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I just called the IRS Practitioner Priority Service about this exact question last week! The agent confirmed that Form 8809 doesn't require a 2848 for preparers to sign. They explained that information return extensions are considered "ministerial acts" that don't require formal representation authorization.
For what it's worth, I've been filing 8809 extensions for clients for years without a 2848 and never had an issue. The IRS is mostly concerned that the extension gets filed on time. Just make sure you have your EFIN or PTIN on the form as required. Also, remember that Form 8809 gives an automatic 30-day extension for 1099-NEC now - you don't even need to provide a reason for the extension request!
Thanks everyone for the helpful responses! This definitely clears things up for me. I'll go ahead and file the 8809 without the 2848 since I already have a service agreement with this client. And I'll look into getting 2848 forms for all my clients going forward as a best practice. Really appreciate all the insights!
Don't forget state taxes in this equation! California is extremely aggressive about taxing worldwide income. I worked for a Japanese company remotely from CA for 3 years and my state tax bill was brutal compared to what colleagues in Nevada paid (zero state tax). If you're making $127K equivalent, CA will take roughly 9.3% of that. Have you considered relocating to a no-income-tax state before taking this position? Could save you $10K+ annually.
I actually have been thinking about that! How hard was the process of working with a foreign employer while in California? Did they handle the state tax withholding properly or did you end up with surprise tax bills?
The foreign employer had no idea how to handle California taxes. They didn't withhold anything for state taxes, so I had to make quarterly estimated tax payments to the California Franchise Tax Board to avoid penalties. I got hit with an underpayment penalty the first year because I didn't realize I needed to do this. If you stay in California, definitely set up quarterly estimated payments right away. The FTB is much more aggressive than the IRS about collecting penalties! Also, document everything about where you physically work - California has been known to audit people who claim they've moved to Nevada but still actually work in California.
Has anyone addressed the currency exchange risk yet? I worked for a UK company from the US and the salary looked great until the pound dropped 18% against the dollar over 6 months. Suddenly I was making way less than expected.
Good point. I negotiate a USD equivalent with my foreign employer that gets adjusted quarterly. Protects against big swings. Swiss franc is usually pretty stable tho.
Has anybody done a "backdoor Roth" using this conversion process? My income is too high to contribute directly to a Roth, so wondering if this is basically what the broker is suggesting...
A backdoor Roth is slightly different. That's when you contribute to a non-deductible traditional IRA first (because there's no income limit) and then immediately convert it to a Roth. Since you're converting after-tax dollars, there's minimal tax impact. What the OP is describing sounds like a regular conversion of an existing pre-tax traditional IRA, which would be fully taxable. Different situation but same conversion mechanism.
Be careful about the pro-rata rule if you have other traditional IRA assets! I learned this the hard way. If you have both pre-tax and after-tax money in traditional IRAs, you can't just convert the after-tax portion. The IRS makes you convert proportionally from both.
Thanks for bringing this up! I hadn't considered this. All my traditional IRA money is pre-tax (I've always been able to deduct it), so I guess this wouldn't apply to my situation specifically? But definitely good to know about.
You're right - if all your traditional IRA money is pre-tax, the pro-rata rule isn't a concern for you. It becomes an issue when people have a mix of deductible and non-deductible contributions across different IRA accounts. The IRS views all your traditional IRAs as one big pot for conversion purposes, which surprises a lot of people. But in your all-pre-tax situation, you'll just pay ordinary income tax on whatever amount you convert.
My two cents as someone who went through this last year: don't overcomplicate it. If you're only making a few hundred bucks per event, a single-member LLC is probably overkill, let alone a multi-member one with 10 people. Have you considered just operating as a sole proprietor and tracking your business income/expenses separately? You can still get a business bank account as a sole proprietor with just an EIN. Then you could just pay your friends as contractors or have an informal profit-sharing arrangement. The paperwork and annual fees for maintaining an LLC in most states might not be worth it for occasional parties. If you do decide to grow it into something bigger, you can always form an LLC later.
Wouldn't I still be personally liable as a sole proprietor though? That's my biggest worry - if someone gets hurt at one of our events or something else goes wrong, I don't want to risk my personal assets.
Yes, you would be personally liable as a sole proprietor - that's the main drawback. If liability protection is your primary concern, then an LLC does make sense. In that case, I'd still recommend keeping it as simple as possible with a single-member LLC unless your friends are insisting on being official partners. Make sure you get proper event insurance regardless of your business structure. Even with an LLC, if something goes wrong at an event, having good insurance is often more practically important than your business structure, especially for small businesses where people sometimes accidentally "pierce the corporate veil" by mixing personal and business finances.
Has anyone mentioned S-Corps yet? If this event business starts making decent money, you might want to look into an S-Corp election down the road. You can start as an LLC and then elect S-Corp status later. The advantage is potentially saving on self-employment taxes since you can pay yourself a reasonable salary and take the rest as distributions that aren't subject to SE tax. But it's only worth it once you're making enough profit to offset the additional paperwork and accounting costs.
Sofia Torres
One thing to consider that nobody's mentioned yet - if you're doing a lot of crypto gambling, make sure you're keeping detailed records of your deposits and withdrawals. I got audited last year because the IRS saw large movements of crypto into my wallet but couldn't identify the source. Had to prove it was gambling winnings and not unreported income from selling services or goods. The annoying part was showing the trail from gift cards to gambling site to crypto withdrawal. Take screenshots of everything!
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GalacticGuardian
ā¢This is why I always take the extra step to get a win/loss statement from gambling sites that offer them. Does your crypto gambling site provide any kind of statement or summary you can download for tax purposes?
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Sofia Torres
ā¢Most legit crypto gambling sites do offer some form of win/loss statement or transaction history you can download. It's not always as detailed as traditional casinos, but it's better than nothing. For sites that don't provide good documentation, I've started keeping a spreadsheet with dates, amounts, screenshots of balances before and after significant wins/losses, and the withdrawal transactions. The more documentation you have linking the gambling activity to the crypto you received, the easier it is if questions come up later.
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Dmitry Smirnov
Quick technical note - when you record this in most tax software, you'll want to enter it as: 1. Gambling income (which you've done) 2. A "buy" transaction for the ETH with a cost basis equal to the USD value of your withdrawal at that exact time 3. Any subsequent sales of that ETH would then generate capital gains/losses Your $101 loss means the ETH decreased 10.1% in value since you received it (assuming you withdrew about $1000 worth). Seems reasonable depending on when this happened and market conditions.
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Zoe Alexopoulos
ā¢Thanks for breaking it down like this! The gift card to gambling site to ETH withdrawal path had me so confused. And yes, it was about $1000 worth when I cashed out, so the 10.1% decrease tracks with the market dip after I withdrew. I'm going to double check the exact date and ETH price to make sure my software has it right.
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