That's an interesting idea I hadn't considered! My friend actually has some web design experience that could help my online store. Would I need to file any special paperwork if I paid him as a contractor? And would this potentially impact any benefits he currently receives?

If you pay him as a contractor and it's $600 or more in a year, you'll need to issue a 1099-NEC form to both him and the IRS. It's pretty straightforward - you'll need to get him to fill out a W-9 form first to collect his tax information. As for benefits, that's definitely something to consider. Earned income could potentially impact certain government benefits he receives, depending on the programs and income thresholds. This is something he should look into carefully before you proceed, as the extra income might reduce benefits by more than the amount earned in some cases. He might want to check with his benefits counselor to understand exactly how additional income would affect his specific situation.

This is super helpful! Does inventory include shipping costs to get the products to me? Or are those separate expenses?

I do have some investments but nothing on margin. What about tax preparation software? I usually spend around $150 on TurboTax Premium - is that deductible if I itemize?

Unfortunately, tax preparation fees including software like TurboTax aren't deductible for individuals anymore. That deduction was eliminated for tax years 2018-2025 by the Tax Cuts and Jobs Act. However, if you have self-employment income or rental property income, you can still deduct the portion of your tax prep fees related to those business activities on Schedule C or Schedule E. But for regular personal tax preparation, those costs aren't deductible currently.

Bunching works really well! We do this with our church donations - double up in December and January of the same tax year, then skip a year. Our CPA ran the numbers and we save about $1,800 every two years compared to giving the same amount spread evenly. Just make sure your charities are cool with the irregular donation schedule.

This subsidy cliff term is exactly what I've been experiencing but didn't have a name for! Do you know of any good resources that explain this phenomenon more? Or are there any efforts to address this problem in policy discussions?

The "subsidy cliff" is well-documented in healthcare policy discussions - the Kaiser Family Foundation has excellent resources explaining how it works, particularly with ACA marketplace subsidies. Urban Institute and Brookings also have published research on this topic. There are ongoing policy discussions about smoothing these cliffs through more gradual phase-outs of benefits rather than hard cutoffs. Some proposals include expanding premium tax credits, creating public options for various services, or implementing more universal programs that eliminate means-testing altogether. Unfortunately, these solutions require significant policy changes that have been difficult to achieve in our current political environment.

This is partially true but oversimplified. The top 1% pay about 40% of all federal income taxes, while the bottom 50% pay about 3%. The issue isn't that the wealthy don't pay taxes - it's that our tax system has inefficiencies, loopholes, and different treatment for different types of income. Capital gains being taxed lower than wages is a policy choice that benefits investors disproportionately.

The idea of renegotiating my equity stake is interesting. My partner and I have been operating this way for years without really thinking about the tax consequences. Do guaranteed payments still incur self-employment tax like salary would?

Yes, guaranteed payments do incur self-employment tax similar to salary. That's the downside compared to distributions. However, unlike regular salary which needs to meet "reasonable compensation" standards, guaranteed payments can be tied to specific services or capital you provide to the business. They're especially useful when partners contribute unequally in ways not reflected by ownership percentages. For the equity restructuring, you might consider a gradual approach where your percentage increases over time based on predefined performance metrics. This could help align your tax situation with the economic reality without creating a sudden shift in the business relationship.

I've done this. The key is proper documentation - you need a written loan agreement with reasonable interest and a realistic repayment schedule. Without that, the IRS might reclassify it as a distribution anyway.

Do you have to file separate identity theft reports with both the IRS and your state's tax agency? Or does reporting to the IRS automatically notify the state?

You definitely need to file separate reports. The IRS doesn't automatically notify your state tax agency. Each state has their own process for handling tax identity theft, and you need to contact them directly. Most states have a form similar to the IRS Form 14039, but it'll be specific to your state. Check your state's department of revenue website for their identity theft reporting procedures. In my case, I had to submit additional documentation to my state that wasn't required for the federal process.

Can anyone get an IP PIN or do you have to be a victim of identity theft first? I've never had an issue but want to prevent one!

Anyone can get an IP PIN now! The IRS used to only offer them to identity theft victims, but they've expanded the program. You can sign up through the IRS website using their "Get an IP PIN" tool. You'll need to verify your identity through their secure access process. The PIN is a six-digit number that changes every year. The IRS sends you a new one each December/January for the upcoming tax season. It provides an extra layer of security because even if someone has your SSN, they still can't file electronically without that PIN. Definitely worth doing as a preventative measure!