That's interesting! Do you find it creates any cash flow issues since one partner is essentially "borrowing" more from the business than the other through these reimbursements? Or does it all even out in the end?

It doesn't create cash flow issues for us because we view it as partnership expenses rather than one partner borrowing more. The expenses are necessary business costs regardless of which partner incurs them. We do track the reimbursements for transparency, but since they're legitimate business expenses that benefit the entire partnership, we don't consider them advances or draws. The partner traveling to land clients is generating value for everyone just like the partner handling local operations. Different roles, different expenses, but equal contribution to the business.

That approach can work fine until you get audited. The IRS looks carefully at partnerships with uneven expense allocations. You need proper documentation in the partnership agreement to support why expenses are allocated differently than the general profit/loss splits.

Thanks so much for this reassurance! I'm still a bit nervous about taking the deduction without photos. For the documentation you mentioned - would a detailed written description with measurements and a hand-drawn floor plan be sufficient? Or should I try to find other proof like emails sent from that workspace?

A detailed written description with measurements and a hand-drawn floor plan is absolutely sufficient documentation. Date it and keep it with your tax records. Including details about the built-in desk, the three walls forming the alcove, and how you used the space for specific business activities strengthens your case. Adding some supporting evidence like business emails, client invoices you created there, or phone records showing client calls would be helpful supplementary documentation, but not strictly necessary. The IRS understands that people move and may not have photographs of previous spaces. Your contemporaneous written records are considered valid documentation, especially when they're detailed and consistent with your business activities.

TurboTax Self-Employed version handles home office deductions pretty well. It walks you through all the questions and helps calculate both the regular and simplified methods. I've used it for the past 3 years with no problems. Just make sure you get the Self-Employed version, not the regular one.

Thanks for mentioning this! I actually have no idea if my state has any special credits for students. How would I find this out? And yes, my parents are claiming me as a dependent still - what kind of coordination do we need to do? I'm so confused about all of this.

You can find state-specific education credits or deductions by checking your state's tax department website - most have a section specifically about education-related benefits. Just search "[your state] education tax credits" and you should find information. As for coordinating with your parents, since they claim you as a dependent, they're eligible for certain education tax benefits like the American Opportunity Credit or Lifetime Learning Credit. You can't claim these same credits on your return. However, you're still responsible for reporting your taxable scholarship income on your own return. Make sure your parents know about your scholarship situation so they can properly claim any education credits they're entitled to. It's a good idea to compare the tax benefit if they claim the education credits versus if you claim them (if you weren't a dependent) to optimize your family's overall tax situation.

I work in a university financial aid office and this is good advice. We can sometimes adjust how aid is distributed or help students understand how to minimize tax impacts. Just don't wait until the last minute! Come see us early in the year, not at tax time when options are limited.

I'm not married, so unfortunately that's not an option for me. But that's good advice for others in a similar situation who might be married!

That's unfortunate. Another option to consider for future years is timing your education expenses. If you expect more income next year, you might be able to bunch more expenses into that tax year instead. For instance, paying spring semester tuition in January vs December can shift which tax year it counts for.

Yes! I claimed LLC for coding bootcamp courses last year. The key requirement is that the educational institution needs to be eligible and provide you with a 1098-T. The courses don't need to be part of a degree program for LLC (that's only a requirement for the American Opportunity Credit).

16 Do you know if these adjustments are something we should actively check for? Like, should I be contacting the IRS to see if they missed something on my old returns, or do they just find these things themselves?

3 The IRS typically finds these issues themselves during their normal processing and reviews. You don't need to contact them specifically about potential missed refunds. They have automated systems that flag discrepancies and potential adjustments. That said, if you think there was a specific error or missed credit on your return, you can file an amended return (Form 1040-X) within 3 years of the original filing date. But in most cases like these surprise checks, it's the IRS catching things during their normal review processes.

9 That's really good advice! I've heard those replacement requests can take forever to process. Is there any way to tell from the check itself what triggered the refund? Mine just says "tax refund" but doesn't give details.