Did your friend have to completely dissolve the LLC eventually or were they able to make it work? I'm trying to understand if this is simply complex but doable vs actually impractical for most people.

They didn't dissolve it, but they had to restructure everything. They created a management company outside the IRA that handled all operations, then the IRA-LLC just became a passive investor in certain aspects of the business. Made the whole setup way more complicated and expensive than just running a regular business. The fees were also eye-opening - about $1,500 in annual custodian fees, plus tax preparation costs for the LLC itself and Form 990-T filings. For a blog, unless you're making serious money (like $50k+ annually), the compliance and administrative costs would probably eat most of your profits.

That's such a good point. I didn't even think about the practical aspects of running the business. Would using personal credit cards for blog expenses count as a prohibited transaction too?

That's interesting! I never heard of that approach. Is that completely legitimate with the IRS? And would there be any downsides to doing it this way versus the relief procedure mentioned above?

It's a legitimate strategy that works in certain situations, but it doesn't bypass all timing rules. The Form 8832 election to be treated as a C Corporation can be made at any time and can be effective up to 75 days prior to the filing date or up to 12 months after the filing date. The potential downside is that you'll need to meet the S Corporation election deadlines that apply to newly formed corporations (generally within 2 months and 15 days after the effective date of the C Corporation election). You also need to ensure you don't inadvertently create a short C Corporation tax period that could have tax consequences. Definitely consult with your tax professional before attempting this route to make sure it applies to your specific situation.

What's considered "reasonable" though? My accountant said 60% salary/40% distributions but my business partner's accountant said we could do 40% salary/60% distributions. There's no clear rule!

Do you find that 30% is enough to cover both federal and state? I'm in Illinois so I have state income tax too. And do you have any recommendations for tracking tips? That's been another challenging part.

For me in Pennsylvania, 30% covers everything with a little buffer, but it might vary depending on your state tax rate. In Illinois you might want to bump it up to 33-35% to be safe. For tips, I use a simple app called Tip Tracker that lets me log cash tips daily. For credit card tips that come through payment apps, I make sure those go into my business account and are labeled properly. The most important thing is consistency - set a reminder to log tips daily, not weekly, because it's too easy to forget the exact amounts.

Yes! Self-employed health insurance is absolutely deductible as an adjustment to income (meaning you get it even if you don't itemize deductions). The key requirements are: 1) Your business must be showing a profit, 2) You can't be eligible for coverage through a spouse's employer plan, and 3) You can only deduct premiums up to the amount of your business profit.

Does this still apply if you're a w2 employee but work remote? My company is based in another state but I work from home 100% of the time.

Unfortunately, if you're a W2 employee working remotely, you currently can't take the home office deduction, even if you work from home 100% of the time. The Tax Cuts and Jobs Act suspended home office deductions for employees through 2025. This deduction now only applies to self-employed individuals, independent contractors, or other business owners. If you get a W2 from your employer, you can't claim it regardless of your remote work status. Some companies offer stipends for home office expenses instead, so it might be worth asking your HR department if that's an option.

But wouldn't I save more using the regular method with my specific expenses? The simplified method seems like it would give me a much smaller deduction given the high housing costs in my area.

That's really good to know, thank you! Do you happen to know when these potential changes might go into effect if they do pass something? And would it make sense to just do this strategy now while it's definitely still allowed?

Nothing is imminent as far as I know - these things typically take time to work through Congress, then the IRS has to issue guidance, etc. We'd likely have months if not a year or more of warning before any major change like applying wash sale rules to crypto. Definitely makes sense to use strategies that are currently allowed. Just keep good records of all your transactions with timestamps. If you're doing a lot of crypto trading, consider working with a tax professional who specializes in this area, as they'll be up-to-date on any pending changes and can help you navigate the transition if/when rules do change.

I did this exact strategy last year with ETH. Sold at $2850, rebought at $2400 a few days later. I just reported both transactions normally on Form 8949 - the sale as a capital gain and then the new purchase established my new cost basis. Nothing special needed documentation-wise beyond what you'd normally track (dates, amounts, proceeds, cost basis). No issues, no audit, no questions from the IRS. As long as you're accurately reporting the transactions, the timing between them isn't relevant for crypto (for now anyway).

Thanks, that's really helpful! Did you use any particular software to track your crypto transactions or did you just use spreadsheets? I'm trying to make sure I have everything properly documented in case I ever do get audited.