What about directors loan accounts? I've heard you can borrow from your company?

Yes, director's loan accounts are an option, but they come with strict rules. You can borrow from your company, but if the loan exceeds £10,000, it's considered a benefit in kind and you'll pay income tax on it. Additionally, if the loan isn't repaid within 9 months after your company's year-end, the company will have to pay a temporary tax (currently 33.75%) on the outstanding amount. When the loan is eventually repaid, the tax can be reclaimed, but it creates cashflow issues. Also, if you repeatedly take out loans and repay them (bed and breakfasting), HMRC has anti-avoidance rules that will catch this. Director's loans are legitimate but not a good long-term strategy for extracting value compared to the salary+dividend approach.

Yes! My brother-in-law tried something similar with his plumbing business. HMRC did a routine VAT inspection which led to them looking deeper at his accounts. They found personal expenses being paid directly from the business account and hit him with additional income tax, NI contributions, penalties AND interest going back 4 years. Cost him over £30k in total and now he's on their high-risk list for future audits.

That's a huge relief! So just to be 100% clear - as long as I file by May 17, 2024, I'll get my full refund amount for tax year 2020 with no penalties at all? Even though I'm super late?

That's exactly right! If you're DUE a refund, the IRS doesn't penalize you for filing late. They only assess penalties and interest when you OWE them money. Just make sure you get it postmarked by May 17, 2024, and you'll receive your full refund amount. The only downside to filing late is that you've essentially given the government an interest-free loan of your refund money for the past few years.

I used FreeTaxUSA for my 2019 return last year when I was in a similar situation. They charge like $15 for state returns but federal is free. Their interface for prior years is identical to current years and super straightforward. Printed everything, mailed it in, and got my refund about 8 weeks later. Definitely recommend for older returns.

Would this also apply to stuff like laundry services at the hotel if you had to wash clothes for a video meeting? I had to do that once when a vacation got extended for work reasons.

Yes, that could potentially be deductible if it was specifically required for business purposes! The key is being able to show that the expense was ordinary and necessary for your business activities during the trip. If you needed clean business-appropriate clothes specifically for a client video meeting, you could make a good case for that being a legitimate business expense. Just make sure to keep the receipt and note which meeting it was for and why it was necessary.

Is that actually true? I've never heard of the distance affecting deductibility before. I thought it was just about the primary purpose of the trip.

Thanks for mentioning this! You're right - there were actually a few extra pages that came with the K-1 that I ignored because they looked like gibberish to me. Just checked and they do have some explanations about the passive activity stuff. Would you recommend I still get professional help or is this something I can handle with tax software if I'm careful?

For a relatively simple K-1 showing only $3,800 in income, you can probably handle it with good tax software if you're careful. Since this is your first K-1, learning how to report it properly now will help you in future years. If the investment becomes more complex or involves much larger amounts, then professional help would be worthwhile. Just make sure you keep copies of all K-1s and supplemental information, as you'll need them if you ever sell your interest in the partnership to calculate your basis.

This is so important! I learned this the hard way too. Also worth noting that some states require estimated payments even if federal doesn't. My state has a much lower threshold for when you need to start making estimated payments.

Do you need to attach any kind of explanation to your return if you're reporting an amount different from the 1099? Or just be ready to explain if they ask later?

You don't need to attach an explanation to your electronic filing. Just be ready to explain if they ask later. The best approach is to keep detailed records of all your income - bank deposits, invoices, payment confirmations - so if there is a discrepancy, you can easily show why your reported amount is correct. For significant discrepancies (I'd say anything over $500), you might want to reach out to the company first to see if they'll issue a corrected 1099-NEC. But if they won't or you can't reach them, filing with your accurate records is the right move.

Use the most recent one they sent, but double-check it against your own records. Companies can issue corrected 1099s (they should be marked as "CORRECTED" on the form), but multiple corrections is definitely unusual and annoying.