Do you need to have a dedicated space for a home office deduction, or can you use your living room/kitchen table etc. for different jobs? I'm thinking about taking on freelance work but don't have a separate room I can use exclusively.

For a home office deduction, the IRS requires that the space be used "regularly and exclusively" for business. This means you need a dedicated space - it doesn't have to be an entire room, but it needs to be a specific area used only for work. A corner of your living room can qualify, but only if that specific section is used solely for business and nothing else. If you're tight on space, even a dedicated desk that's never used for personal activities could potentially qualify. Just be aware that home office deductions can be a red flag for audits, so make sure you take photos of your setup and keep excellent records of your business use of the space.

What's the minimum income level where this S-corp approach makes sense? I'm making about $65k from various gigs and wondering if it's worth the hassle.

Does the IRS ever negotiate during the process? Like if they reject your initial amount, do they come back with a counter offer or just flat out reject you?

Yes, the IRS frequently counters with what they consider a more reasonable amount based on their calculations. If they think your offer is too low, they'll often send a letter explaining why they can't accept it and propose a higher amount they would accept. It's not like a flat rejection in most cases - it's more of a negotiation. When this happens, you can either accept their counter, submit a new offer with additional documentation to justify your original amount, or withdraw your offer entirely. This is why having your documentation solid from the start is essential.

Is there a specific form for offer in compromise or do you just write a letter explaining your situation?

How do you know which code goes with which amount if there are multiple entries in Box 12? My W2 has like 4 different codes and amounts all squished together and I can't tell what goes with what.

Each code-amount pair should be separated in some way, even if it's not perfectly clear. They're usually listed in sequence like "D 2000 E 500" etc. If they're really hard to distinguish, you should contact your payroll department to clarify. The W-2 should also have a corresponding W-2 statement or earnings summary that might format this information more clearly. Sometimes these are available through your company's employee portal or payroll system.

That makes so much sense! I just checked my paystubs and I did contribute around $2,000 to my 401k this year. I was overthinking this whole thing. So I should just enter it as Code D with the full amount when I file, right?

Exactly this. I'm in a similar salary range in Minnesota and between ALL the deductions (federal, state, SS, Medicare, health insurance, dental, vision, 401k) almost 35% of my gross pay never makes it to my bank account. It was a rude awakening when I got my first "adult job" lol.

This is actually super helpful to see all those categories broken down! I wasn't accounting for all the different types of withholdings when I was doing my mental math. My total withholding is about 28% of my gross, which sounds like it's pretty normal based on what you're saying. I definitely noticed the state income tax too (around $240 per paycheck), which was another surprise. Guess I need to adjust my budget expectations a bit. Thanks for the perspective!

Thanks for sharing this! I just tried it out and it looks like I'm actually on track to get a small refund (about $800) if nothing changes. That's a relief since I was worried I might be underwithholding. Appreciate the resource!

That calculator has been wrong for me 2 years in a row... it said I'd get a refund both times and I ended up owing around $1,200 each time. Just be careful relying on it exclusively.

Yikes, that's exactly what I'm worried about. What specific documentation should I make sure my employer has? And what does "exclusively for work" actually mean in practice? Can I occasionally use my work computer to check personal email or is that a no-no?

For documentation, your employer needs to have a written policy that states employees must submit expenses within a reasonable time (usually 60 days), provide receipts or similar documentation, and return any excess reimbursement within a reasonable time. They should have you fill out a form showing the business purpose of each expense. On the "exclusive use" question - that's actually a bit of a gray area. The strict interpretation is that the space should only be used for business, but in reality, the IRS recognizes that's nearly impossible with a desk in a living room. What matters most is that you're using it primarily for work during working hours. Occasional personal use (checking email, etc.) won't invalidate the arrangement. Just don't try to claim a space that's clearly used for multiple purposes (like your dining table).

That's what my company does too! They give us $150/month for "home office expenses" but it's fully taxed. I asked about submitting actual expenses instead and they said it was too much administrative work for them to track. Super frustrating.