Thanks for breaking down the numbers! So even with the extra costs of payroll processing and additional tax filings, I'd still come out way ahead. Do you recommend using a payroll service or trying to handle it myself?

Definitely use a payroll service. The cost is minimal (usually $50-75/month for just yourself) and the peace of mind is worth it. They handle all the tax deposits, quarterly filings, W-2s, etc. Trying to DIY payroll is asking for trouble - the penalties for missed deadlines or incorrect deposits are steep. I use Gusto for my S corp payroll, but there are plenty of good options like OnPay, QuickBooks Payroll, or SurePayroll. Most accounting software integrates with these services too, making bookkeeping easier.

Wait, I thought QBI applied to S-Corp distributions too? My accountant definitely included my S-Corp distributions in QBI calculations last year...

Yes, that's exactly what I said - QBI applies to S corp distributions but NOT to the salary portion. So if you take $150k salary and $120k in distributions from your S corp, only the $120k would potentially qualify for the QBI deduction. Your accountant was correct to include S corp distributions in QBI calculations. I was just pointing out that when you compare sole proprietorship to S corp, you need to account for the fact that the salary portion of S corp earnings won't qualify for QBI, whereas all net income from a sole proprietorship potentially qualifies.

Thanks for mentioning this! I was leaning toward Section 179 anyway since my business income is pretty healthy this year, but I wasn't aware that bonus depreciation was down to 80% now. Is there any advantage to using bonus depreciation instead of Section 179 in my situation?

Section 179 is probably your best bet in this case. The main difference is that Section 179 is optional on an asset-by-asset basis and limited by your business income, while bonus depreciation is automatic unless you elect out and doesn't have the same business income limitation. The other consideration is that if your business income is relatively small, a large Section 179 deduction could potentially create a loss, which might be limited. Bonus depreciation doesn't have that same restriction. But for a $2,400 laptop, Section 179 is usually the simplest approach unless you have other reasons to preserve income on your return.

Did your accountant have you fill out Form 4797 for the disposition of the old laptop? I'm using TurboTax and it's asking me to complete that form, but it seems complicated for just a laptop trade-in.

That's good to hear! Their accounting department is pretty responsive usually, so hopefully they can fix it quickly. Is there a deadline for when they need to issue a corrected form?

The company technically should issue a corrected form as soon as they discover an error, but there's no strict deadline for corrections like there is for the original forms. If you're filing your return before they send a correction, just make sure you report the income correctly on your Schedule C regardless of what box it appears in on the incorrect form. The important thing is that you're properly reporting all your income and paying the appropriate taxes on it.

I used TurboTax last year with a wrong-box 1099 issue. You just enter the income correctly on your Schedule C as business income. There's no specific place to note the box discrepancy. TurboTax has you enter the total amount from each 1099, but the Schedule C is where you categorize everything properly. Never had an issue with the IRS questioning it.

Thanks for the info! That makes me feel better about just going ahead with my filing. Seems like as long as we report the total income correctly, the specific box issues aren't a dealbreaker.

Did you ever make any big mistakes during those learning years? That's my biggest fear.

I made one significant mistake my third year doing taxes. I messed up reporting some stock sales and ended up paying about $600 more than I needed to. I only discovered it two years later when I was learning more about capital gains. The good news is most tax software now has really strong error checking. The review process will flag anything unusual or incomplete. The key is to start early so you have time to research anything that seems confusing. Don't wait until April 14th when you're rushed and stressed!

Do you think TurboTax is worth the money? I've been using the free options but wondering if paying for the deluxe versions actually helps.

How do you calculate the right percentage to claim? Is it based on income split, hours worked, or something else?

You calculate it based on the square footage of your office space divided by your total home square footage. So if your office is 100 square feet in a 1,000 square foot apartment, you'd get a 10% deduction of eligible expenses. It's not based on income or hours worked at all. The more complicated part is that you can only deduct expenses against your self-employment income. So if your freelance work only brings in $2,000 but your deductible home office expenses would be $3,000, you're limited to deducting $2,000. The calculation can get a bit tricky but most tax software walks you through it.

Seconding this. My company reimburses up to $750 for home office furniture and tech. They switched to this model instead of maintaining physical offices. Definitely worth asking your employer about!