Wait, can you really deduct car repairs if you use your car for both personal and business? How does that work with the standard mileage deduction? I thought it was one or the other?

You're absolutely right about the standard mileage rate vs. actual expenses - it's one or the other. If you take the standard mileage rate (which is 67 cents per mile for 2024), that's meant to cover gas, insurance, repairs, depreciation, etc. If your car costs are really high, you can instead choose to deduct actual expenses, but you'll need to track everything and then deduct the business percentage. For most people, especially with older vehicles, the standard mileage rate is simpler and often more beneficial. Just make sure you're keeping a detailed mileage log either way!

This information is outdated. The IRS eliminated Form Schedule C-EZ after the 2019 tax year. All self-employed individuals now use the regular Schedule C, regardless of income amount or business complexity. The good news is that most tax software makes filling out Schedule C pretty straightforward, even for simple situations. Just answer the questions the software asks, and it will complete the form properly.

Thank you so much for clarifying this! So when I'm filling out the value portion, should I use the current market value of the account or the amount that I've personally contributed so far? It's only been about 8 months since I started contributing.

For the 433-A form, you should use the current market value of your account, not just what you've contributed. This would include any growth or losses in the investments, plus any matching contributions your employer might have made. You should be able to find the current value by logging into your account online or checking your most recent statement. The IRS wants to know the total amount you could potentially access (even with penalties) because they're assessing your overall financial situation.

Is there any real difference between a 403(b) and a 401(k) from the IRS perspective? Like if someone accidentally marked 401(k) instead of "other" for their 403(b)/SRA, would that cause problems?

Thanks for mentioning the SEP IRA option! Do you know what the contribution limits are compared to the Solo 401k? And is it true there's less paperwork involved? The Form 5500 requirement for Solo 401ks once you hit $250k sounds like a potential headache.

For a SEP IRA, you can contribute up to 25% of your net self-employment income with a maximum of $66,000 for 2023. With a Solo 401k, you can contribute $22,500 as an employee plus that same 25% of income as the employer contribution, still capped at $66,000 combined. The paperwork difference is significant. With a SEP, there's no annual filing requirement regardless of account size - just set it up once and make contributions. Solo 401ks require Form 5500-EZ filing once assets exceed $250,000, which isn't super complicated but is an extra annual task. For many small business owners, the simplicity of a SEP outweighs the potential for slightly higher contributions with a Solo 401k.

Did you have to start running payroll for yourself to contribute to the Solo 401k? That's the part that confuses me with my LLC.

Thanks for the tip! I actually went back and checked my W-2 and you're right - the retirement plan box is checked but I definitely didn't select that in TurboTax. I didn't even notice that option when going through the questions. Do you remember where in TurboTax I need to go to fix this?

You should be able to find it by going back to the W-2 entry section in TurboTax. Look for a section that says something like "Does your employer offer a retirement plan?" or there might be a specific checkbox when entering your W-2 information. If you're not seeing it there, try looking in the "Deductions & Credits" section under retirement savings options. Sometimes TurboTax splits these questions into different sections which can cause these kinds of mismatches. Once you get the information entered correctly to match your W-2, the paper filing requirement might disappear.

This is a good point. I ran into this with New York one year because I'd moved mid-year and the address discrepancy triggered a paper filing requirement. Double check all your personal info matches what the IRS has on previous returns or communications.

Does this mean you still have to pay taxes during that waiting period? Our animal rescue just applied for 501(c)(3) status but we're not sure how to handle income and expenses while waiting.

Generally, if your 501(c)(3) application is ultimately approved, the tax-exempt status is retroactive to your date of incorporation, provided that was within 27 months of your application. So technically, you might not owe taxes even during the waiting period. However, you still need to file the appropriate information returns (usually Form 990 series) during this time. It's also smart to set aside funds just in case your application is denied and you do end up owing taxes on income received during this period. For your animal rescue, I'd recommend tracking all income and expenses very carefully, following non-profit accounting practices from the start, and being transparent with donors about your pending status.

This is actually an important distinction that others haven't mentioned! Are we talking about personal tax returns or the organization's filing? I've been assuming the organization's taxes, but now I'm confused.