Thanks for this clarification! So if I understand correctly: I should definitely file Schedule C with my business expenses to reduce my self-employment tax, but that's completely separate from deciding between itemized vs. standard deduction? And since my total income is only around $32,500, the standard deduction ($13,850) is probably better unless I have some major itemized deductions?

Yes, that's exactly right! File Schedule C to report your 1099 income and expenses (which reduces or eliminates self-employment tax on that income). And yes, at your income level, you'll almost certainly want to take the standard deduction unless you have extraordinary itemized deductions like major medical expenses, huge charitable contributions, or large mortgage interest payments. For most people in your situation, itemized deductions don't exceed the $13,850 standard deduction.

Just be careful with the home office deduction - it has to be a space EXCLUSIVELY used for business. If you sometimes use that desk/room for anything personal, it doesn't qualify. I got audited over this once.

Thank you for this insight. I hadn't considered doing just a consultation. Would that one hour really be enough to catch potential issues across multiple tax years including the business transition?

A one-hour consultation won't be comprehensive enough to catch everything across multiple years, but it would be enough time to identify major red flags in your approach and give you guidance on the areas where software typically fails for business returns. If you're going the DIY route, I'd actually recommend two consultations - one before you start to get a strategic approach, and one review after you've prepared the returns but before filing. The key is finding someone experienced with both the sole proprietor to LLC transition and back tax situations.

The Fresh Start program isn't actually a specific program you apply for - it's a collection of different IRS initiatives that make it easier to resolve tax debt. The main components are expanded installment agreements, offers in compromise with more flexible terms, and tax lien procedures. For OP's situation with unfiled returns, the most relevant part would be penalty abatement options after filing the back returns. First-time penalty abatement is available to many taxpayers who haven't had previous issues.

Thanks for the feedback. So even with the weird situation where the land appraisal was higher than my total purchase price, I still need to allocate some value to the building? Would I need to get another appraisal specifically breaking down the components, or can I just make a reasonable allocation myself?

Yes, you definitely still need to allocate some value to the building. The IRS won't accept that a functional commercial building has zero value, regardless of the land appraisal. You don't necessarily need a new formal appraisal, but you should have some reasonable basis for your allocation. I'd recommend looking at the county tax assessment to see how they split land vs. improvements, or checking comparable properties in your area. Many CPAs recommend documenting your methodology in case of questions later. A 75/25 or 80/20 land-to-building split might be reasonable in your case, but have documentation to back it up.

So you're saying the IRS will tax you on depreciation you SHOULD HAVE taken even if you didn't actually get the tax benefit? That seems incredibly unfair. Is there any way around this if OP sells soon?

I've heard about DSTs but don't really understand how they're different from REITs? Are there minimum investment requirements? My financial advisor never mentioned these as an option.

DSTs are fundamentally different from REITs in both structure and tax treatment. Unlike REITs which are securities, DSTs are considered direct ownership in real estate for tax purposes, which qualifies them for 1031 exchanges. This means you can defer capital gains taxes by rolling proceeds from property sales into DSTs. Minimums typically start around $100,000, which is higher than REITs, but that's because they're designed for accredited investors. The tax benefits are substantial - you'll receive K-1s showing your portion of depreciation, which often shelters a significant portion of the cash distributions from immediate taxation. Many financial advisors aren't familiar with them because they require specialized knowledge and typically don't fit into standard model portfolios. You'll want to work with someone who specializes in tax-advantaged real estate strategies for high-income professionals.

I've invested in two Opportunity Zone funds. They do work as advertised tax-wise but be extremely careful about the underlying investments. Many OZ areas are economically distressed for good reason, and some developers are creating poor investments that only make sense because of the tax benefits. The best approach is to find OZ investments that would make sense even without the tax advantages. I found a multi-family development in an emerging area just outside a major city that had strong fundamentals regardless of the OZ benefits. The tax deferral and eventual exclusion is just a bonus.

That's really helpful insight. I was looking at a fund that invests in multiple OZ projects to spread the risk, but you're right that I should be evaluating the underlying economics first. What documentation do you need for tax purposes? My accountant mentioned something about attaching an election statement to my return and filing Form 8997 annually, but I want to make sure I don't miss anything that could jeopardize the tax benefits.

That's really interesting! I do have a small side business doing web design that brought in about $12,000 last year. Would I qualify for this SEP IRA option? And can I open one if I also have access to my employer's 401k from my main job?

Yes, you absolutely can set up a SEP IRA for your self-employment income, even while having access to an employer 401k! The two are independent of each other. The calculation gets a bit tricky though - it's not simply 25% of your gross $12,000. For self-employment income, you first need to deduct the self-employment tax deduction, then calculate 25% of that reduced amount. With $12,000 in net business income, you could probably contribute around $2,200-2,500 to a SEP IRA. That would directly reduce your taxable income for 2023 if you establish and fund the account before filing your taxes. Many brokerages like Vanguard, Fidelity, or Schwab offer SEP IRAs that you can open online pretty quickly.

The work-related educational expenses deduction was suspended until 2025, so that's unfortunately not an option for 2023 taxes. The moving expense deduction is indeed only for active duty military now too. But good call on the self-employed health insurance premiums! If OP has self-employment income as mentioned above, they might be able to deduct health insurance premiums paid.