But that's exactly the concern, right? Without extremely tight definitions, people find ways to game the system. I mean, tipping has expanded to so many industries now - you get tip prompts everywhere from coffee shops to retail stores. Where would they draw the line?

That's a fair point. The expansion of tipping culture does complicate things. I suspect any actual legislation would need to establish criteria like: the worker receives a reduced minimum wage under tip credit rules, the industry has a historical practice of tipping, and the tips are contemporaneous with service rather than contractually required. The IRS and Treasury would likely issue regulations clarifying these boundaries. Similar to how they've handled other tax provisions, they'd establish factors to determine legitimate tips versus disguised regular compensation. The challenge would be enforcement - they're already understaffed for existing tax issues.

I work in payroll software development, and yes, it would be a significant change. We'd need to create new income classifications, update tax withholding algorithms, and modify all the reporting. The IRS would also need new forms. It's not impossible, but would require substantial systems updates.

Can you explain what you mean about S-Corps and "reasonable compensation issues"? My construction business is an LLC but I elected S-Corp status for tax purposes and now I'm confused about how this would work.

With an S-Corp, you need to pay yourself a reasonable salary before taking distributions. If the LLC pays for your education, it could be considered either a business expense or potentially a fringe benefit to you as an employee-owner. If it's clearly related to your current business functions and helps you perform your job better, it can be treated as a normal business expense. However, if the education would qualify you for a new trade or significantly different position, the IRS might view it as a taxable fringe benefit to you personally, which complicates things from a tax perspective.

Is this still true? I thought they changed some of these rules with the Tax Cuts and Jobs Act in 2017? My accountant told me the rules got more flexible.

Does this calculator work well for people with both W-2 and 1099 income? I do some contract work where taxes aren't withheld at all.

Yes, the IRS Withholding Calculator handles both W-2 and 1099 income. For your 1099 contract work, it will help determine if you need to make estimated quarterly tax payments or if you can increase withholding from your W-2 jobs to cover the taxes on your contract income. It asks for detailed information about all income sources, which makes its recommendations much more accurate for complex situations like yours with mixed income types. Just be sure to update your information whenever your income situation changes throughout the year.

This is so helpful! So even if I change jobs mid-year, I should still check the multiple jobs box on the new employer's W-4, right? Does this mean I'll have less takehome pay each paycheck?

Yes, even if you change jobs mid-year, you should still check the multiple jobs box on your new employer's W-4 if you've had or expect to have other jobs during the same calendar year. And you're right - checking that box will result in more tax being withheld from each paycheck, which means your take-home pay will be lower. But this is actually a good thing because it means you're less likely to owe money when you file your taxes. Think of it as paying the correct amount gradually throughout the year instead of getting hit with a big bill at tax time.

20 Good point about the house allocation. How would you recommend splitting this up on tax forms? Should the house be completely separate from the business assets?

2 I'd recommend separating the house value from the business assets when determining what portion of expenses (like mortgage interest and property taxes) are deductible business expenses. One approach is to determine the house's value as a percentage of the total property value, then allocate that percentage as personal use. The house doesn't need to be completely separate - the LLC can still own the entire property. You just need to properly allocate expenses between business and personal use. If you're not paying market-rate rent to the LLC for your personal use, there could be imputed income or other tax consequences to consider, so that's something to discuss with a tax professional familiar with your specific situation.

19 Yes, cattle operations typically qualify as farming activities under IRS rules. This means you might be eligible for things like farm income averaging, which can help reduce your tax burden in profitable years. Even in loss years, farm activities have some specific rules that can be advantageous.

Thanks for the advice! Do you happen to know if there's a way to look up my state's laws about refund interest? I'm in Michigan if that helps.

For Michigan, you can check the Michigan Department of Treasury website for their "Revenue Administrative Bulletins" or RABs. They usually publish the interest rates for underpayments and overpayments there. Last I checked, Michigan does pay interest on refunds but only after a certain processing period has passed (I think it's 45 days after you file for a refund). The statutory reference should be in Michigan Compiled Laws (MCL) somewhere in the 205 section which covers revenue and tax laws. The exact interest rate changes periodically based on market rates, so you'll want to look up the current rate applicable to your situation.

This is seriously good advice. I made this mistake and regretted it. If you can afford to pay now, do it while simultaneously disputing. You can always get a refund later, but you can't get rid of penalties once they attach.