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One thing nobody's mentioned - if your donation to the school was for a raffle, you need to be extra careful. The IRS treats raffles differently than regular donations. The school should have given you documentation that specifically states the donation was for a charitable fundraiser. Just make sure the letter doesn't say it was a "raffle prize" but rather a "donation of goods to support educational fundraising" or something similar. It's a small distinction but can matter if you get audited.
Thanks for bringing this up! The letter they gave me does say "donation to support school fundraising activities" and doesn't specifically mention raffle or prize. So I'm guessing that's the right wording? Should I request any additional documentation from them before filing?
That wording sounds perfect! It acknowledges your charitable intent while not specifically tying it to the raffle mechanism. You should be good to go with that documentation. I wouldn't request additional paperwork as that might just complicate things. Just make sure you have your receipts showing your costs alongside the donation acknowledgment letter. For business expenses under $250, the documentation requirements aren't as strict, but since your total was $275, having both the letter and receipts provides the complete documentation package you'd need in case of questions.
Does anyone know if there's a minimum donation amount for taking the business deduction? I donated a small basket worth about $50 to my kid's soccer team fundraiser and wonder if it's even worth tracking.
There's no minimum for business deductions. But honestly for $50, you might spend more time documenting it than it's worth in tax savings. If your tax rate is say 20%, you're talking about saving $10. But if you're already tracking all expenses carefully anyway, might as well include it!
Don't forget the HOLDING PERIOD issue!! Everyone's talking about the exercise tax hit, but there's also huge tax implications for how long you hold the shares AFTER exercising. If you exercise now and hold for >1 year after IPO before selling, any gains ABOVE the FMV at exercise would be long-term capital gains (15-20% tax). If you exercise at IPO and immediately sell, it's ALL ordinary income (up to 37% federal + state + FICA). This was a game-changer for me - exercised my NSOs 14 months before our IPO, paid taxes on a smaller spread, then got LTCG treatment on the massive post-IPO appreciation.
This is absolutely correct. I made the mistake of exercising right at our IPO and selling within the year. Ended up paying nearly 45% (combined federal, state, local) in taxes on the full value. A colleague who exercised a year earlier paid ordinary income on the smaller pre-IPO spread, then only 15% on the huge jump from exercise to IPO price. Difference was over $100k in taxes on roughly similar option grants.
Something I learned the hard way: that 409(a) valuation of $10.50 isn't guaranteed to stay static until IPO! Our company had THREE valuation increases in the 9 months before IPO, with the final one being almost 70% of the eventual IPO price. If your company is gaining momentum toward IPO, the 409(a) valuation will likely increase in the coming months, potentially eliminating some of the tax advantage of exercising early. Maybe consider a partial exercise now to lock in the current valuation for some of your shares? Also, do you know if your company will offer a cashless exercise option at IPO? That's important for your cash flow planning.
That's a really important point about the 409(a) potentially increasing! I hadn't considered that but it makes total sense as we get closer to IPO. I like the idea of a partial exercise strategy. Regarding cashless exercise - I've heard rumors that we'll have that option at IPO, but nothing confirmed in writing. I should probably ask our finance team about this. Would that essentially mean I could exercise and immediately sell enough shares to cover the exercise cost and taxes?
Exactly - a cashless exercise at IPO would let you exercise options and immediately sell enough shares to cover both the exercise cost and the resulting tax bill, without needing to come up with cash out of pocket. Very common for IPOs. If that's an option, you might want to hold some options for that route, especially if you're cash-constrained. The tax hit will be higher, but you won't need liquidity. Many people do a mixed approach - exercise some now for tax advantages (if you have the cash), and save some for cashless exercise at IPO to diversify risk. Definitely get confirmation from your finance team though - some companies require you to exercise before IPO to participate in the offering!
Honestly, most people are wasting money at places like H&R Block. I've used TaxSlayer for the last 3 years and it's been way cheaper (around $60 total for federal and state) and super easy to use. Has all the same features as TurboTax but without the higher price tag. Unless you have a really complicated situation (like owning a business, multiple rental properties, or complicated investments), the tax software options are more than enough. The people at those tax prep places are usually just entering your info into similar software anyway, but charging you $200+ for the privilege!
Do you know if TaxSlayer handles crypto transactions well? I did some trading last year and heard that can be a nightmare to report correctly.
TaxSlayer does handle crypto transactions, but I found it to be somewhat limited for more complex crypto situations. It works well if you have straightforward trades from major exchanges that provide good documentation. If you have extensive crypto activity across multiple platforms or DeFi transactions, you might want to use specialized crypto tax software first (like CoinTracker or Koinly) to generate the necessary forms, then import those into TaxSlayer. That's what I did this year after struggling with manual entry last year, and it was much easier.
Spent 15 years as a tax preparer and here's my honest take: the best tax accountants are local CPAs or EAs (Enrolled Agents) who specialize in your specific situation. BUT they're expensive ($350-600 typically). For most people with W-2s and simple investments, TurboTax, TaxAct, or FreeTaxUSA are perfectly fine and will save you hundreds. The big chains like H&R Block often employ seasonal workers with just basic trainingβyou're paying premium prices for entry-level knowledge. One trick: if your adjusted gross income is under $73,000, you can use the IRS Free File program partners to file federal taxes completely free. Many states have similar programs.
This is super helpful! Is there any way to know if I qualify for free file without going through the whole process first? I'm right on the edge income-wise.
Quick tip from someone who does this regularly - if your income is genuinely below all thresholds, you might not even need to file a self assessment next year. You can call HMRC and ask to be taken out of self assessment if you no longer meet the criteria. Common reasons people stay in self assessment unnecessarily: - They had a one-off income spike - They started self-employment but then stopped - They previously had multiple income sources but now just have PAYE Just something to consider if your situation has changed permanently.
That's really helpful, thank you! My situation was exactly that - I had a side business that generated decent income in 2020-2021, but I closed it down last year. Would I just call HMRC after filing my 2021-2022 return to ask to be removed from self assessment?
Yes, that's right! Complete your 2021-2022 return first (which will show your income is below thresholds), then call HMRC and explain that you've closed your business and no longer need to be in the self assessment system. They'll ask a few questions to confirm you don't meet any of the criteria, and if they agree, they'll remove you from the system. Make sure you keep the confirmation they send you about this. Most people find it's a huge relief not having to worry about the annual self assessment deadline anymore!
Just to add to what others have said - be careful with the timing. If you reduce your payment on account and later your actual income turns out to be higher than you estimated, HMRC will charge interest on the underpayment. Not trying to scare you - if your income is genuinely below thresholds then you're fine! But I made a mistake once where I forgot about some dividend income that pushed me over the threshold, and ended up paying interest.
Liam O'Donnell
Let me add something that nobody has mentioned yet - make sure you're filling out Part IV of Schedule C where you answer questions about material participation and whether you started or acquired this business during the tax year. Many people skip this section, but it's crucial for establishing that this was a legitimate business activity, especially when you're showing losses. Also, consider adding a statement to your return that explains your business plan and why you reasonably anticipated making a profit eventually. This proactive documentation can help if questions come up later.
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Aisha Rahman
β’Would you recommend attaching some kind of profit projection or business plan to my return? I did have one when I started, showing how I planned to monetize once I hit certain view thresholds. Just wasn't sure if that would help or draw more attention to the loss.
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Liam O'Donnell
β’I wouldn't attach the full business plan to your return as that might actually draw unnecessary attention. Instead, keep it with your tax records in case of an audit. What can be helpful is a brief statement with your return explaining the nature of your business, that you operated with an intent to profit, and mentioning that you have documentation of your business plan and efforts. This shows you're aware of the requirements without overwhelming the initial filing with extra documents.
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Amara Nwosu
Has anyone mentioned the potential impact on your Social Security earnings? If you're offsetting your W2 income with Schedule C losses, it could reduce your Social Security wages and potentially lower your future benefits. Something to consider when claiming significant business losses against high W2 income.
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AstroExplorer
β’This is actually a common misconception. Schedule C losses don't reduce your Social Security wages from W2 employment. Your W2 income is still fully reported for Social Security purposes regardless of Schedule C losses. The losses might reduce your overall income tax, but your Social Security contributions and credits remain based on your W2 earnings.
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