I did check that actually - FreeTaxUSA doesn't let you just do the state return separately unfortunately. You have to buy the whole package. Based on everyone's advice, I'm going to try the Oregon Department of Revenue direct filing option instead. Seems silly to pay $50 for a $5 refund!

Yep, same happened to my cousin. Ignored a small state return and got hit with a $125 penalty two years later. The state tax departments definitely do cross-check with federal returns.

Thanks for the warning! I'll definitely file the Oregon return then. I was leaning that way already but this confirms it's not worth the risk of penalties. I'm going to try the direct filing option through Oregon's website that others mentioned.

Yes, you can deduct the business percentage of expenses for mixed-use items. There's no specific percentage threshold - you just need to have a reasonable method for determining the business portion. Some people track hours of use, others track the number of projects, and some use square footage for workspace deductions. The most important thing is documentation. Keep a log showing when equipment is used for business vs. personal purposes. Take photos of business projects vs. personal ones. Track the income from business projects. In case of an audit, you need to be able to justify your allocation percentage.

Thanks for the clarification on mixed-use deductions! I've been keeping receipts but haven't been tracking usage time. I'll start keeping a simple log of hours spent on personal vs. sellable projects to document my business percentage. Do you think a spreadsheet would be sufficient documentation or should I be doing something more formal? I'm trying to do this right without creating an overwhelming amount of paperwork for what's still a relatively small operation.

This is really helpful advice, thank you! Do you have a specific method you'd recommend for tracking the business vs. personal usage? I'm thinking of creating a spreadsheet or maybe using a time-tracking app, but I'm not sure what would be most acceptable to the IRS if I ever got audited.

For my photography business, I now use a simple but effective system. I have a digital calendar where I color-code business shoots versus personal use. I take a screenshot at the end of each month showing the breakdown. I also keep a simple spreadsheet tracking hours of use, project names (business clients vs. personal), and income generated from business projects. The key is consistency - whatever method you choose, use it regularly. The IRS doesn't require any specific format, but they need to see that your tracking is reasonable and applied consistently. Contemporaneous records (created at the time of use, not recreated later) are much more credible in an audit situation. Finally, keep all this documentation for at least 7 years along with your tax returns.

Thank you all SO MUCH for the helpful responses! I definitely don't receive any Trade Adjustment Assistance or PBGC payments, so it sounds like I shouldn't have included Form 8885 at all. I'm going to file an amended return this weekend to remove it. Would it be better to use a different tax service than H&R Block for the amendment since they're the ones who confused me in the first place?

You don't necessarily need to switch tax services. H&R Block should be able to prepare an amended return for you. However, if you're not confident in them after this experience, you might consider using a different service or even consulting with a tax professional for the amendment. The most important thing is to file the amendment correctly to remove Form 8885 entirely. Make sure the amended return clearly shows you're no longer claiming the Health Coverage Tax Credit. Also keep in mind that amended returns can take 16+ weeks to process, so patience will be necessary after you submit it.

Not OP but sometimes tax software will ask general questions about health coverage and depending on how you answer, it might add forms you don't actually need. I've had H&R Block try to add a premium tax credit form for me even though I had employer coverage and wasn't eligible.

The software asked me some questions about healthcare coverage, and I think I must have answered something incorrectly. I definitely didn't manually add Form 8885 - I had never even heard of it before this whole mess! I just checked my health insurance documentation, and I had regular employer coverage all year. Clearly I clicked something wrong in the interview questions. Lesson learned to pay closer attention to those details in the future!

I've considered that option but there's a specific reason I'm sticking with the company plan. They have access to some institutional funds with extremely low expense ratios that aren't available in individual plans. Plus the plan administrator handles all the compliance testing and Form 5500 filing, which I'd otherwise need to manage myself once the solo 401k exceeds $250k. Also, there's a potential opportunity in the future for me to be brought on as a W-2 employee, so staying in their plan makes that transition smoother. I just need to figure out the proper tax treatment for now.

Those are excellent reasons to stick with the company plan. The institutional fund access alone can save you significant money over time with those lower expense ratios. And you're right about the Form 5500 requirements - that paperwork gets complex fast when you're handling it yourself. For the proper tax treatment, one additional document that might help your CPA get comfortable is IRS Notice 2012-8, which provides specific guidance on affiliated service group arrangements. It clarifies that contractors who qualify under 414(m) should treat their contributions similarly to self-employed individuals with their own plans, but within the structure of the larger company plan.

Form 8606 is specifically for IRAs and reporting nondeductible contributions to traditional IRAs or Roth conversions. It doesn't apply to 401(k) contributions, whether in an affiliated service group or otherwise. Using this form would actually create more confusion.

Is it really worth switching tax software at this point? I'm halfway through my return in TurboTax and have a similar K-1 issue. Will H&R Block let me import what I've already done or would I have to start over?

Unfortunately, you'd likely need to start over if you switch software at this point. The import functions between competing tax products aren't great and often miss details. If you're already halfway through your return in TurboTax, your best option is probably to upgrade to their live help version rather than switching entirely. The TurboTax live tax pros can walk you through entering the statement items correctly, and that would be less frustrating than starting over in a new system. Just make sure you specifically ask about entering K-1 statement items, as some of the more general support people might not be familiar with the nuances.

You report K-1 income in the tax year shown on the K-1 itself, not when you physically received the form. If the K-1 says "2023" at the top, it goes on your 2023 return, even if you received it recently in 2024. Estates can take time to process, which is why K-1s often arrive late. If the K-1 is for 2023 and you've already filed your 2023 return, you'll need to file an amended return to include this information.