits, pushing the tax burden onto you. If you're still being told when and where to work, using their equipment, and following their processes, you might still legally be an employee regardless of what they call you.
I hadn't even considered this angle! My situation might actually fall into this gray area - I'm still expected to work set hours and use company equipment. Do you know what the specific tests are that the IRS uses? And if I pursue this, would I likely get fired or face other repercussions?
The IRS primarily looks at three categories: Behavioral Control (do they control how you work?), Financial Control (do they control the business aspects of your work?), and Relationship Type (written contracts, benefits, permanency of relationship). If they control when, where, and how you work, provide your equipment, don't let you work for others, pay you by time rather than project, and the relationship is ongoing rather than project-based, you're likely an employee regardless of what they call you. As for repercussions, legally they can't fire you for questioning your classification - that would be retaliation. But practically speaking, it could create tension. Some people start by having an informal conversation with HR or management before filing anything with the IRS. Documentation is key throughout this process.
Quick tip about solo 401(k) plans - make sure you shop around! I found huge differences between providers. Some charge setup fees and annual maintenance fees, while others don't. Some offer better investment options or Roth components. I went with Fidelity for my solo 401(k) because they have no fees and decent fund selection. Vanguard is good too but requires more paperwork. E*Trade offers more investment flexibility but has a more complicated setup process.
Has anyone used Schwab for their solo 401(k)? Their regular investment accounts are great but wondering specifically about their solo 401(k) options compared to Fidelity.
I actually did research Schwab before settling on Fidelity. Their solo 401(k) is solid with no setup or maintenance fees similar to Fidelity. The main differences I found were that Schwab's plan doesn't allow for Roth contributions within the solo 401(k), while Fidelity does. Schwab also requires a bit more paperwork for the initial setup. Investment options are comparable between the two, with both offering good access to low-cost index funds. Schwab's customer service for small business retirement accounts was excellent in my experience during the research phase. If the Roth option isn't important to you, Schwab is definitely worth considering.
As a manager, this is actually concerning from a financial literacy standpoint. My company started offering basic financial wellness sessions because we found similar misconceptions were common. Your employee isn't alone - a survey from a few years ago found that about 40% of Americans didn't understand that tax refunds are returns of their own money. Many see it as a "bonus" and plan major purchases around it. Maybe suggest some basic financial literacy resources rather than just being frustrated? Part of leadership is helping team members grow, and this could be a growth opportunity.
Do you have any recommendations for resources I could share? I'm worried about coming across as condescending since we already had that awkward conversation. I'd like to help without making him feel stupid.
The Consumer Financial Protection Bureau has free, straightforward resources that explain tax basics without being condescending. You could also look into whether your company's benefits include any financial wellness tools - many do these days, often through the same providers that handle 401(k) plans. A low-key approach might be sending resources to your whole team rather than singling him out. Something like "Found these helpful tax planning resources as we head toward year-end" could provide the information without embarrassment. The IRS also has surprisingly readable explainers on their website about withholding and how to adjust it.
Sadly, I've found that a lot of people look forward to tax season specifically for this "bonus" and build it into their annual financial planning. My sister literally plans her family vacation around her tax refund every year, and gets angry when I try to explain she could have that money throughout the year instead. Some people actually use overwithholding as a forced savings method because they know they wouldn't save the money if it came in smaller amounts in their regular paychecks. In a weird way, it makes sense psychologically, even though financially it's giving an interest-free loan to the government.
This is actually me! I know it's not the financially optimal choice, but I deliberately overwithhold because I'm terrible at saving small amounts. Getting that big check once a year lets me make major purchases or pay down debt in meaningful chunks. It's like a forced savings account where I can't access the money until tax time.
One thing nobody's mentioned yet - if you have multiple contractors for different parts of your renovation (like separate HVAC guy, window installer, etc.), make sure you get documentation from EACH contractor. I made the mistake of only getting detailed paperwork from my main contractor, but he subcontracted the windows to someone else who didn't provide proper documentation. Had to chase him down months later when I was doing my taxes, and by then he'd lost some of the specific model numbers. Also, take pictures of any labels/stickers on the products before they're fully installed. Many Energy Star products have labels showing the ratings that get removed during installation.
Thanks for bringing this up! My situation is exactly like that - main GC but with subcontractors for electrical, windows, and HVAC. Should I be asking each sub directly for their documentation or should everything go through my general contractor?
Ideally everything should go through your general contractor - that's part of what you're paying them for. They should collect all the proper documentation from their subs and provide it to you in an organized way. Make sure to specify exactly what you need (itemized receipts, model numbers, Energy Star certifications). If your GC is resistant or doesn't seem to understand what you need, then you might need to speak directly with the subcontractors. But start by giving your GC a specific list of what documentation you need from each aspect of the project. Most good contractors have dealt with this before and should know what to provide.
A tip from someone who got audited on Energy Star credits last year - save DIGITAL copies of everything! I had all the right paperwork but couldn't find some of the manufacturer certifications when the IRS came knocking 2 years later. Now I take pictures of all documentation and store it in cloud storage alongside the receipts. The IRS accepted my digital copies during the audit. Also, make sure installation dates are clearly documented. I had some work done in December 2023 but wasn't billed until January 2024, and it created confusion about which tax year the credit belonged to.
Had the same error code last year. In my case, I had started a return using TurboTax, then switched to H&R Block software but the TurboTax one had already been submitted even though I never finished it. Check if you started returns on multiple platforms or if you maybe authorized a preparer to file an extension for you. Worst case, do what others suggested - file a paper extension today and sort out the details later. As long as you get that postmarked today, you'll avoid the late filing penalty. Then take your time figuring out what happened.
This happened to my brother too! TurboTax apparently auto-submitted something even though he hadn't finished. The whole system is ridiculous. He ended up having to file an identity theft affidavit just to get his actual return processed.
Yeah, many tax software platforms have automatic submission features that aren't always clearly explained. Some will submit a partial return or an extension if you've entered basic info but haven't completed the process. It's always worth checking with any software you might have used. It's actually a lot more common than people realize. The IRS systems aren't great at distinguishing between a completed return and one that was just initiated with basic information. That's why filing that paper extension is so important - it gives you documentation and time to sort everything out.
I'm a tax preparer and see this frequently. Another possibility: if you received certain benefits last year (like stimulus or advance child tax credit), the IRS system sometimes treats the information return for those payments as an actual tax return. Call the IRS Practitioner Priority Line if possible - they can sometimes see things in the system that regular customer service can't.
Is there any way normal people can access that Practitioner line? Or do you need some kind of credentials?
AstroAlpha
Just to add another perspective - even if you don't technically have to file for such a small amount, there are advantages to filing Schedule C anyway. You can establish a pattern of business expenses that can help if you're ever audited in future years when you make more money. Plus, those business losses can sometimes offset other income. I've been running my small woodworking business for years and always file even in low income years.
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Yara Khoury
ā¢How many years can you show losses before the IRS considers your business a hobby though? I heard they get suspicious if you're always operating at a loss.
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AstroAlpha
ā¢The IRS generally expects you to show a profit in at least 3 of the last 5 tax years to be considered a legitimate business rather than a hobby. If you consistently show losses year after year, that's when they might question whether you have a profit motive. However, for a new business like yours, it's completely normal to have losses or very small profits in the beginning years. They understand businesses take time to become profitable. Just make sure you're operating in a businesslike manner - keep good records, have a separate business bank account, and be working toward profitability.
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Keisha Taylor
Has anyone used TurboTax for filing Schedule C for a tiny business like this? Is it worth the extra cost for the self-employed version?
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Paolo Longo
ā¢I've used TurboTax Self-Employed for my small Etsy shop and it works fine, but honestly it's overkill if you just have a few transactions. You might be better off with FreeTaxUSA which is a lot cheaper and handles Schedule C just fine for simple situations.
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