Do you think QuickBooks is worth the monthly cost? I've been using a spreadsheet so far but it's getting unwieldy as my business grows. Are there any free alternatives that are decent?

Absolutely worth the cost in my opinion. The time savings alone pays for itself - what used to take me hours each month now takes minutes. Plus it reduces the chances of errors or missing deductions. The mileage tracker alone saves me hundreds in deductions I would have forgotten to log. There are free alternatives like Wave Accounting which is decent for basic bookkeeping. But they typically lack the more advanced features like receipt scanning and mileage tracking. If you're grossing $135k, investing $15-25 per month in proper accounting software is definitely worth it. Just remember to deduct the subscription cost as a business expense!

Does anyone know if disability insurance is also deductible? I've been thinking about getting it since as a sole proprietor I don't have any safety net if I get sick or injured and can't work.

Would option 2 trigger an audit or get her employer in trouble? She likes her job and doesn't want to cause problems, just wants to file correctly.

Filing Form 8919 with code H generally won't trigger an audit for your stepdaughter - it's a fairly common form used specifically for these situations. The form itself doesn't automatically lead to employer penalties. However, it does potentially flag the employer's practices to the IRS. This doesn't mean they'll immediately get audited, but if many employees file this form, it could eventually lead to questions for the employer. That said, your stepdaughter's primary concern should be filing her taxes correctly, not protecting her employer from their own incorrect practices. The employer is already putting her at a financial disadvantage by making her pay extra taxes.

I used TurboTax last year for exactly this situation. It can definitely handle it, but you need to be careful about how you enter it. Don't just enter the 1099-NEC in the "self-employment income" section automatically or you'll end up paying too much tax. Instead, when you get to the income section, look for the option about "Form 8919" or something like "I received a 1099 but should have received a W-2" (wording might vary slightly). TurboTax will then guide you through filing with Form 8919 which is much better than filing Schedule C for misclassified wages.

How detailed do these records need to be? Like do I need to track each expense category separately for the carryover or just the total loss amount each year? I've been just writing the total on a notepad file on my computer...

You should definitely track more than just the total. At minimum, track each property separately if you have multiple rentals, the total loss for each property each year, how much was allowed to be deducted (if any), and the running balance of disallowed losses. I also recommend keeping a copy of the complete Schedule E and Form 8582 for each year, not just the totals. During my audit, the IRS wanted to see the connection between what was reported on Schedule E and what flowed to Form 8582, including all allocation calculations. I had some losses that were partially allowed due to passive income from other sources, and they scrutinized how I calculated those allocations.

Short-term rentals can actually be treated differently in some cases! If your average rental period is 7 days or less, the IRS may consider it a "business" rather than a rental activity. This means it might be reported on Schedule C instead and subject to different passive activity rules. The material participation standards would apply instead of the rental real estate rules.

Do you know if there's a secondary market for these credits if someone needs to cash out early? Like if I buy them but then need the money back before using all the credits - can I resell them?

Yes, there is typically a secondary market for unused transferable tax credits, though it varies significantly by state. In Louisiana, for example, you can resell unused film credits, but you'll likely take another haircut on the price - meaning you'd sell at an even deeper discount than what you paid. The marketability also depends on the credit type and remaining utilization period. Credits with longer remaining lifespans and from more established programs (like historic preservation) tend to be more liquid than newer or more niche credit programs. Some states also have restrictions on how many times a credit can be transferred, so you'd need to check your specific state's rules.

What documentation did you receive when you purchased the credits? I'm considering buying some but don't know what paperwork to expect or what should raise red flags.

For my purchases, I received several key documents that you should absolutely expect if you go forward with buying credits. For the NJ solar credits, I got the original credit certificate from the state showing the amount and validity period, a notarized transfer document signed by the original credit recipient, and confirmation from the state tax authority that the transfer was recorded in their system. For the GA film credits, the documentation was similar but also included the production company's certification letter from the film commission. When purchasing any credits, you should always get written verification from the state that the credits exist and haven't been previously transferred or used. Some states have online systems where you can verify this information directly. The biggest red flags would be reluctance to provide proper documentation, pressure to complete the transaction quickly without verification, or inability to explain the origin and certification of the credits.

That's not right. Form 8379 is for when your spouse's past-due obligations (like child support) are affecting your portion of a joint refund. This is a different situation with two separate returns claiming the same dependent.

You're absolutely right, I got the forms mixed up. Form 8379 is for injured spouse allocation, not dependent disputes. What I should have suggested is that OP needs to file a paper return claiming the child as entitled, along with all supporting documentation. There isn't actually a specific form for this situation - the paper filing itself is the process. Thanks for the correction!

You can't actually "cancel" a tax return once it's been accepted by the IRS. The only option at that point is to file an amended return, which is what OP's partner already did.

I didn't know that! I thought you could cancel within a certain timeframe if you made a mistake. Thanks for the correction. I guess the paper return is really the only option then, like others have suggested. Definitely file before the deadline, even if it means sending in an incomplete return with a note that you'll provide additional documentation.