I actually hadn't thought to check the partnership agreement for that. I inherited this share and just kind of accepted what I was told. Is this something that would be obvious in the agreement or would it be buried in legal language?

It would typically be in a section about "Distributions" or "Tax Matters." It might use language like "The Partnership shall make distributions to Partners in amounts at least sufficient to cover their tax liabilities resulting from allocated Partnership income." If you can't find your copy of the agreement, you should request one from the management company. Even without a specific tax distribution provision, you could try negotiating with the other partners. Sometimes partnerships can do special tax distributions even without a formal requirement if all partners agree.

Selling a minority interest in a private partnership can be really difficult though. I tried to sell my share in a similar situation and the discounts were ridiculous - like 70% below what I thought it was worth based on the underlying real estate.

For 2024 taxes (filed in 2025), the Child and Dependent Care Credit allows you to claim up to $3,000 in expenses for one child or $6,000 for two or more dependents. The credit percentage ranges from 20-35% of those expenses depending on your income. The percentage decreases as your income increases, with the 35% rate applying to those with AGI below $15,000. For most middle-income families, you'll get 20% of your qualifying expenses. Since you spent $8,400, you'd be limited to claiming the $3,000 maximum for one child. At the 20% rate, that would be a $600 credit. This is a non-refundable credit, so it can only reduce taxes you owe to zero, not generate a refund beyond that.

Thank you so much for explaining! That makes way more sense now. So basically even though I spent $8,400, I can only claim $3,000 of it, and then I get 20% of that amount as an actual credit on my taxes. That's much less than I was hoping for, but at least it's something.

Check out the IRS Free File program. If your AGI is under $73,000, you can file federal taxes for free. The Free File Alliance has different providers, and some even offer free state filing too. TaxAct, TaxSlayer, and 1040Now are usually good options. Make sure you go through the IRS website (irs.gov/freefile) to access the truly free versions. If you go directly to the company websites, they often push you toward paid versions.

How did they catch him? Was it also through payment apps or did someone report him?

It was actually through social media. He was advertising his training services on Instagram and Facebook, and someone (probably a competitor) reported him to the IRS. They have a whistleblower program where people can report suspected tax fraud. Once they started looking into him, they found the payment app transactions didn't match his reported income. It was really stressful for him, and he ended up having to hire a tax professional to help sort everything out, which was another expense on top of the penalties.

Yes! All of that counts as business expenses. Keep your receipts though. Also track mileage if you drive to buy supplies or meet clients anywhere outside your home. That adds up fast at the current deduction rate.

Do you have a template or example of how you organize everything? I've just been keeping a folder of receipts but your system sounds much better. Also, do you track things like percentage of internet/electricity used for streaming?

I use a simple Google Sheet with columns for Date, Item, Cost, Category (equipment, games, subscriptions, etc.), and Notes (where I document why it's streaming-related). Nothing fancy but it works great! For internet and utilities, I keep it simple - I calculate the percentage of square footage my streaming setup takes in my home and the percentage of time I use it for streaming, then multiply those together to get a reasonable deduction percentage. For example, my setup is in about 10% of my home's space and I use it for streaming about 30% of the time I'm in that space, so I deduct 3% of those bills. The IRS rarely questions this method as long as you're reasonable and consistent.

Since we've established that Twitch royalties typically go on Schedule E (not Schedule C), they don't count as earned income for the Earned Income Tax Credit. This means they won't help you qualify for the EITC, but they also won't mess up your EITC calculation from your W-2 job. However, if some of your streaming income comes from other sources (like direct donations or merchandise) that would go on Schedule C, that portion could potentially affect your EITC - though in your case with an overall loss, it probably wouldn't negatively impact your credits.

Thanks for this suggestion! Do you know if taking this approach creates any issues with the foreign partner's home country taxation? I'm concerned about creating unintended tax consequences for them.

The impact on home country taxation depends entirely on which country your partner is from. Every country has different rules for how they tax their residents on foreign income, and how they treat entities that are disregarded or classified differently in the US tax system. For instance, if your partner is from a country with a territorial tax system, they might not face additional tax on US business income. But if they're from a country with a worldwide tax system, they'll likely need to report the income regardless of the structure, though foreign tax credits may be available to offset double taxation.

Our partnership faced this exact issue! Did you consider having the LLC elect corporate status? We're currently evaluating that option but concerned about the additional tax burden.