


Ask the community...
Just a heads up that getting this wrong can trigger an audit! My sister's salon got audited because she was inconsistent with how she categorized supplies vs. small equipment with de minimis. The auditor specifically looked at how she categorized product that was used in services vs. sold retail. Make sure you're consistent year to year with your approach! If you use de minimis for certain categories, keep using it that way. Sudden changes in how you categorize things can raise red flags.
Just a quick reality check - as a CPA who works with many salon owners, this question comes up constantly. Here's the simple version: 1) Supplies used up within a year in services (color, shampoo, etc.) = regular business expense on Schedule C 2) Equipment under $2500 that lasts multiple years (tools, iPads, etc.) = can use de minimis if you elect it 3) Retail products you sell = inventory (different rules entirely) For FreeTaxUSA, just group by category. "Hair color & chemical supplies - $X,XXX" is totally fine as one line. Hope that helps!
Don't forget that amending in FreeTaxUSA will likely cost you some money. They charge like $15-20 for amendments even if you filed for free originally. And if you need to amend both federal and state returns, that's separate fees. Also be prepared for a LONG wait. IRS is still processing amended returns very slowly - like 20+ weeks in some cases.
Don't forget about all the other business expenses you can write off besides just rent! Since you do videography and photography, you can deduct: - Equipment purchases (cameras, lights, etc.) - Software subscriptions (editing software, cloud storage) - Travel to shoots (mileage or actual expenses) - Professional development (courses, workshops) - Marketing expenses (website, business cards) - Props and backdrops - External hard drives and memory cards These can add up to more savings than the home office deduction in many cases!
Thank you so much for this list! I've been deducting my equipment and software, but I completely forgot about tracking mileage to shoots. Do you know if there's a good app for tracking business miles? And can I retroactively claim mileage from earlier this year if I didn't track it at the time?
There are several good mileage tracking apps - MileIQ, Everlance, and Stride are popular ones. Most have free versions with limited trips and paid versions for more frequent drivers. For past mileage, you can create a log retroactively, but you'll need to provide reasonable documentation. Look through your calendar, emails, or invoices to find dates of shoots. Then use Google Maps to determine the mileage for each trip. Keep this log with addresses, dates, purpose of trips, and miles driven. It's not ideal, but it's better than losing the deduction entirely. Going forward, I'd strongly recommend using an automatic tracking app.
One thing nobody mentioned - if you're renting and want to take the home office deduction, make sure your lease allows for business use! I got in hot water with my landlord when they found out I was running a business from my apartment. Some leases specifically prohibit using the space for commercial purposes.
This is so important! I had to renegotiate my lease when my landlord found out. Also worth checking your city's zoning laws - some municipalities have restrictions on home-based businesses, especially if clients come to your location.
Has anyone used any tax software that makes amending 1099s easier? I'm using QuickBooks and it's not very intuitive for handling corrections.
I've had good experiences with Track1099 for corrections. Their interface is really straightforward for amendments - there's literally a "create correction" button that walks you through the process step by step.
Just a heads up - if your original 1099 had an incorrect TIN (tax ID number) for the contractor, the correction process is slightly different. You'll need to: 1. Create a new 1099 with all zeros in the amount boxes 2. Mark it as "CORRECTED" 3. Submit this to void the original 4. Then create another NEW 1099 with the correct TIN and amounts 5. Don't mark this one as "CORRECTED" Made this mistake last year and had to redo everything a third time.
Melina Haruko
I'm an accountant and see this confusion with clients all the time. The exchange is probably calculating your cost basis correctly, but it's important to understand what it actually means. Cost basis isn't the amount of money you put in - it's the sum of the value of each asset at the time you acquired it. If you're actively trading between different cryptocurrencies, your cost basis will be much higher than your initial investment. Example: You buy $1000 of Bitcoin, it grows to $1500, you trade it all for Ethereum. Your new cost basis for the Ethereum is $1500, not your original $1000. Regarding audit risk - the IRS is primarily looking for people who don't report crypto transactions at all. Since you're keeping track and reporting everything, your audit risk is much lower than someone hiding their crypto activity completely.
0 coins
Mateusius Townsend
ā¢Thank you for explaining this! Does this mean when I file taxes I need to report that full $47,500 cost basis amount on my forms? Or just the actual profits I've made when I've sold back to USD?
0 coins
Melina Haruko
ā¢You need to report all transactions where you disposed of cryptocurrency - either by selling it for USD or trading it for another crypto. For each transaction, you'll report both the proceeds (what you received) and the cost basis (what you paid for it originally). If you use tax software or Form 8949, you'll list each transaction separately. So yes, the total cost basis across all your transactions might add up to that $47,500 figure, but your taxable gains will only be the difference between your total proceeds and total cost basis. If you've only made $650 in actual profit, that's all you'll pay taxes on - not the full cost basis amount. This is why good record-keeping is essential with crypto.
0 coins
Dallas Villalobos
Has anyone used Koinly or CoinTracker for this? My exchange is showing crazy numbers too and idk which software is best for figuring out the real tax situation.
0 coins
Reina Salazar
ā¢I used CoinTracker last year and it was ok but missed some DeFi transactions. Had to manually input a bunch of stuff. Haven't tried Koinly though.
0 coins
Saanvi Krishnaswami
ā¢I've used both. Koinly was better for me because it handled my NFT transactions properly. CoinTracker kept treating my NFT trades as regular crypto and messed up the cost basis calculations. But it depends on what kind of crypto activity you have.
0 coins