That's a really good point. I started contracting around April 2021 and didn't form the S Corp until September. So I definitely had some income before the corporation existed. And yes, I'm pretty sure I filed the 2553 - the bookkeeper handled that paperwork and I signed it. I got something back from the IRS confirming the S election but I'd have to dig through my files to find it.

That's good you filed Form 2553 and have confirmation. Your approach should be to file two different types of returns for 2021 then: For January-August 2021, report your contracting income on Schedule C as a sole proprietor. This will be part of your personal 1040. For September-December 2021, file an 1120-S for your S Corporation. You'll need to report any reasonable salary you should have taken (even if you didn't actually run payroll) and any distributions you took from the business.

I use TurboTax Business for my S Corp. Would that work for someone in OP's situation or is this too complex for DIY software?

Do you have any tips for tracking DeFi staking rewards if you were, hypothetically, completely disorganized and didn't track anything all year? Asking for a friend... 😬

If your "friend" hasn't been tracking anything, there are a few options! First, check if the DeFi protocols you're using have any dashboard that shows historical rewards - some newer ones do offer this. For most cases though, you'll need to use a blockchain explorer like Etherscan, Solscan, etc. Look up your wallet address and filter for the contract addresses of the staking protocols you used. You'll need to go through the transactions and identify the rewards. It's tedious but possible. Some tax tools can also retroactively analyze your on-chain activity and categorize staking rewards automatically. Worth the investment if you have significant DeFi activity, especially across multiple chains or protocols.

How much staking would trigger that self-employment consideration? I'm running 3 Ethereum validators and about 10k in Polkadot. Is that enough to be considered a "business"?

15 Is there any way to reduce that self-employment tax? That's a huge chunk of money on top of regular taxes!

5 You can reduce your self-employment tax by forming an S-Corporation instead of operating as a sole proprietor. With an S-Corp, you pay yourself a reasonable salary (which is still subject to self-employment tax) but can take the rest of your profits as distributions that aren't subject to SE tax. However, there are additional costs and complexities with an S-Corp, including payroll processing, separate tax returns, and other compliance requirements. Generally, it's not worth considering until you're consistently making at least $80-100K in profit. Given your income level, it might be worth consulting with a tax professional who specializes in small businesses to see if this strategy would benefit you.

8 BAD idea. The IRS has been cracking down hard on unreported income, especially from payment apps. As of 2022, platforms like CashApp, Venmo, PayPal etc. are required to report transactions to the IRS if they total over $600 in a year. Even if you don't get a form, they're sending the info to the IRS. Plus, if you have large deposits going into your bank account that don't match your reported income, that's a major audit flag. The penalties for intentional underreporting can include up to 75% of the unpaid tax plus interest, and potentially criminal charges for tax evasion. Not worth the risk with six-figure income!

Thanks for mentioning this! What exactly are the Excess Business Loss limits for 2025? I've been so focused on the passive vs non-passive issue that I totally overlooked this potential limitation.

For 2025, the Excess Business Loss limitation is $300,000 for single filers and $600,000 for joint filers. This means if your total business losses exceed your business income by more than these thresholds, the excess gets carried forward to future years. For most people with a single vacation rental property, this limit isn't an issue. But if you have multiple properties or other business losses, it could come into play. The At-Risk Rules are potentially more relevant in your case - they limit your deductible losses to the amount you have "at risk" in the activity, which typically includes your cash investment, the portion of loans you're personally liable for, and certain qualified non-recourse financing.

Totally agree! I feel like half of tax law is hidden in obscure regulations that normal people would never find. It seems like they make it intentionally complicated.

Thanks for this perspective! I definitely won't go back to H&R Block after that experience. Do you have any tips on finding a good CPA who knows how to handle these interstate moves and stock issues? Is there anything specific I should look for or ask when I'm interviewing them?

Look for a CPA who specializes in individual taxes rather than business taxes. Ask specifically about their experience with interstate moves and stock compensation (RSUs, options, etc). A good question is "how would you handle allocation of income between California and Oregon for a mid-year move?" Also ask about their approach to organizing those old 401ks - a good tax professional thinks beyond just this year's return. Check Google reviews, but also ask for referrals from colleagues in similar situations. Since you work for a large company, there might be others who've dealt with the same stock and relocation issues who can recommend someone.

I'll second FreeTaxUSA. It handled my interstate move and stock sales for $15 (for the state return). Federal filing is completely free regardless of complexity. TurboTax would have charged me $120+ for the same forms.

Thanks for confirming! I felt like I was taking a risk trying a less-known software but it worked perfectly. The interface isn't as pretty as TurboTax but it asks all the right questions and handles the complex scenarios at a fraction of the cost.