Is it even worth claiming home office then? I've heard it reduces your mortgage interest deduction and complicates selling your house later because of capital gains implications. Some of my friends say to avoid it completely.

I didn't make any special elections, so I guess it's the default (sole proprietorship)? Is that bad? Should I have chosen S-Corp instead?

For your first year with more expenses than income, the default sole proprietorship treatment is actually perfect! This allows your business losses to directly offset your W-2 income on your personal return. If you had elected S-Corp status, the rules for how losses flow through would be more complicated and potentially less beneficial in this startup phase. As your business becomes profitable, S-Corp status might make sense to save on self-employment taxes, but for now, you're in the ideal structure to maximize the tax benefit of your startup losses. You made the right choice by sticking with the default!

That's really encouraging to hear! Did you have to do anything special on your tax return to make sure your parents could still claim you as a dependent? I'm worried about filling something out wrong and messing up my parents' taxes.

Nothing complicated at all! On your tax return (if you need to file one), there's just a checkbox that says "Someone can claim you as a dependent." You check that box, and that's it! You file your return, your parents file theirs claiming you as a dependent, and everything works out fine. The first year I filed, my dad helped me through it using TurboTax, and it was actually way easier than I expected. After that, I did it myself. When you're a dependent with a simple job, tax filing is usually very straightforward - just a few forms to fill out.

This isn't completely accurate. You're confusing household employee rules with self-employment. If someone is babysitting or doing lawn work as an independent contractor (which most teen jobs like this are), they need to file if self-employment income exceeds $400, even if they're a dependent.

That sounds interesting but I've never heard of a spousal IRA. How does that work exactly? Does it come with the same tax benefits as a regular IRA?

A spousal IRA works just like a regular IRA - same contribution limits, same tax benefits. The difference is that normally you need earned income to contribute to an IRA, but the spousal IRA is an exception that allows a working spouse to contribute to an IRA for a non-working spouse. For 2024, you could contribute up to $7,000 to a spousal IRA for your wife ($8,000 if she's 50 or older). This gives you an additional tax deduction if you choose a Traditional IRA, or tax-free growth if you choose a Roth IRA. You'll need to file jointly to use this benefit, and your earned income must be at least equal to the total contributions you make to both your IRA and her spousal IRA.

This is a really good point. Do you use any specific tax software that made it easy to compare the two options?

How often do you need to document shareholder meetings if you're the only owner? Is that even necessary for a single-member S Corp? Seems like excessive paperwork.

Yes, it's still necessary even as a single owner! I hold and document quarterly meetings with myself (sounds ridiculous, but it's important) and maintain a corporate minute book. My accountant advised doing this because maintaining the corporate veil is critical - if you're ever challenged, you need to show you're treating the business as a separate entity. The documentation doesn't need to be complex, but should demonstrate you're making business decisions as a corporation rather than as an individual. This includes formally approving major purchases, loans, salary changes, etc. Many single-owner S Corps get sloppy with this paperwork and it can create real problems during an audit.

This is actually a common misconception. S Corp shareholders who own more than 2% can still deduct health insurance premiums on their personal returns (Form 1040) as an adjustment to income, so it ends up being a wash tax-wise in most cases. You just can't deduct it directly on the S Corp return.

How do you figure out how much you owe for the quarterly payments? I just started doing deliveries this year and am totally lost.

You need to estimate your annual income from deliveries, calculate the taxes you'll owe, and divide by four for each quarterly payment. The simplest approach is to set aside about 30% of your delivery earnings (15.3% for self-employment tax plus your income tax rate). You can use Form 1040-ES to calculate the exact amount, or many tax software programs have quarterly tax calculators. The quarterly due dates are April 15, June 15, September 15, and January 15 of the following year.

That's right - this was all word of mouth with seniors in my community. No app involved, just me picking up groceries and prescriptions for cash payment. No 1099s or any official paperwork.