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I was in almost the identical situation 2 years ago. Here's what I learned after talking with a tax professional: 1. Keep DETAILED records separating your expenses. I use different credit cards for each venture and different categories in my accounting software. 2. Make sure your startup has a clear business plan and path to profitability. The IRS gets suspicious if you claim losses for too many years. 3. For me, filing separate Schedule Cs made tracking everything clearer, especially since I planned to bring on a partner for the startup later. 4. The home office deduction gets complicated with multiple businesses. I ended up calculating time spent in the space for each business and prorating based on hours. Hope this helps! The first year is the hardest - it gets much easier once you have systems in place.
Did your accountant recommend any specific software for tracking dual businesses? I'm currently using a spreadsheet but it's getting unwieldy.
I started with QuickBooks Self-Employed but found it limiting for multiple businesses. I switched to QuickBooks Online Small Business which lets you track multiple businesses with separate profit & loss statements. FreshBooks is another good option that many of my freelancer friends use. The key feature to look for is the ability to tag transactions by business/project and run separate reports. If you're on a tight budget, Wave is free and can handle basic tracking for multiple ventures. Whatever you choose, set it up correctly from the beginning - I wasted hours recategorizing transactions because I didn't have a proper system initially.
Quick tip from my own experience: Don't overlook potential QBI (Qualified Business Income) deduction implications! If your freelance work is profitable but startup is running losses, filing separate Schedule Cs might preserve your ability to claim QBI on the profitable business. Combined, your overall business profit might be too low for a meaningful deduction.
You should check your driver app accounts too. Even if DoorDash/UberEats didn't mail you a 1099, they sometimes have tax documents available for download in your driver portal. Worth checking before you file.
Thanks for the tip! I just checked both apps and you're right - UberEats had a tax summary in the driver portal even though they didn't send anything. It doesn't have a tax ID number but at least shows my exact earnings which helps. DoorDash didn't have anything though. Guess they really don't generate any documents for earnings under $600.
Don't forget you can deduct mileage for all those deliveries! Standard rate was 67 cents per mile for 2024. Even with just $475 in income, the mileage deduction could potentially offset most of that.
I had the EXACT same issue! TurboTax somehow added a recovery rebate credit to my return. When I looked closer, it was because I answered "yes" to a question about not receiving stimulus payments. I think the question is worded confusingly. Go back through your TurboTax and look for any questions about "economic impact payments" or "stimulus payments" and make sure you answered them correctly. There should be a review section where you can see what credits you're claiming and why.
I went back through everything and you're totally right! There was a question that asked "Did you receive all Economic Impact Payments you were eligible for?" and I must have clicked "No" by accident. When I changed it to "Yes" the huge credit disappeared and now I owe $3,275 like I originally expected. Thank you! Do you know if I would have gotten in serious trouble if I had filed with that error?
Glad you found it! That question trips up so many people. Since it was clearly just a mistake on a confusing question, you probably wouldn't have faced fraud penalties, but the IRS definitely would have caught it, rejected the credit, and you'd end up owing the correct amount plus interest for the late payment. You might have also had your return flagged for additional review, which could have delayed any legitimate refunds on other parts of your return. Always better to catch these things before filing!
Pro tip: Always review the actual forms before submitting, especially Form 1040. The recovery rebate credit appears on a specific line (usually line 30 on previous years' forms) and if you see a large unexpected number there, that's your red flag. TurboTax has a "forms" view where you can see the actual IRS forms before filing.
This is such good advice. I never look at the actual forms cuz all the tax software just asks questions instead. Where exactly do you find the forms view in TurboTax? Is it obvious or hidden in some menu?
In TurboTax, you can usually find the forms view by looking for "Tax Tools" in the left sidebar and then selecting "View Tax Forms." If you're using the web version, it might be under a menu called "Tools" or there's sometimes a "Preview" button near the end of the filing process. It's definitely worth checking before filing. The software is generally accurate, but only if all the questions are answered correctly. Looking at the actual forms helps catch errors like this $10,000 credit that shouldn't be there.
One thing nobody's mentioned yet - there's an opportunity cost to giving the IRS an interest-free loan. If you apply your $3200 refund to next year, that's money that could be: - Invested in your business equipment - Put in a high-yield savings account (currently 4-5%) - Used to pay down business debt - Covering operating expenses during slow months I've been running my small consulting business for 8 years and I ALWAYS take the refund now, then set up automatic transfers of 25% of my income to a separate tax account. This gives me both the cash flow benefit AND peace of mind for quarterly payments.
Do you ever worry about forgetting to make those quarterly payments? That's my biggest fear - getting hit with penalties because life got busy and I missed a payment date.
I set up calendar reminders for all four quarterly tax payment deadlines (April 15, June 15, September 15, and January 15) with alerts two weeks before each one. I actually have a separate checking account just for taxes and transfer money there with each invoice payment. You can also use the IRS Direct Pay system to schedule payments in advance if you're worried about forgetting. The penalties aren't massive if you miss by a little bit, but they do add up over time. The peace of mind from having a system is definitely worth the small amount of setup time.
Another consideration that helped me decide: your first year business profits are often not a good predictor of your second year. My first year refund was large because I over-withheld, being cautious. But my second year had way different income patterns. If I'd applied my first year refund to my second year, it would have been way too much for Q1 and not enough for the rest of the year when my business grew. Taking the refund and then making estimated payments based on actual quarterly income worked MUCH better.
Ev Luca
Does anyone know if there's a simple calculator online where I can see exactly how much of my income falls into each tax bracket? I'm trying to figure out if I should contribute more to my 401k to stay in a lower bracket.
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Avery Davis
ā¢The IRS has a Tax Withholding Estimator on their website that's pretty good. TaxCaster by Intuit is also decent for quick calculations. Just google "tax bracket calculator" and you'll find several options.
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Collins Angel
Something nobody mentions about tax brackets - they're adjusted for inflation each year! The income thresholds for each bracket typically increase a bit annually. So if your salary just keeps pace with inflation, you shouldn't "bracket creep" into higher rates.
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Marcelle Drum
ā¢This is so important! I got a 3% raise last year and was worried about moving into a higher bracket, but then realized the brackets themselves had adjusted by about the same amount. My marginal rate stayed the same even though my income went up.
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