1 I've heard about the S-Corp option but wasn't sure if it was worth the extra paperwork and compliance requirements. What income level do you think makes the S-Corp election worthwhile? And did you need to hire a specialized accountant to handle it?

22 Most tax professionals suggest considering S-Corp election when your business profit exceeds about $40,000-$50,000 annually. That's typically where the self-employment tax savings outweigh the additional costs of compliance. I did hire a specialized accountant because the S-Corp has more filing requirements including an annual 1120S corporate return. The costs run me about $1,200 annually for tax preparation, but I save around $4,000 in self-employment taxes, so it's definitely worth it. You'll also need to run regular payroll and maintain more formal business documentation, but the tax savings can be significant once your business is consistently profitable.

11 I used TurboTax Self-Employed last year for my single-member LLC with both 1099s and W-2 (I pay myself). It worked well and walked me through reporting the 1099 income on Schedule C, entering business expenses (including my salary to myself), and then separately entering my W-2. Just make sure you enter your salary as a wage expense on Schedule C - this is critical to avoid double taxation.

Do those services automatically generate and file the 1099-NECs at the end of the year? That's my biggest headache with contractors.

Yes, all three services I mentioned can automatically generate and e-file 1099-NECs based on the payments you've processed through them throughout the year. They collect and verify contractor W-9 information upfront and track all payments. QuickBooks is probably the most comprehensive if you use their accounting system too, but even standalone Melio or Bill.com will handle the 1099 filing process. They usually charge a small fee per 1099 (like $3-5 each), but the time saved and accuracy is absolutely worth it compared to manually preparing them.

I agree with this. I've been running a small photography business for 5 years and have occasionally messed up payment classifications. As long as you issue the correct 1099s at tax time, how you actually transferred the money is less important. The IRS wants the income reported correctly on both sides.

Thanks for the suggestion! I've actually been thinking about getting out of real estate altogether, so a 1031 exchange probably isn't right for me at this point. But I appreciate the idea - if I was looking to stay in the landlord business, that would definitely be something to consider to avoid the recapture hit.

Yes, an installment sale can help spread out the tax hit. When you sell with owner financing and receive payments over multiple years, you can spread the depreciation recapture tax over the payment period rather than paying it all in year one. However, there's a catch - if the mortgage on your property exceeds your basis, you might face something called "mortgage over basis" that can trigger immediate gain recognition.

Do tie-breaker rules automatically apply or do you have to specifically claim them somehow? And would using them affect their green card status?

You have to specifically claim treaty benefits by filing Form 8833 (Treaty-Based Return Position Disclosure) with your tax return. It's not automatic - you need to identify which specific treaty provision you're claiming and explain why it applies to your situation. Using tie-breaker rules can potentially affect immigration status long-term. The IRS and USCIS don't directly share this information, but claiming to be a non-resident for tax purposes while holding a green card can raise questions about your intent to permanently reside in the US during future immigration proceedings. It's a bit of a balancing act that should be discussed with both a tax professional and an immigration attorney.

That's correct. Form 8840 is specifically for non-resident aliens who meet the substantial presence test but wish to claim a closer connection to a foreign country. Green card holders cannot use Form 8840 because they're already considered U.S. tax residents regardless of their physical presence. The only way for green card holders to be treated as non-residents for tax purposes is through an applicable tax treaty using Form 8833, or if they've formally abandoned their permanent resident status.

This is such an important point! When my friend got married, her husband had back taxes and liens. When they filed jointly, her refund got seized to pay HIS old tax debts. She was furious because she had no idea this could happen.

Exactly! The IRS calls it "joint and several liability" which basically means both spouses are fully responsible for all taxes due, regardless of who earned the income or claimed deductions. There is something called "innocent spouse relief" that can help in extreme cases, but it's difficult to qualify for and a huge hassle to go through. Much easier to just file separately if you have any concerns about your spouse's tax situation.

This is a great point! Another situation where filing separately can help: income-based student loan repayment. If one spouse has federal student loans on an income-driven repayment plan, filing separately can keep their payments lower since only their income counts.

You're absolutely right about the student loan situation! I forgot to mention that was actually another factor for us. My wife is on an income-based repayment plan for her grad school loans, and filing separately kept her monthly payments about $180 lower than they would have been if we filed jointly. The tradeoff is we lost some tax credits, but the yearly savings on loan payments more than made up for it. Definitely a situation where you need to do the math both ways.