That's a really good point about the fair market value. I've been researching comparable workshop spaces in my area to make sure I'm charging a reasonable amount. Would you recommend getting some kind of formal appraisal to document the fair market rental value? I hadn't considered selling the garage space to the business - that seems complicated since it's on the same property lot. Wouldn't that create zoning issues or require subdividing the property?

A formal appraisal would be ideal for documentation, but even gathering 3-5 comparable rental listings from your area can serve as reasonable support for your rental rate. Save screenshots or printouts of similar workspace rentals to keep with your tax records. You're absolutely right about the complications with selling just the garage. Unless your property is already zoned for mixed use, you'd likely face zoning issues. Subdividing residential property to sell a portion to a business entity is possible but extremely complex and might trigger reassessment of property taxes or other consequences. The rental approach you're considering is likely simpler from a practical standpoint.

If you convert it to a legal ADU with living facilities, it would likely be considered a separate dwelling unit entirely. This could actually work in your favor for the Augusta Rule because each dwelling unit gets its own 14-day exemption. Just make sure the conversion is permitted and up to code, otherwise you could have issues with both the IRS and local authorities.

Wait what's the difference between 8840 and 8843? I've been filing wrong for years maybe??

Form 8843 is for J visa holders, students, and certain other nonimmigrant statuses to explain your presence in the US. It's required for everyone on those visas regardless of how many days you were in the US. Form 8840 is only for people who would otherwise meet the substantial presence test (183+ days using the formula) but want to claim they have a closer connection to a foreign country and should still be treated as nonresidents. They're often confused because of the similar numbers, but they serve different purposes. If you're on a J visa, you definitely need to file 8843, but you only need 8840 if you meet that substantial presence test and want to claim the closer connection exception.

Thanks for sharing your experience! Did Sprintax handle direct deposit of refunds well? That's important to me since I'll be leaving the US soon and want to make sure I get my refund.

How difficult was the NAEA content? I don't have any formal accounting background - just basic bookkeeping for my business. Would I be in over my head?

You wouldn't be in over your head with NAEA courses. They're designed to be accessible to people without accounting backgrounds, starting with fundamental concepts and building from there. Each module typically begins with basics and progressively gets more detailed. The S Corporation course specifically explains concepts like reasonable compensation and pass-through taxation in plain language before diving into the more technical aspects. They also provide plenty of real-world examples that make it easier to understand how the concepts apply to actual businesses. Most of my fellow students were business owners like yourself rather than accounting professionals.

I did their S Corporation specialist course last year. It's good info but very focused on California tax issues, so if you're in another state, just be aware of that limitation. Their materials are easy to understand though, and they explain things much better than the dry IRS publications.

Thank you for this suggestion! I didn't even know the Taxpayer Advocate Service existed. Did you need to provide special documentation to them, or just explain your situation?

I had to provide pretty much everything - bank statements, my complete Venmo transaction history, my tax return, and the deficiency notice. The more documentation you have ready, the faster they can help. Make sure to explain that this is causing you significant financial hardship (which I'm guessing it is, given the amount). That helps them prioritize your case. They're understaffed but they really do try to help if they can see clear evidence that the IRS made a mistake.

This 100%. Document EVERYTHING. I had to reference previous conversation IDs several times during my deficiency dispute. Also send everything via certified mail so they can't claim they never received your documentation.

Omg I didn't even think about workers comp! Do I calculate that the same way as the other payroll taxes? Is there a standard percentage for bakery workers?

You don't calculate workers comp the same way as payroll taxes. You'll need to contact an insurance provider who offers workers compensation insurance in Illinois. They'll assign classification codes based on the type of work (bakers might be code 9083) and give you a rate per $100 of payroll for each classification. The rates for bakery workers vary widely by state, but in Illinois, you might expect something around $1.50-$3.00 per $100 in payroll, depending on your claims history and other factors. So if you have $10,000 in monthly payroll, you might pay $150-$300 monthly for coverage.

I second this. I messed up some calculations and classified contractors incorrectly. Ended up with huge fines. A payroll service would have been so much cheaper!