Thank you for explaining this! Does this mean when I file taxes I need to report that full $47,500 cost basis amount on my forms? Or just the actual profits I've made when I've sold back to USD?

You need to report all transactions where you disposed of cryptocurrency - either by selling it for USD or trading it for another crypto. For each transaction, you'll report both the proceeds (what you received) and the cost basis (what you paid for it originally). If you use tax software or Form 8949, you'll list each transaction separately. So yes, the total cost basis across all your transactions might add up to that $47,500 figure, but your taxable gains will only be the difference between your total proceeds and total cost basis. If you've only made $650 in actual profit, that's all you'll pay taxes on - not the full cost basis amount. This is why good record-keeping is essential with crypto.

I used CoinTracker last year and it was ok but missed some DeFi transactions. Had to manually input a bunch of stuff. Haven't tried Koinly though.

I've used both. Koinly was better for me because it handled my NFT transactions properly. CoinTracker kept treating my NFT trades as regular crypto and messed up the cost basis calculations. But it depends on what kind of crypto activity you have.

Thank you so much for this list! I've been deducting my equipment and software, but I completely forgot about tracking mileage to shoots. Do you know if there's a good app for tracking business miles? And can I retroactively claim mileage from earlier this year if I didn't track it at the time?

There are several good mileage tracking apps - MileIQ, Everlance, and Stride are popular ones. Most have free versions with limited trips and paid versions for more frequent drivers. For past mileage, you can create a log retroactively, but you'll need to provide reasonable documentation. Look through your calendar, emails, or invoices to find dates of shoots. Then use Google Maps to determine the mileage for each trip. Keep this log with addresses, dates, purpose of trips, and miles driven. It's not ideal, but it's better than losing the deduction entirely. Going forward, I'd strongly recommend using an automatic tracking app.

This is so important! I had to renegotiate my lease when my landlord found out. Also worth checking your city's zoning laws - some municipalities have restrictions on home-based businesses, especially if clients come to your location.

Thanks for sharing your experience! I hadn't even considered the QBI deduction. Do you remember how complicated the process was to switch from S to C? And now you're switching back? Did you use a specific service or accountant to help with the transition?

The conversion process itself wasn't too difficult - it's basically filing Form 8832 to elect C-corp status. The real complications came afterward with the new tax reporting requirements and accounting changes. I worked with my accountant who specializes in small business taxation. If you're considering a change, I'd definitely recommend working with a specialist rather than doing it yourself. There are timing considerations and potential tax implications that aren't obvious. For example, after you revoke S-corp status, you generally can't re-elect it for 5 years without IRS permission, which is why I'm having to go through a more complex process to switch back.

I did this calculation recently for a similar situation. Here's a simplified breakdown: S-corp: 60k business income passes through. Assuming a reasonable salary of 35k (subject to payroll taxes) and 25k as distribution (no SE tax). The 60k is taxed at personal rates, but with QBI deduction on qualified income. Approx total tax: $12-14k depending on deductions. C-corp: Corporation pays 21% on 60k = $12.6k. Then any money taken out as dividends gets taxed again at 15% (assuming qualified dividends). So if you took all remaining $47.4k as dividends, that's another $7.1k in tax. Total: $19.7k. This is simplified and excludes other factors, but illustrates why S-corps often work better for smaller businesses where owners need to take most profits out.

Would you mind explaining a bit more about those unexpected complications with California? I'm in a similar situation with a Delaware entity but live in California.

Sure thing. California takes the position that if you're a CA resident managing the holding company, they can tax the income and capital gains regardless of where the entity is formed. What happened in my case was that I had created a Delaware holding company owning several startup equity positions, but since I was making all investment decisions from California, the state considered it a California business. When I sold two of my positions for a significant gain, California required me to pay state tax on the entire gain, effectively ignoring the Delaware structure. I also had to deal with California's "doing business" fee since they deemed my holding company to be operating in California. The real surprise was that I still had to pay Delaware franchise tax while also being fully taxed by California - basically getting the downsides of both states without the expected benefits of Delaware.

That's actually a complicated area. You can use a Self-Directed IRA for certain equity investments, but there are prohibited transaction rules that can easily be violated with startup equity. If you're actively involved with any of the companies, it's especially problematic. Plus many equity compensation types like ISOs and NSOs can't be held in IRAs directly.

11 Is there a minimum amount of tax debt for an Offer in Compromise to be worth it? I owe about $6,500 which is a lot for me right now but not like tens of thousands.

16 There's no minimum amount required for an Offer in Compromise, but the process is intensive enough that it's usually pursued for larger debts. For $6,500, a payment plan might be simpler unless you have extreme financial hardship. The IRS looks at your ability to pay, income, expenses, and asset equity. They essentially ask: "Could we reasonably expect to collect more from you over time than what you're offering now?" If your financial situation is truly dire with no improvement in sight, it could be worthwhile even for smaller amounts.

3 Would it make sense to put like half on a credit card (the amount I could pay off in 2-3 months) and then get on a payment plan for the rest? My tax bill is around $4300 and I could probably handle about $2000 on my card.