Thank you for bringing this up! My divorce was finalized in May 2024 so I should be good for the 2025 filing. But that's definitely something important I didn't think about. Did the IRS charge you any penalties or just make you pay the difference?

They only made me pay the difference in taxes between HOH and Married Filing Separately, plus a small amount of interest since I paid after the filing deadline. No penalties since they determined it was an honest mistake rather than deliberate evasion. The IRS actually has a "considered unmarried" provision that might apply in some situations even if you're technically still married on December 31st, but my situation didn't qualify. If your spouse didn't live in your home for the last 6 months of the year, you might still qualify for HOH even if not technically divorced yet.

Absolutely right. The rules for "qualifying person" for HOH are really specific. For a child to qualify, they generally need to be your son, daughter, stepchild, foster child, brother, sister, or a descendant of one of these (like a grandchild or niece/nephew). Just having a child live with you isn't enough unless you're related by blood, marriage, or adoption in most cases.

Hadn't even considered the retirement account implications. Do you know if this affects 401k contributions as well? My employer matches up to 6% and I wouldn't want to lose that benefit.

Your 401k contribution limits actually aren't affected by filing status - you can still contribute the full amount ($23,000 for 2025, plus catch-up contributions if you're eligible) and get your employer match regardless of whether you file jointly or separately. The issue is specifically with IRAs, particularly Roth IRAs where the income limits are drastically lower for MFS. If you're currently doing backdoor Roth IRA conversions, which many high-income professionals do, you'll face additional complexities with MFS status due to the pro-rata rule calculations being done separately, but it's still doable with proper planning.

Yeah it depends on if they're in a community property state or not. In non-community property states, you generally split based on who paid. In community property, it's usually 50/50 regardless of who paid. Gets complicated fast.

Thanks for mentioning the mileage deduction! Do you know if I should be tracking mileage for all business-related driving? And what app do you use to track it?

Yes, you should absolutely track mileage for all business-related driving - going to client meetings, picking up supplies, driving to business meals, etc. Just remember that commuting to a regular workplace isn't deductible. I use MileIQ for tracking, but there are several good options like Everlance and Hurdlr too. Most of these apps automatically detect when you're driving and let you swipe to categorize trips as business or personal. Super simple and creates the documentation you need for tax time.

That receipt tip is gold! Do you just write directly on the physical receipt or do you scan it first and add notes digitally?

This is exactly what I'm worried about. How detailed does the documentation need to be for proving the revenue decline was COVID-related? We definitely had a 32% drop, but how do I PROVE it was because of COVID vs other market factors? We're in manufacturing and there were supply chain issues, reduced orders, etc.

For proving COVID causation, you'll want to create a narrative document that connects specific COVID factors to your business decline. Include things like: emails from customers canceling or reducing orders citing COVID concerns, documentation of supply chain disruptions with vendor communications, any relevant COVID restrictions that affected your operations, contemporaneous business records showing canceled projects or reduced capacity. The key is showing a clear cause-and-effect relationship. Also maintain detailed quarterly revenue reports that clearly show the percentage decline from 2019 to 2021 for the same quarters. The more specific documentation you have linking COVID factors directly to your revenue decline, the stronger your position will be if audited.

My brother's construction business got audited for their ERC claim last month. They claimed about $135k total. The auditor mainly focused on two things: documentation of their revenue decline and making sure they didn't count wages that were paid with PPP funds. They had good records and passed, but the agent mentioned they're specifically targeting claims filed by third-party "ERC specialists" since they've found a lot of fraud there.

Do you know if there are any major changes to the 2023 version? I heard something about some states changing their credit reduction status but wasn't sure if that would affect the actual form layout.

Based on the draft version, the core form layout is practically identical to 2022. The main differences are in Schedule A where they updated which states have FUTA credit reductions. California has been added to the reduction list this year, and I believe Connecticut's reduction percentage has changed. If you don't have employees in those states, the form will be essentially the same as last year for you.

I switched from QuickBooks to Gusto last year and they're much faster with form updates. Their payroll system automatically calculates your FUTA liability throughout the year and they usually have the new forms implemented within days of IRS releases. Little more expensive but worth it for the peace of mind.