Is there any way to reduce the self-employment tax? That's a huge chunk of my income, and I didn't realize it would be that much higher than regular income tax.

You can reduce your self-employment tax by setting up an S-Corporation instead of operating as a sole proprietor. With an S-Corp, you pay yourself a reasonable salary (which is subject to self-employment tax) and take the rest as distributions (which aren't subject to SE tax). For example, if your actual earnings are $125K, you might pay yourself a salary of $75K (subject to the 15.3% SE tax) and take $50K as distributions (not subject to SE tax). This could save you thousands. However, S-Corps have more paperwork and costs, so you need to make sure the tax savings outweigh those expenses.

I thought you can't claim home office deduction unless you have a separate entrance for clients? Is that still true?

Do you need a separate bank account for the rental income too? I'm about to start renting out my spare bedroom and wondering how detailed the bookkeeping needs to be.

A separate bank account isn't absolutely required, but it makes your life SO much easier. It creates a clear separation between your personal finances and your rental business, which is extremely helpful if you ever get audited. As for bookkeeping detail, err on the side of too much rather than too little. Keep all receipts, maintain a spreadsheet tracking income and expenses by month, and document everything about the rental use (dates occupied, repairs, any personal use periods). Take photos before/after tenants for documentation of condition. The more organized you are now, the less stress you'll have at tax time or if questions come up later.

That's for home OFFICE deductions, not rental property. The simplified method doesn't apply to rental income reported on Schedule E. They're totally different tax situations.

Does anybody know which brokerages are good about reporting cost basis correctly? I'm with Fidelity now but thinking about switching.

In my experience, Fidelity is actually one of the better ones for correctly reporting cost basis to the IRS. Vanguard and Charles Schwab also tend to be reliable with their reporting. The issues I've seen most often come from newer trading platforms and especially crypto exchanges, which sometimes have incomplete reporting systems. TD Ameritrade (now part of Schwab) has been solid in my experience too. The key thing to look for is whether your year-end tax documents clearly show both proceeds and cost basis for each transaction. If you see "cost basis not reported to the IRS" footnotes on your 1099-B, that's a red flag that you might face the exact situation the original poster is dealing with.

This happened to me too. How long did it take to resolve once you sent in your documentation?

That's a really good idea I hadn't thought of! Do you know how long the process typically takes when you file a complaint with the insurance commissioner? I'm a bit worried about the timeframe since the IRS only gave me 30 days to respond with the documentation.

In my case, I got a response within about a week after filing the complaint. The insurance commissioner's office contacted the insurance company directly, and suddenly they were able to "find" the documentation they claimed didn't exist. You should mention the 30-day IRS deadline in your complaint - the commissioner's office can often expedite cases that have external deadlines. They can't force the company to create a form that doesn't exist, but they can pressure them to provide acceptable alternative documentation that satisfies the IRS requirements. The state regulators have significant leverage over insurance companies, which is why you'll often see faster results when they get involved.

Yes! I had to submit alternative documentation instead of a 1095-B last year. I sent in my insurance cards, payment receipts, and a letter explaining why I couldn't get the official form. The key was including Form 8275 (Disclosure Statement) where I explained the situation in detail. The IRS accepted everything without any follow-up questions.

This is exactly what happened with my ex. He tried to claim our kid on his unemployment to get the higher benefit amount, knowing a portion would be garnished for the back support he owed. Kind of sneaky but at least some money was coming to support the child.