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Just wanna add my experience as another small business partner. Our partnership agreement explicitly states that we handle healthcare individually, but we found a workaround. We amended our agreement to have the partnership reimburse each partner for their health insurance premiums and report it as guaranteed payments. This made the premiums clearly deductible as self-employed health insurance on our personal returns. The key is proper documentation and making sure your business and personal finances connect correctly for the deduction. Don't just pay from your personal account without the proper paper trail!
That's really helpful, thanks! Did changing your partnership agreement have any other tax implications we should be aware of? Also, did you have to make this change before the tax year began, or could you implement this partway through the year?
Changing the agreement did increase our self-employment taxes slightly since guaranteed payments are subject to SE tax. However, the health insurance deduction more than offset this increase for most partners. You can implement this change partway through a tax year. We made the change in August and just documented that going forward, the premium reimbursements would be treated as guaranteed payments. Your partnership will need to keep detailed records of the reimbursements and make sure they're properly reflected on your K-1s. The mid-year change is fine as long as you clearly document when the policy changed and handle the accounting consistently after that date.
One thing nobody mentioned - check if your state has additional rules! Here in California, I could deduct my health insurance premiums on my federal return as self-employed, but the state had different requirements.
Quick tip from someone who makes this kind of mistake ALL THE TIME: Check your decimal places! One year I owed $7,800 instead of $78 because I accidentally put my stock sale proceeds as $120,000 instead of $1,200. The worst part is I didn't catch it before filing and had to do an amended return which was a huge pain. Also double check if you entered something as a deduction when it should be a credit or vice versa. That can cause massive swings in what you owe.
Thanks for this tip. I went back and checked all my numbers again and noticed I accidentally entered my student loan interest as $45,000 instead of $4,500. That was part of the problem! Still working through the rest of the issues, but every bit helps.
Glad you caught that! Student loan interest is an easy place to make a mistake since there's a cap on how much you can deduct anyway (I think it's $2,500 max for 2024). Another thing to check is filing status - if you accidentally selected "Married Filing Separately" instead of "Single" it can sometimes cause weird tax calculations. Also verify your state residency information is correct if you're filing state taxes too.
Has anyone else noticed that TurboTax has gotten worse at catching obvious errors? I used them for years but switched to FreeTaxUSA last year after TurboTax let me submit a return with my birthday entered incorrectly which caused all kinds of problems.
I've used both and definitely prefer FreeTaxUSA. TurboTax seems designed to upsell you on premium features while FreeTaxUSA just lets you file without all the marketing. Plus it's WAY cheaper.
I use QuickBooks for my business accounting, and they have an integrated 1099 e-filing service. If you're already using QB or similar accounting software, check if they offer this feature - it's usually pretty straightforward. You just verify the vendor info, select who needs 1099s, and submit electronically. The fee is typically around $15-20 per form.
Does QuickBooks automatically know who should get a 1099? I've paid several people but I'm not sure which ones qualify for needing the form.
QuickBooks doesn't automatically determine who needs a 1099 - you need to properly categorize your vendors first. Generally, you need to send 1099s to any unincorporated businesses or individuals you paid $600+ for services during the tax year. When you set up vendors in QB, there's an option to mark them as 1099 vendors and enter their tax information. At year-end, the system will identify all 1099 vendors who've been paid over the threshold amount. You can then review the list, make any needed adjustments, and process the forms directly through their e-filing service.
Just want to point out that the IRS changed things in 2020. Now you should use Form 1099-NEC (Non-Employee Compensation) for contractor payments instead of the 1099-MISC. The 1099-MISC is still used but only for other types of payments (like rent, royalties, etc.). Sounds like you might be using the wrong form entirely for contractor payments.
This is accurate. I made the same mistake my first year with contractors. The 1099-NEC is what you need for anyone who did contract work for your business. MISC forms are for things like rent, prizes, etc. The instructions on both forms explain the difference pretty well.
Wait seriously?? I've already sent the contractor the 1099-MISC Copy B. Do I need to send them a 1099-NEC now instead and withdraw the MISC form somehow? This is getting more confusing.
Something else to consider - check what actual numbers she put on your return. My cousin had a similar experience and the "tax preparer" had falsified her charitable contributions and business expenses to create a fake refund. When my cousin actually looked at the forms, there were donations listed that she never made and a "home business" that didn't exist.
I did look through everything and found some creative "deductions" she included! She claimed I had over $7,500 in unreimbursed employee expenses (which aren't even deductible for most people now) and $4,300 in charitable contributions I never made. She also somehow found a "home office deduction" even though I work full-time at my employer's location. No wonder I was getting a refund! Definitely doing my taxes myself now.
That's exactly what I was afraid of. Those are the exact same tactics my cousin's ghost preparer used! It might be worth checking if you qualify for the IRS Identity Protection PIN program. It's an extra layer of security that prevents anyone from filing a tax return in your name without that special PIN. You can request one through the IRS website, and it makes it nearly impossible for someone to file a fraudulent return using your info.
Just wanna say don't be too hard on yourself. These ghost preparers are really good at what they do! My partner is a legit tax accountant and says they see the aftermath of ghost preparers all the time. The scary thing is how many people DON'T catch it before filing and end up with audit notices 2-3 years later.
For real! My neighbor got hit with a $12k bill from the IRS for returns a ghost preparer filed THREE YEARS ago. He had no idea anything was wrong until he got the audit notice. By then the "preparer" was impossible to find.
A Man D Mortal
22 A little-known trick: check if your property is listed on Zillow or Redfin. In many cases, they'll show the tax assessment including the land/improvement breakdown even when the county website doesn't make it obvious. Look under the "Tax History" or "Property Details" sections. Not always accurate, but it's worked for 3 of my rental properties when I couldn't find the info elsewhere.
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A Man D Mortal
ā¢4 I never thought to check Zillow! Just looked at my property and they do have land value listed, but it's from 2022. Do you think those values would still be acceptable to use for my 2024 taxes, or would they be too outdated?
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A Man D Mortal
ā¢22 2022 values are fine to use as a starting point! The land/improvement ratio tends to stay fairly constant unless there's been major construction or a significant change in your area's land values. If you want to update them to current values, you can apply the same ratio to your current total assessed value. For example, if land was 25% of the total in 2022, apply that same percentage to your current assessment.
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A Man D Mortal
3 Is anyone else bothered by how difficult they make this for regular people? I'm not an accountant or tax professional and it feels like the government deliberately hides this information to trip us up. All these extra steps just to figure out a number they already know!
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A Man D Mortal
ā¢19 100% agree. And then if you get it wrong, they penalize YOU. It's absurd that we have to jump through all these hoops when the IRS and county assessors already have all this information. The whole tax system needs a complete overhaul.
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