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Important note that nobody has mentioned yet - if you end up having to pay taxes as if you were a 1099 contractor for 2023, make sure you deduct all your business expenses! That includes a portion of your phone bill if you use it for work, home office deduction if applicable, mileage, work supplies, etc. This can help offset some of the extra tax burden.
How do you properly document these expenses if you didn't track them throughout the year? I'm in a similar situation and I use my personal computer and cell phone for work all the time, but I don't have any special receipts or anything.
You can still claim those expenses even without perfect documentation. For things like cell phone and internet, determine what percentage is used for work (be reasonable and honest) and deduct that percentage of your bills. Pull your statements from 2023 to calculate the total. For a home office, measure the square footage of your dedicated work space compared to your total home size. That percentage can be applied to rent/mortgage, utilities, etc. For computer equipment you already owned, you can deduct the business-use percentage based on current fair market value if you started using it for business in 2023. Going forward, keep better records - a simple spreadsheet works, along with taking photos of receipts. Remember, in an audit you need to prove these were legitimate business expenses, so some documentation is better than none.
Has anyone actually succeeded in getting their employer to pay back taxes after being misclassified? My employer just agreed to make me W2 going forward but refuses to do anything about 2023 where I paid way too much in taxes.
I had partial success. Filed the SS-8 and 8919 forms, and after the IRS determination (took like 8 months), my employer had to pay their share of FICA taxes. They were annoyed but ultimately it worked out. We're still on good terms. The key was being super professional about it and framing it as "just following tax law" not a personal issue.
Has anyone used TaxAct or TurboTax for filing multiple years of back taxes with 1099 income? I'm in a similar situation and wondering which software handles this best.
I used TurboTax for 3 years of unfiled 1099 taxes last year. It worked ok but you have to buy each year separately which adds up fast. They don't make it super clear how to find the previous year versions either - you have to specifically search for "TurboTax 2019" etc. on their site. The business version is what you need for 1099s, which is their most expensive tier.
One important thing nobody's mentioned yet - if you're trying to catch up on unfiled 1099 taxes, make sure you're keeping your current year tax obligations on track too! For 1099 income, you should be making quarterly estimated tax payments. One of the biggest mistakes I made when catching up on my back taxes was ignoring my current year, which just created another problem. Set up those quarterly payments while you're sorting out the past years.
I went through something similar with deducting my real estate licensing courses from my rental income. The key question the IRS asked me during a review was whether I was already established in the business BEFORE taking the courses. Since I had owned and managed rental properties for 3 years before starting the courses, I was able to successfully argue that I was improving skills in my EXISTING business, not preparing for a new one. Make sure you have documentation showing you were already operating as a landlord before starting your MBA.
That's really helpful! I've been operating my rental properties for about 4 years now, so sounds like I'm in a similar situation to yours. How detailed did you have to get with your documentation? Did you keep syllabus info for each course to show relevance?
Yes, documentation was crucial. I kept copies of all course syllabi and highlighted specific modules that directly related to property management, tenant relations, and real estate finance. I also maintained a simple log noting when and how I applied specific concepts from my courses to my rental business. For example, when I redesigned my lease based on contract law principles from a course, I documented that change with dates and notes. The IRS didn't ultimately request all of this during my review, but having it ready demonstrated I was serious about the legitimate business purpose. Also keep records showing your rental business was established before starting courses - tax returns showing rental income, business licenses, property management records, etc.
Don't forget that if you're taking these courses to move into a different type of real estate business (like going from residential landlord to commercial property development), the IRS might consider this qualifying for a new trade or business, which would make the expenses non-deductible. Also, if your MBA would qualify you for a substantial promotion at a job unrelated to your rental properties, that could also disqualify the deduction. The "same general type of work" test is crucial here.
This is an important distinction. I tried deducting real estate courses a few years back and got audited because they determined I was using the education to expand into commercial real estate when I had only been managing residential properties before. The expansion was considered a new business category by the auditor.
One thing nobody's mentioned yet - if you miss the 2 month 15 day window but still want S-corp status for the entire year, you can file Form 2553 and write "PURSUANT TO REV. PROC. 2013-30" at the top. Under Rev Proc 2013-30, the IRS provides automatic relief if: 1) You intended to be an S-corp 2) You file Form 2553 within 3 years and 75 days of the date you wanted the election to take effect 3) You have reasonable cause 4) All shareholders reported income consistent with S-corp status This saved me last year when I messed up my timing!
Does this Rev Proc 2013-30 actually work though? I've read horror stories about people thinking they qualified for relief but then getting rejected.
It absolutely works, but you have to make sure you meet ALL the requirements. The most important is that your shareholders (which is just you if you're a single-member LLC) have filed their personal returns consistent with S-corp status. That means if you're trying to get S-corp status for 2023 after the deadline, you'd need to have filed your 2023 personal return as if you were an S-corp owner (reporting K-1 income, not Schedule C). The IRS is actually pretty lenient with this relief procedure for small businesses. I submitted mine with a simple statement explaining I didn't understand the election timing requirements, and it was approved without any questions.
Just to add a practical note as a fellow photographer who went LLC/S-corp last year: remember that once you're an S-corp, you MUST pay yourself a reasonable salary through payroll with proper withholding. This is the #1 audit trigger for S-corps. I set my salary at about 60% of my net profits based on industry averages for photographers, and I use Gusto for payroll which makes it super simple. The remaining business profit passes through to my personal return without self-employment tax, which saved me about $7,300 last year. Worth all the extra paperwork!
What's a "reasonable salary" though? I've heard everything from 30% to 70% of profits and I'm confused about what's actually required.
Rudy Cenizo
What nobody's mentioning is the Qualified Business Income Deduction (Section 199A) which gives most self-employed people a deduction equal to 20% of their qualified business income. This is available regardless of whether you're a sole proprietor or have an S-corp. It's basically a tax break designed for small business owners.
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Natalie Khan
ā¢Does the QBI deduction apply if you're doing gig work like DoorDash? I'm confused about whether that counts as a "qualified" business.
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Rudy Cenizo
ā¢Yes, gig work like DoorDash typically qualifies for the QBI deduction. Any income you report on Schedule C as self-employment income generally qualifies, with some exceptions for certain service businesses at higher income levels. The deduction is calculated as 20% of your net business income after expenses, so make sure you're tracking all your mileage and other business expenses to maximize your deduction. For most gig workers, this ends up being a significant tax savings without requiring any special business structure or additional paperwork.
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Daryl Bright
Just to complicate things further - if your business is making really good money (like over $100k profit), you probably DO want to look into an S-Corp. I saved over $13k in self-employment taxes last year by switching from sole prop to S-Corp for my consulting business.
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Sienna Gomez
ā¢Totally this! My accountant had me switch to an S-Corp once I hit about $80k in profit and I'm saving a ton on SE taxes. But for smaller businesses its probably not worth the extra hassle and fees.
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