Wait, can you still deduct legal fees on Schedule A at all? I thought those miscellaneous deductions were completely eliminated with the 2017 tax law.

You're right about the changes. Prior to 2018, you could deduct certain legal fees as miscellaneous itemized deductions on Schedule A, subject to the 2% AGI limitation. After the Tax Cuts and Jobs Act, most miscellaneous itemized deductions were suspended through 2025. For legal fees now, the best approach is to tie them directly to business income whenever possible so they can be deducted on Schedule C. For a 1099 contractor like the original poster, this should be straightforward since they're suing to collect business income. The key is making sure you can substantiate that the legal expenses are ordinary and necessary business expenses directly related to your self-employment activities.

Is this still true even with contingency fees? My attorney takes 30% if we win. Do I really have to report the whole amount including what goes directly to the lawyer?

That's a really interesting approach! Did you have previous experience in the restaurant industry, or did you just decide to focus there? I'm wondering what industry I should target if I go this route.

I had worked as a server and bartender through college, so I had some familiarity, but I wasn't an expert when I started. I chose restaurants because there were many in my area and I noticed they had specific bookkeeping challenges (inventory, tips, high turnover, etc.) that general bookkeepers often handled poorly. For choosing your industry, look at your existing client base and see if you already have a concentration in one area. Otherwise, consider industries that: 1) have many businesses in your location, 2) typically struggle with financial management, and 3) you find personally interesting. Healthcare practices, construction companies, e-commerce businesses, and professional services firms are all good options with specialized bookkeeping needs.

This is brilliant! How do you structure pricing for these quarterly packages? Do you charge a flat rate or is it based on business size/complexity?

OMG thank you for mentioning this! I completely forgot about state requirements. I'm in Michigan - do you know if they have any special LLC fees I should know about? Also, do I need to collect sales tax on online sales to other states?

Michigan is much more reasonable than California! They have an annual LLC filing fee of just $25 (due February 15th each year). You'll need to file an annual statement to maintain your LLC status. For sales tax, Michigan requires you to collect sales tax on in-state sales. For out-of-state sales, it depends on your sales volume in each state and their specific economic nexus laws. If you're selling through platforms like Etsy or Amazon, they might handle this for you in many states. But if you're selling through your own website, you'll need to research each state's requirements. Generally, if you have less than $100,000 in sales or fewer than 200 transactions in a state, you might be exempt from collecting sales tax there.

Is there a good app you recommend for tracking mileage? I always forget to log my trips for my business.

Thanks so much for explaining from the university side! Does this mean universities just routinely report things in a way that doesn't match how taxes are supposed to be filed? Seems like this could cause problems for tons of students.

Yes, unfortunately, it happens quite frequently. University accounting systems are designed primarily for the school's financial tracking, not for optimal tax reporting. Many schools use Banner or similar systems that allocate payments based on an internal priority list rather than student intent. This disconnect is why the IRS allows taxpayers to claim education expenses based on when they actually made payments, not necessarily what's on the 1098-T. The form is considered informational, not definitive. This is also why we always advise students to keep their payment receipts and confirmation emails. If you're ever questioned, having documentation of your actual payment dates will resolve any discrepancies.

Yes, it definitely affects the AOTC! Remember the American Opportunity Credit is based on what you PAID in the calendar year, not what was billed. So only count what you actually paid in 2023, regardless of what the 1098-T says.

The LLC never owned the property - it was rented commercial space. The property taxes I'm referring to are personal property taxes on business equipment and fixtures, not real estate taxes. Does that change anything about how I should handle this?

That actually makes your situation clearer and potentially simpler. Personal property taxes on business equipment and fixtures are definitely business expenses. Since you had a single-member LLC that was disregarded for tax purposes, you can claim these on your Schedule C even with zero income now that the business is closed. Make sure you categorize them correctly on your Schedule C as "Taxes and licenses" rather than lumping them in with other expenses. This provides clearer documentation if your return is ever questioned. The fact that these are specifically business personal property taxes strengthens your position for taking the deduction.

You're thinking of the hobby loss rules, which is different. There's no specific time limit for legitimate business expenses related to winding down a business. As long as these are actual business property taxes tied to business assets, they remain deductible until the obligation ends or the assets are disposed of.

Thanks for the clarification. I was confusing this with the rules about businesses that never make a profit. Glad to know there's no specific cutoff for winding down expenses as long as they're legitimate.