Thanks for this warning! This is making me rethink our plan. Maybe instead of claiming 100%, we should just track the mileage super carefully and go with the actual percentage. I definitely don't want to deal with an audit. Do you know if we need to keep paper logs or if the delivery apps' records are enough proof?

The delivery apps aren't enough for the IRS if you get audited. You need a detailed mileage log showing starting and ending odometer readings for each delivery shift, dates, and business purpose. There are some good apps like MileIQ or Stride that make it easier. Also don't forget you can deduct more than just the car itself! Hot bags, phone mounts, portion of phone bill, extra car chargers - all that stuff is 100% deductible separately from your vehicle expenses. I even deduct part of my Spotify since I play music during deliveries lol.

That's somewhat misleading. Most food delivery people aren't driving vehicles over 6000 lbs - that's like a large SUV or truck. For regular cars, the Section 179 deduction is capped MUCH lower - around $19,200 for 2024 I believe. And remember you can't claim more in deductions than you earn from your delivery work!

You're right - I should have been clearer about the weight limitations. For most standard cars used for food delivery, there are lower caps on Section 179. For 2024, passenger vehicles are limited to around $19,200 for the first year if they weigh less than 6,000 lbs. And you made another great point - your total deductions can't exceed your business income, so if you're just starting out in delivery, you might not have enough income to take advantage of the full deduction in year one. Any unused portion can be carried forward to future years though!

Really? That's interesting. My HR department said the 3921 form was all I needed and that I'm responsible for figuring out the taxes. I'll double check with them about the W-2 reporting. If they won't issue a corrected W-2, is there any downside to reporting it as "Other Income" instead?

There's not really a downside to reporting it as "Other Income" - you'll pay the same amount of tax either way. The main difference is that Other Income isn't subject to FICA taxes (Social Security and Medicare), whereas if it were on your W-2, it would be. Many companies don't correctly report ISO disqualifying dispositions on W-2s because their payroll systems aren't set up to track when employees sell shares. That's why they issue the 3921 form but leave the tax reporting to you. Just make sure you have documentation of everything in case you're ever audited. The 3921 plus your brokerage statements showing the sale should be sufficient.

If you haven't exercised yet, you have options to possibly reduce taxes. The key is to try to get a qualifying disposition rather than disqualifying. To do this, you need to: 1) Hold the shares for at least 1 year after exercise AND 2) Hold the shares for at least 2 years after the option grant date If you meet both conditions, only the difference between sale price and strike price is taxed, and it's taxed as long-term capital gains (usually lower rates) rather than ordinary income.

Wait can you really deduct parking and tolls separately? I thought those were included in the standard mileage rate! I've been tracking everything together in one log. Do I need separate records for those?

Yes, parking fees and tolls related to business travel are deductible separately from your standard mileage rate! The standard mileage rate only covers the basic costs of operating your vehicle (gas, maintenance, depreciation, etc.). You should keep separate records of your parking and toll expenses for business trips. Save those receipts or take photos of them, and note which business trip they were associated with. This is one of the most overlooked deductions for freelancers who drive for work.

I use MileIQ and it's pretty decent. Automatically tracks all your drives and you just swipe left for personal or right for business. Costs like $6/month but it's worth it to me.

Thanks for sharing your experience! Did you also report the fellowship stipend as "Other Income" like someone suggested above? And did you need to provide any additional documentation with your tax return?

Yes, we reported it as "Other Income" on Schedule 1 and labeled it as "Research Fellowship Stipend" in the description. This is the correct way to report it. We didn't need to attach any additional documentation to the tax return itself, but we did keep the letter from the university in our records in case of any questions. Most universities that regularly deal with international students and researchers have standard language they use for these letters that clearly explain the fellowship is not an employment relationship. Your husband should be able to request this from the international student/scholar office if you want extra peace of mind.

I used TurboTax last year for a similar situation and there was definitely an option to override. It's usually something like "I understand but want to continue without filing this form" somewhere on that screen. They make these warnings look scary but many are just precautionary.

I actually called my old bank and they only keep records for 7 years so that only helps with the most recent missing returns. Did you have any luck explaining your situation to the IRS? Were they understanding about the estimation approach?

In my experience, the IRS was surprisingly reasonable once I explained my situation clearly. The key was documenting my estimation methods and being consistent. For the years where you have absolutely no documentation, focus on being realistic rather than punitive to yourself. I included a detailed cover letter with each return explaining exactly why I had no records and the methodology I used to create my estimates. The agent I eventually worked with appreciated the transparency and it made the negotiation process much easier. Remember that they deal with record loss situations frequently - you're not the first person to go through this.

This is a great tip! I had a similar issue and the SSA earnings record was super helpful in establishing baseline income amounts. Much of my self-employment income hadn't been reported properly, but it still gave me a starting point.