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Something similar happened to me a few years back. One thing I learned is that keeping detailed records of EVERY interaction with the tax department is crucial. Write down names, ID numbers, times of calls, and summaries of what was said. If you end up getting your money back, some states have "taxpayer bill of rights" provisions that might entitle you to interest. But don't expect them to volunteer this information - you usually have to specifically request it and cite the relevant statute.
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.
Just be careful about not paying while you dispute this. Even if you're 100% right, the penalties and interest can add up FAST if you ultimately lose the dispute. In my case, my original tax bill of $3,200 ballooned to over $5,000 with penalties and interest during the 7 months it took to resolve.
One thing nobody mentioned yet - if you have a dedicated home office for your Etsy business, you can also deduct a portion of your internet costs, which is super helpful if you're downloading and printing shipping labels at home! Just calculate what percentage of your home is used exclusively for business, and apply that same percentage to your internet bill.
But don't you need to be really careful with home office deductions? I heard they're a big audit flag. Is it really worth claiming internet expenses if it might trigger extra scrutiny?
The "home office deduction is an audit flag" concern is mostly outdated advice. The IRS has simplified the home office deduction in recent years with the "simplified method" that lets you deduct $5 per square foot (up to 300 square feet) without extensive documentation. That said, you do need to be truthful - the space must be used regularly and exclusively for business. So if you're printing shipping labels at your kitchen table where you also eat dinner, that wouldn't qualify. But a dedicated room or space used only for your Etsy business absolutely qualifies. Internet expenses can be partially deducted based on business use percentage even if you don't take the home office deduction.
Don't forget about mileage for post office runs! I track every trip I make to drop off Etsy orders and it added up to a nice deduction last year. The IRS rate was 65.5 cents per mile for 2023, so even short trips can add up if you're making regular post office visits.
Does anyone know if the trips have to be dedicated post office trips only? Like if I drop packages off on my way to pick up my kids from school, can I still count that mileage?
To answer the original question directly - the filing requirement thresholds for 2024 (filing in 2025) are: - Single, under 65: $13,850 - Head of household, under 65: $20,800 - Married filing jointly, both under 65: $27,700 But there are special rules if: - You're self-employed and earned more than $400 - You owe special taxes like alternative minimum tax - You have untaxed tips - You receive health insurance credits Even if you're not required to file, you should ALWAYS file if taxes were withheld from your paychecks to get a refund!
Is there a deadline to file if you're just trying to get a refund but aren't required to file? Like if I didn't file for 2022 but had withholding, can I still get that money back?
Yes, there's definitely a deadline. You have 3 years from the original due date to file a return and claim a refund. For 2022 returns (which were due April 18, 2023), you have until April 18, 2026 to file and claim any refund you're owed. If you miss that 3-year window, you lose the refund completely - the money becomes property of the U.S. Treasury. So if you had withholding for 2022, you should definitely file before April 2026 to get that money back.
Has anyone used the free filing options on the IRS website? I'm in a similar situation making under $12k and wondering if its worth paying for TurboTax or if the free options are good enough?
The IRS Free File is actually really good for simple tax situations. If you made under $73,000, you can use it. I used it last year for my W-2 income and it was straightforward. Just go to IRS.gov and search "Free File." Don't go directly to TurboTax's website if you want the free version - go through the IRS Free File portal to make sure you actually get the completely free version. TurboTax's website often upsells you to paid versions even if you qualify for free filing.
Just want to throw in my experience - I switched from an accountant to DIY last year using FreeTaxUSA and it was WAY easier than I expected. The federal filing is free and state is only like $15. I also itemize (mortgage, charitable donations, etc) and it handled everything perfectly. The interface isn't as fancy as TurboTax but it does everything you need and saved me about $250 compared to what I was paying my accountant. Plus I found a deduction he had been missing for years!
Do they have good support if you get stuck on something? I'm worried about messing something up and getting audited.
Their support is decent but not as comprehensive as TurboTax's. They have email support that usually responds within a day and a good knowledge base with articles explaining most common tax situations. The audit risk is pretty minimal if you're just reporting things accurately. The software does have accuracy checks built in that will flag anything that looks unusual or might trigger an audit. I was nervous my first year too, but it really walks you through everything step by step. If your tax situation is fairly straightforward (W-2 income, mortgage, charitable donations), you should be fine. The peace of mind might be worth paying a bit more for TurboTax if you're really worried, but I found FreeTaxUSA perfectly adequate.
Anybody know if it's too late to switch accountants instead of going DIY? Mine is terrible this year and I'm thinking of just finding someone new before April.
You can definitely still find an accountant this time of year, but many good ones are already at full capacity. I'd start calling around asap. My sister just switched in February and found someone, but she had to call 8 different places before finding one accepting new clients.
Jacob Smithson
2 Something important nobody mentioned yet - if you're living in the house on the property, you need to be careful about how you're allocating expenses. The portion related to your personal use of the home generally isn't deductible as a business expense. You might need to separate the business portion (land, cattle, outbuildings) from the personal residence portion. Also, if you're paying rent to the LLC, that could create income for the partnership, which would offset some losses. If you're not paying rent, there might be other tax implications to consider.
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Jacob Smithson
β’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?
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Jacob Smithson
β’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.
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Jacob Smithson
4 Has anyone dealt with cattle specifically? I'm curious if this qualifies as farming activity because there are special tax rules for farmers. Might affect how losses can be used.
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Jacob Smithson
β’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.
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