How's the Transit Connect working out for you? I looked at those too but thought they were a bit small for my needs. Do you ever have issues with the cargo space compared to a full size minivan?

It's been perfect for my needs. The cargo space is actually really well designed - more practical than a minivan because it's squared off with a flat floor. I can fit way more equipment in it than I could in my previous Sienna because of how the space is configured. The higher roof version gives you surprising vertical space too. Fuel economy has been great (averaging about 25-28 mpg) and maintenance costs are lower than my previous vehicle. The tax classification alone made it worth it - no questions about deduction eligibility since it's clearly a purpose-built business vehicle.

That's what I do with my Sienna. I'm about 60% business and 40% personal, so I just track all expenses meticulously and deduct the business percentage. Over 5 years I've probably come out ahead compared to Section 179 anyway, especially with the reduced depreciation rates for vehicles. Just make sure you have a dedicated mileage log app or notebook!

Thank you for this detailed explanation! I checked both forms like you suggested and found that H&R Block was adding back in my 401k contributions for state purposes while TaxSlayer wasn't. After checking my state's website, turns out H&R Block is doing it correctly - my state doesn't allow 401k deductions the same way federal does. Makes sense now why the numbers were different. Really appreciate your help!

You're welcome! I'm glad you were able to track down the difference. The 401k contribution adjustment is one of the most common causes of this exact discrepancy. Different states handle retirement contributions very differently - some follow federal rules, while others tax them differently. Now that you know, you can also check if there are any state-specific credits or deductions you might qualify for that neither software automatically found. Many states have unique credits that people miss because tax software doesn't always prompt for them.

I switched to using an accountant three years ago and it was the best decision ever. Yes, it costs more than tax software, but my accountant has saved me way more than her fee each year by finding deductions and credits I didn't know about. Plus she handles any weird situations like this so I don't have to stress about it.

Wait, I'm confused about ministers. My husband is a youth pastor with a W-2, but the church takes out income tax AND social security/medicare. Does he still need to pay self-employment tax?

For your husband's situation, it depends on whether he's officially ordained, licensed, or commissioned as a minister. If he is, then the church shouldn't be withholding Social Security and Medicare - ministers are exempt from FICA withholding and must pay self-employment tax regardless of W-2 status. If your husband is not officially considered a minister for tax purposes but just a regular church employee, and the church is withholding FICA taxes, then he files like a normal employee and doesn't need to pay self-employment tax.

Regular church employees cannot opt out of Social Security taxes. The exemption you're thinking of only applies to ministers, members of religious orders, and Christian Science practitioners who file Form 4361 for exemption based on religious opposition to public insurance. To qualify, they must be conscientiously opposed to receiving public insurance benefits and must belong to a religious organization that provides care for its dependent members.

That's a really good point I hadn't considered. My first LLC does own the building where we operate. Would the self-rental rules apply even after the restructuring since I'd still be the ultimate owner through the second LLC?

Yes, the self-rental rules would still apply even after restructuring. The IRS looks at the ultimate ownership when determining whether these rules kick in. Since you'd still be the ultimate owner of both entities (you own the second LLC which owns the first LLC), any rental payments between them would be subject to scrutiny. The main thing to be aware of is that rental income in this situation is typically treated as non-passive, regardless of your level of participation. This means you can't use these rental losses to offset other passive income. It can significantly impact your tax planning if you were counting on those losses.

What ratio did you end up using between salary and distributions that the IRS was ok with? I've heard everything from 50/50 to 70/30 but never from someone who actually went through an IRS review.

Is there some calculator you can use to figure out the right withholding amount? I always struggle with this and either get a huge refund or end up owing.

Yes, the IRS has a Tax Withholding Estimator on their website that's pretty accurate. Just google "IRS withholding calculator" and it should be the first result. You'll need your most recent pay stub and tax return handy when you use it. The calculator will tell you exactly how to fill out your W-4 based on your specific situation. It even lets you adjust whether you want a bigger refund or more money in each paycheck. I use it every time I get a raise or my life circumstances change, and it's kept my tax bill/refund pretty balanced.

Exactly this. I work in payroll and see this all the time. Payroll systems calculate withholding based on the assumption that each check is what you'll make all year. So if you get a raise midyear, the system doesn't know about your previous lower income months and doesn't withhold enough.

That's a great point about midyear raises. The payroll system treats each check as if you've been making that amount all year, which can lead to significant underwithholding. This is especially true for bonuses or people who get promoted partway through the tax year.