Thanks for the info. I hadn't considered that the IRS wouldn't know my S corp was dissolved. Is Form 4852 something I can just fill out myself, or do I need a tax professional to help with that?

Form 4852 is typically used as a substitute for W-2s, but can sometimes be used for 1099 situations. However, I misspoke - a better option might be to include a written statement with your personal tax return explaining the situation. This would create a paper trail showing you've disclosed the issue. You can complete this yourself, but if your tax situation is already complex (which it sounds like it might be with the transition from S corp to sole proprietor), it might be worth consulting with a tax professional. They can help you document everything properly and advise on the best approach for your specific circumstances.

You might be able to handle this with a "nominee" situation on your personal return. Basically, you report the full amount on Schedule C of your personal return, then file a 1099-NEC from yourself to your LLC. It's a bit complex but prevents double taxation. I'd recommend talking to a CPA though, as this gets tricky fast.

Can you explain how the QBI deduction works in simple terms? I tried reading about it online but got lost in all the technical jargon.

QBI deduction is basically a 20% discount on your taxable business income. So if you made $50,000 profit from your contracting work after all expenses, you get to deduct another $10,000 (20% of that profit) before calculating your income tax. You don't even need to itemize to get this deduction! There are some limitations if your income gets above $170,050 (for single filers in 2024), but for most beginning contractors, you'll qualify for the full 20%. The deduction appears on your 1040 after you calculate your business income on Schedule C - you don't need any special forms if you're a simple sole proprietor. It's essentially free money the government is giving to small business owners and self-employed folks.

Agree 100%! I got absolutely destroyed my first year as 1099. Now I use a separate business checking account and put my "tax money" in a high-yield savings account so at least I earn some interest on it while waiting to pay the IRS.

Her husband passed away so she can't file separately going forward, she'll be filing as single or qualifying widow. But your advice about responding to IRS notices is spot on! The worst thing is to ignore them.

Is there an app you recommend for tracking all this? Seems like a lot to keep up with when you're doing multiple rides a day.

I personally use MileIQ now, but there are several good ones - Stride, Everlance, and Hurdlr are all popular with drivers. Most of them use GPS to automatically track your trips and let you swipe to categorize them as business or personal. Then you can export a detailed report at tax time that meets IRS requirements. The key is consistency - start using it from day one and categorize your trips daily or weekly at the latest. It only takes a few minutes once you get in the habit.

Yep, self-employment tax is 15.3% on your net earnings (after expenses like mileage but before the standard deduction). So in the original example, if you had $38k in income and $22,925 in mileage deductions, you'd have $15,075 in net earnings. The SE tax would be about $2,306 (it's actually calculated as 15.3% of 92.35% of your net earnings). So while your income tax might be super low, you'd still owe that $2,306 for SE tax. One small benefit is you get to deduct half of your SE tax on your 1040, which lowers your income tax a tiny bit more.

1 These are all really good ideas! I hadn't thought about the mortgage skip-payment option. I'll definitely look into that. I'm also considering selling some stock I've been holding, even though the market is down a bit right now. I guess paying the IRS has to take priority over ideal investment timing. Did you find that the IRS was generally reasonable to work with? I've been anxious about dealing with them directly.

13 In my experience, the IRS representatives were surprisingly reasonable and helpful once I actually got through to them. They've dealt with this situation thousands of times and have standard procedures in place. The key is being proactive and honest. I explained my situation clearly, had all my numbers ready, and proposed a solution rather than just asking what to do. They responded well to that approach. Most importantly, never ignore IRS notices or deadlines - that's when they become much less flexible.

1 That's a good point. I've done a preliminary calculation for state and we actually should be getting a small refund there (about $1,200). I guess that will help offset the federal bill a tiny bit. The majority of our issue was federal withholding that didn't account for some investment income and a side business I started last year.

7 Also, don't forget to check if you qualify for state-level payment plans too. Some states offer better terms than the IRS, with lower interest rates or longer payment periods. When I had a similar issue, I was able to set up a 24-month payment plan with my state that had a much lower interest rate than the federal one.