Wait what? I thought ANY side income got hit with self-employment tax! Are you sure about the $400 thing?

Yep, 100% sure about the $400 threshold for self-employment tax. It's directly from the IRS rules. If your net earnings from self-employment are less than $400, you don't have to pay the SE tax, though you still report the income on your tax return for income tax purposes. Most new content creators don't realize this and end up saving way too much when they're just starting out. Of course, most people who stick with it eventually earn more than $400 in profit annually, but it's good to know the actual threshold.

This is solid advice. I started doing this after my first year and it made a HUGE difference. My question is do you do quarterly estimated payments or just save it all for April?

Do you need receipts for all of these? I did some freelance work last year but was terrible about keeping records. Can I still claim some of these deductions?

You should ideally have documentation for all business expenses, but the level of documentation varies. For things like home office, you need to know the square footage. For mileage, you should have a log of business trips. For expenses like internet and phone, you can calculate the business percentage based on reasonable usage. If you don't have exact receipts but have bank or credit card statements showing the purchases, that can work too. The key is being able to show the expense was real and business-related if you ever get audited. For this year going forward, I recommend using a free app to track expenses or even just a simple spreadsheet. It makes tax time so much easier!

I used Direct Pay last year. When you go through the steps, you select "Form 1040" and then "Tax Return" or "Balance Due" as the payment type (I used Balance Due). Then select the right tax year. It was actually easier than I expected. Just make sure you keep the confirmation number they give you after the payment processes. I also took a screenshot of the confirmation page just to be safe.

Is this still true with all the recent changes to federal cannabis policy? I thought things were changing with banking and taxes.

Yes, it's absolutely still true. While there have been some banking improvements with the SAFE Banking provisions, Section 280E is still very much in effect and will remain so until cannabis is rescheduled or descheduled at the federal level. The recent policy changes have mainly affected banking access and research, but the tax code restrictions remain unchanged. Any legitimate PE firm in the cannabis space should be building their financial models with 280E limitations factored in, resulting in effective tax rates that can reach 50-70% depending on the operation's structure. Always ask to see their tax assumptions when reviewing projected returns.

Thanks for bringing this up - honestly I haven't done as much due diligence as I probably should. They did provide an investment memorandum but I haven't verified SEC registration or the actual farm ownership. Do you have suggestions for what specific documents I should be requesting or how to verify their legitimacy?

Absolutely. Request their Form D filing with the SEC (all private offerings should have this), check the backgrounds of all principals through FINRA BrokerCheck, and get proof of the actual cannabis licenses they hold or have applied for. Also ask for references from current investors, and ideally visit the actual operation if possible. Request their detailed tax strategy document specifically addressing 280E issues - legitimate operators will have this prepared. Finally, have an attorney experienced in cannabis review all documents before transferring any money. The extra $1-2k in legal fees could save you from a total loss on your investment.

Do you know if they offer any sort of discount or special features for seasonal businesses? Since tax prep has that huge Jan-April rush and then slower periods.

They don't have specific seasonal business features that I know of. But their transaction limits are fairly generous which handles the busy season well. During slower months, you can easily maintain the minimum balance to avoid fees since you're not drawing as much from the account. The mobile app is also really good for depositing client checks which saves tons of time during the busy season when you can't step away to visit a branch.

Square's great but their transaction fees add up. 2.9% + $0.30 per transaction means you're losing like $3-4 on each $100 payment. Better to encourage direct bank transfers or checks.

That's a great idea! I think they used ADP actually. Do you know if there's a general customer service number for employees to contact them or would I need a specific account number?

For ADP, try calling their W2 services line at 800-247-3237. You'll need to verify your identity with your SSN and some other basic info. If you had an online account with them previously, you might still be able to log in at https://my.adp.com even if you no longer work there. If you don't know what service they used, try asking former coworkers if you're still in touch with any. Even if you don't have an account number, most payroll providers can look you up by SSN and previous employer.

Some lenders do look at gross income before certain deductions. Self-employed people especially get evaluated differently. My mortgage broker wanted to see my gross contractual income rather than just what showed up on my tax return after all the deductions.

That makes sense for self-employed people, but OP mentioned a W2 which typically means they're an employee. For W2 employees, lenders usually just want Line 1 of the 1040 or Box 1 of the W2. Pre-tax retirement contributions don't usually get added back in unless the loan is borderline and they need to squeeze out a bit more qualifying income. If they're trying to qualify for a specific loan amount, they might want to know the maximum income they can claim. But generally, mortgage underwriters follow pretty standardized guidelines for W2 employees.