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One thing to consider with IP PINs - if you have a tax preparer or use an accountant, make sure you give them your PIN! My husband and I got PINs after our identities were stolen in 2022, but I completely forgot to give mine to our accountant last year. Our return got rejected and it delayed our refund by almost 6 weeks. Just a heads up since tax season is approaching!
Do you have to request a new PIN every year or does the IRS automatically send it? I'm worried about forgetting to get a new one.
The IRS automatically sends you a new IP PIN each year - you don't need to request it. They typically mail it in a letter around December or January before tax season starts. If you've created an online account with the IRS, you can also retrieve your current IP PIN there if you misplace the letter.
Just a data point - I got an IP PIN three years ago after someone filed a fake return with my info. No issues since then. Before getting the PIN, I had fraudulent returns filed in my name two years in a row despite changing all my passwords and getting credit monitoring. The IP PIN seems to be the only thing that actually stopped it.
I run a small consulting business and pay around $800-900 for tax prep each year. What helped me bring costs down was keeping super organized records throughout the year. I use QuickBooks Self-Employed ($15/month) to track everything, categorize expenses automatically, and record mileage. When tax time comes around, I just hand over organized reports instead of a shoebox of receipts. Tax preparers charge less when you do some of the legwork!
Did you find it difficult to set up QuickBooks initially? I've heard mixed things about how user-friendly it is. Also, does it handle the LLC specifics well?
QuickBooks has a bit of a learning curve at first, but it's not too bad for a basic setup. I watched a couple YouTube tutorials and got comfortable with it in about a week. The mobile app is actually pretty intuitive for day-to-day stuff like taking pictures of receipts and tracking mileage. For LLC specifics, it handles the basics well for a single-member LLC (which is taxed as a sole proprietorship by default). If you have a more complex LLC setup with multiple members or special tax elections, you might need QuickBooks Online rather than Self-Employed. The main thing is that it keeps your business finances separate and organized, which is crucial for any LLC regardless of tax treatment.
Can anyone recommend tax software that's good for LLC owners? I'm thinking of ditching paid preparers altogether next year. I'm organized enough but just nervous about missing deductions.
you might wanna look into the qualified business income deduction (QBI) too. it lets you deduct up to 20% of your net business income if you qualify!! i missed this my first year of freelancing and probably left like $1500 on the table š
Everybody's giving you good advice about the schedule C stuff, but don't forget to look into business liability insurance too if you're doing design work for clients. It's tax deductible and could save your butt if a client ever sues you over something you designed. Learned this the hard way š¤¦āāļø
Have you considered just selling your property on the open market and letting your mom purchase something else? The related party rules are there specifically to prevent the kind of arrangement you're describing. Even with the intermediary step, the IRS would likely view this as a related party transaction. I went through something similar with my daughter and we ultimately decided it wasn't worth the risk of invalidating the entire exchange. The potential tax consequences if the IRS challenges the exchange could far outweigh any benefits.
Thanks for the suggestion. We have considered that, but my property is in a really hot location that my mom has specifically wanted to invest in for years. It's also got some unique features that make it perfect for the rental strategy she wants to pursue. I'm willing to pay my capital gains tax, I just want to make sure she can get her 1031 benefits. But you're right that it might not be worth the risk if there's a chance her exchange could be invalidated.
I understand wanting a specific property type and location. One alternative approach might be for your mom to purchase a different replacement property now to complete her 1031 exchange properly. Then later (after a reasonable time period has passed), she could do another 1031 exchange from that property into yours. This would require more time and potentially more transaction costs, but it would avoid directly linking her current 1031 exchange funds to your property. You'd still owe taxes when you sell, but at least her exchange would be protected. Just make sure there's enough time and separate transactions between her current exchange and any purchase from you to avoid the step transaction doctrine.
I think everyone is overcomplicating this. The related party rules in Section 1031(f) mainly apply when BOTH parties are doing a 1031 exchange. If you're just selling normally and paying your taxes, and your mom is buying with 1031 funds, it should be fine.
That's actually incorrect and could get the OP in serious trouble. The related party rules absolutely apply even when only one party is doing a 1031 exchange. This is specifically addressed in Revenue Ruling 2002-83, which states that a taxpayer cannot use a qualified intermediary to acquire replacement property from a related party, even if the related party recognizes all gain in the transaction. The IRS's concern is that the exchange funds would ultimately be going to a related party, which could be used as a way to cash out while still getting exchange treatment. This is prohibited regardless of whether both parties are doing exchanges.
Douglas Foster
Has anyone used the qualification test for home office deduction on FreeTaxUSA? I'm trying to figure out if my setup qualifies but the questions are confusing.
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Nina Chan
ā¢Yep, I went through that section last week. The key questions are about exclusive use and regular use. If you use the space for ANYTHING else (even occasionally), technically you shouldn't claim it. I ended up not claiming mine because sometimes my kids use the desk for homework.
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Douglas Foster
ā¢Thanks for the info! That clarifies things. I guess I can't claim my space since I also use it for gaming in the evenings. Bummer, but better than risking an audit.
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Ruby Knight
My biggest schedule C tip: track EVERYTHING throughout the year! I use a simple spreadsheet with categories that match Schedule C exactly. So much easier than trying to remember everything at tax time. Also make sure to save for quarterly estimated payments - I got hit with penalties my first year because I didn't realize I needed to make those.
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Diego Castillo
ā¢Do you have a template for that spreadsheet you could share? I'm already making a mess of my 2024 expenses and would love to get organized.
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