I didn't even consider filing separately! Did you still get to claim the mortgage interest and property tax deductions that way? And did you have to do anything special with the marketplace insurance forms?

When filing separately, only the spouse who actually paid the mortgage interest and property taxes can claim those deductions. In our case, we had set up our mortgage so both our names were on it, and we paid from a joint account, so we could document that my wife (the lower earner) paid those expenses. This helped maximize the benefit. For the marketplace insurance forms, it gets a bit complicated. You'll need to allocate the premium and subsidy amounts between spouses. Our tax preparer handled this for us, dividing it based on who was actually covered by the policy. The key benefit was that by filing separately, my wife's income alone (not our combined income) was used to calculate the subsidy repayment for the months before we were married.

The Saver's Credit phases out pretty quickly though. For 2025 filing, married couples filing jointly lose eligibility when their AGI exceeds $73,000. Given their combined income of about $103k, they probably won't qualify.

Thanks for the suggestion! We actually do use TaxJar for calculations, but the issue is still around whether we can legally turn on collection in states where we don't have the permit yet. Seems like from what others are saying, we definitely need to wait until the permits are approved. I'll mention the filing service to my boss though - might help lighten the load once we're up and running!

That makes sense! Yes, definitely wait for the permits. One other tip - many states will give you a registration date that's earlier than the date you actually receive the permit. This is normal and means you can start collecting as soon as you get approval, even if you're "technically" registered as of an earlier date. Just make sure to keep good records in the meantime!

Oof, that's rough. Which states hit you with backdated liability? I'm currently in the permit process with NY, NJ, and California.

California was the worst offender - they backdated my liability to exactly when I crossed the threshold ($500,000 in sales or 200 transactions). Illinois and Massachusetts did something similar, but they were more reasonable about waiving penalties since I registered promptly after exceeding the threshold. Just be especially careful with California - they track your sales somehow and knew almost exactly when I hit nexus!

Would Form 843 work even though the mistake is from a few years ago? And should I hire a different CPA to handle this or try to do it myself?

Yes, Form 843 can still be filed for the tax year in question even though it's from a few years ago. The statute of limitations for filing a claim for refund or abatement is generally three years from the date the return was filed or two years from the date the tax was paid, whichever is later. Since you're just now discovering this issue, you should still be within that timeframe. I would strongly recommend hiring a different tax professional to handle this rather than trying to do it yourself. Look for an Enrolled Agent or CPA who specializes in tax resolution or IRS representation. They'll know exactly how to present your case for maximum chance of success and can handle all communications with the IRS on your behalf. Given the significant amount at stake ($32,000), professional assistance is definitely worth the investment.

This is the real answer. My dad's accountant made a similar mistake and ended up paying the entire bill including penalties because it was 100% their error. Don't just accept this as your problem to fix!

Thanks for the warning! So if I have a desk in my bedroom that I only use for work, but it's in my bedroom where I also sleep, would that area around the desk qualify? Or does the entire room have to be exclusively for business?

The space needs to be exclusively for business, not the entire room necessarily. So if you have a clearly defined area in your bedroom that's used only for work (like a desk and the surrounding area), that specific space can qualify. Take measurements of that dedicated workspace to calculate what percentage of your home it represents. You'll need to be able to prove that area is used exclusively for business if audited. Take photos of your setup, keep records of business activities conducted there, and ensure nothing personal is stored in that specific area. I recommend consulting a tax professional if you're unsure, but many people successfully claim partial room deductions.

This is great advice. I started a SEP IRA when I was contracting and it made a huge difference in my tax bill. I think you can contribute something like 20% of your net earnings? Definitely worth looking into.

11 Wait, so if my candle making business hasn't been profitable yet, I can't deduct ANY of my expenses?? I've spent like $2000 on supplies and only made like $800 in sales so far this year.

22 That's not exactly right. You CAN deduct expenses even if you're not profitable yet. The hobby loss rule doesn't kick in immediately - it's more of a guideline the IRS uses after several years of losses. The key is demonstrating that you have a profit motive and operate in a businesslike manner, even while you're in the startup phase. Keep good records, have a separate business bank account, develop a business plan, market your products, and maintain professional practices. These all help show it's a legitimate business attempt, not just a hobby.

16 That's not actually how tax deductions work for sole proprietors. You can't "deduct" the value of your own labor - you can only deduct actual expenses paid. Though I agree it's important for pricing products correctly!