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Something nobody has mentioned yet - check if you can deduct it on your state taxes! Even if you can't benefit from itemizing on your federal return, some states have different rules or lower thresholds for medical expense deductions. For example, my state allows medical expense deductions that exceed just 4% of income instead of the federal 7.5%. Also, some states offer special credits for people with lower incomes who have high medical costs.
That's a great point I hadn't considered! Do you know where I would find information about my state's specific rules for medical deductions? Is there a website that compares all the different state rules?
The best place to check is your state's department of revenue or taxation website. Just google "[your state] department of revenue medical expense deduction" and you should find the official information. Each state has different rules, and they don't always match federal guidelines. Don't bother with websites that compare all states - they're often outdated. Your state's official tax website will have the current rules. You can also download your state's income tax forms and instructions, which usually explain the medical deduction rules in detail.
One thing to consider - are you eligible for the Earned Income Tax Credit (EITC)? With an income of $22k, you might qualify for a refundable credit that could be more valuable than trying to deduct the dental expenses. Also, if your income is actually $22k from employment and you paid for the dental procedure yourself, you might look into an HSA for future medical expenses if your employer offers one. Too late for the current expense, but helpful for the future.
If you can't wait to get the certified letter, you might want to check if your post office offers "informed delivery" which lets you see scanned images of your mail online. Might at least let you confirm if it's from the IRS before you panic too much. Also, if you're really tight on money, call the Taxpayer Advocate Service at 877-777-4778. They can sometimes intervene in hardship cases, especially if you're at risk of not being able to afford basic living expenses because of the tax debt. They're separate from regular IRS collections and can sometimes be more helpful.
I didn't know about Informed Delivery! Just checked and my post office does offer it, but it takes a few days to set up so probably won't help with this letter. But thanks for the TAS number - I'll definitely call them if I can't work something out with the regular IRS line. I'm definitely in hardship territory right now, so maybe they can help me out.
One thing I learned when dealing with a tax lien - DON'T ignore that certified letter! The clock on your appeal rights starts ticking from when they ATTEMPT delivery, not when you actually get it. I think you have 30 days to request a Collection Due Process hearing, which can stop the lien while you work things out. Also, if you get the lien notice and then pay in full, make sure to specifically request a lien WITHDRAWAL not just a release. A release just shows it's paid but stays on your credit report, a withdrawal makes it like it never existed. Huge difference for your credit score!
From what I understand, it also depends on whether you're reimbursing the employee or if they're trying to claim a deduction. The TCJA eliminated miscellaneous itemized deductions for employees through 2025, so even if these are technically "business miles," the employee can't deduct them on their personal return. But you as the employer can still choose to reimburse them tax-free if they qualify as business miles.
Wait, so employees can't deduct mileage at all anymore? I've been tracking all my miles going between worksites thinking I could claim them. Does that only work for self-employed people now?
Yes, that's exactly right. Since the 2017 Tax Cuts and Jobs Act, employees can no longer deduct unreimbursed business expenses, including mileage, on their personal tax returns. This elimination of miscellaneous itemized deductions is scheduled to continue through 2025. Self-employed individuals, independent contractors, and business owners can still deduct their legitimate business mileage on Schedule C or their business returns. So if you're an employee, your best option is to request an accountable reimbursement plan from your employer.
Doesn't your determination also depend on what state you're in? California has different rules than federal for some of this stuff. Our accountant says we have to follow the stricter of the two sets of rules.
Has anyone noticed if the new K-1 format changes how guaranteed payments are reported? I'm a partner who receives guaranteed payments and I'm wondering if this affects the self-employment tax calculation.
Thanks for clarifying! That makes sense. Do you know if there's a sample of the new form available somewhere online that shows the exact layout? Would be nice to see what I'm going to be dealing with.
Yes, the IRS has published draft versions of the new K-1 forms on their website. If you go to IRS.gov and search for "2023 draft forms" you should be able to find it. They usually have PDF versions of all the draft forms with instructions. The final version might have some minor changes, but the draft will give you a good idea of the new layout and where to find the guaranteed payments section.
Does anyone know if the new K-1 breakout format changes how we handle foreign tax credits? I have partnership interests with income from several countries and it's always been a nightmare to sort through.
The new K-1 format actually improves the reporting of foreign income and taxes. Instead of lumping foreign taxes into a single box with a statement, the new format breaks out foreign income by country and provides clearer reporting of the foreign taxes paid. This should make calculating your foreign tax credit much easier. There's a new specific section for international tax matters that provides more granular information. You'll see a country-by-country breakdown rather than having to decipher sometimes confusing supplemental statements. This is especially helpful if you have income from multiple countries since you can more easily track which income relates to which foreign tax.
That's such a relief to hear! The supplemental statements were always inconsistent between my different partnerships. Having it directly on the form with a standard format will make things so much clearer. Thanks for the info!
Megan D'Acosta
Don't forget about Schedule SE for self-employment tax! Each partner will need to file this separately with their individual returns based on their K-1 income. My partner and I missed this our first year and got hit with penalties. The partnership itself doesn't pay self-employment tax, but each partner does on their share of partnership income.
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Sarah Ali
ā¢Is self-employment tax really that significant? I'm also in a new partnership and trying to figure out if I should be making quarterly estimated payments.
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Ryan Vasquez
For your marketing expenses - make sure you separate out meals if you took potential clients out for business discussions. Those are only 50% deductible while your other marketing costs are likely 100% deductible. Form 1065 has specific lines for this. The equipment you purchased might qualify for Section 179 expensing too, which lets you deduct the full cost immediately rather than depreciating it over several years.
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