That's a really smart point about considering future income growth! Do you know off-hand what the depreciation percentages would be for each year if I went the MACRS route? And did you have to file any special forms when you did this?

For 5-year property under MACRS with the half-year convention, the percentages are roughly: 20% in year 1, 32% in year 2, 19.2% in year 3, 11.52% in year 4, 11.52% in year 5, and 5.76% in year 6. But since you're starting in the year after purchase, you'd use 32% for this year. Yes, you'll need to file Form 4562 (Depreciation and Amortization) with your Schedule C regardless of which method you choose. It's not particularly complicated, but tax software makes it much easier. The form has specific lines for listing your depreciable business assets and the method you're using.

I used TurboTax Self-Employed last year for my freelance business, and it does handle depreciation including Section 179 and MACRS. It asks a series of questions about when you purchased the equipment, what it's used for, and then gives you the options. It filled out Form 4562 automatically based on my answers. The interview process was pretty straightforward for basic equipment like computers. If you have more complex assets it might be worth getting additional help, but for a laptop used for tutoring, TurboTax should be fine.

That's super helpful, thanks! Sounds like it should work for my situation too. I was worried I'd need to understand all the depreciation rules myself, but it sounds like TurboTax guides you through it. Appreciate the feedback!

Thanks for mentioning that about eBay handling the sales tax now. I didn't realize that! So I just need to focus on accurately reporting my cost basis vs. selling price on my tax return? Do you know if it matters whether these were personal items vs. items I bought with the intention to resell?

For the IRS, intent does matter. If these were truly personal items you originally bought for yourself (not with intention to resell), then you're generally not taxed on sales unless you sell for more than your purchase price. Many personal items actually sell at a loss, which isn't deductible for personal items. If you bought items specifically to resell, that's different - you'd report all profit as business income on Schedule C and could deduct legitimate business expenses. The line gets blurry when you're selling collectibles that appreciated in value while you owned them. Those can be subject to capital gains tax (usually at higher collectible rates of 28% versus normal capital gains rates).

The 1099-K thresholds are actually changing! Congress kept pushing back the $600 reporting threshold. It was supposed to start in 2022, then 2023, and now it's delayed again. So confusing to keep track of. I think we're still at $20K/200 transactions for 2023 tax year.

Does FreeTaxUSA handle more complicated returns? I use Free Fillable Forms because I have some unusual deductions and self-employment income that the regular free versions of TurboTax etc. won't handle.

FreeTaxUSA handles pretty much everything, including self-employment, investments, rental properties, etc. The federal filing is free regardless of complexity, you only pay if you want them to file your state return (and even that's much cheaper than TurboTax). The interface is way more user-friendly than Free Fillable Forms too - it actually checks for errors before submission and explains things clearly. I had some complicated stock sales and business deductions and it handled everything perfectly.

Thanks for the suggestion! I actually tried on both Chrome and Firefox already, but I haven't tried Edge. Did you create a completely new return or were you able to fix the existing one? I'm hesitant to start over since I've already entered so much information.

Thanks for mentioning this! That's exactly what I was worried about. Better to report everything now than deal with notices later. Is there a threshold for the amount that triggers these notices?

There's no specific threshold that I know of. The IRS automated matching program seems to flag any discrepancy, regardless of amount. My brother's notice was for less than $100 in unreported interest income, so even small amounts get caught. The bigger issue is that responding to a CP2000 notice takes time and can be stressful, plus if you end up owing, they'll add interest and possibly penalties from the original due date. Much simpler to just include everything correctly the first time.

This is incorrect advice. Schedule B is for interest and dividends, not capital gains from trading. Capital gains need to be reported on Schedule D and Form 8949. Even with basis reported to the IRS, you still need to include the transactions on your return.

This is really helpful, thanks! Do you know if the IRS has issued any specific guidance about this for crypto specifically? I've looked around but couldn't find anything that explicitly says "summary reporting is fine for crypto.

The IRS hasn't issued explicit guidance saying "summary reporting is fine for crypto" specifically, but they treat crypto as property for tax purposes, which means it follows the same reporting principles as other capital assets (like stocks). The instructions for Form 8949 do mention that you can use a separate statement for reporting multiple transactions, which is essentially what summary reporting is. In practice, the IRS is more concerned with accurate reporting of the totals rather than seeing each individual transaction on the form itself.

My brother got audited last year and had a lot of crypto trades. They basically just wanted to see his transaction records and make sure the totals matched what he reported. They didn't dig into each individual transaction, just verified he had proper documentation for everything.