I did this for my job as a martial arts instructor. It took about 6 months but the IRS determined I was misclassified and I was able to file as self-employed, which saved me thousands in deductions.

This is actually a really important point! When I switched from W2 to 1099 for my coaching job, I was excited about the deductions but then got hit with that self-employment tax. Wasn't prepared for it.

I hadn't even thought about that aspect. My last pay stub shows I'm paying about 7.65% for Social Security and Medicare combined. So I'd basically be paying double that as a 1099? That definitely changes the math on whether pushing for reclassification makes sense. I'll need to calculate if the deductions would offset that extra cost.

That's a good point I hadn't considered. I have no idea if he had insurance, but I'll definitely look into that. The police haven't given us much information about his business affairs due to the ongoing investigation. I'm guessing we'll learn more once the criminal case progresses and the estate gets settled. Would business insurance typically cover something like this?

Most legitimate HVAC contractors carry some form of business insurance that might cover situations where they can't complete contracted work. It varies widely by policy, but many include provisions for "business interruption" or "contract fulfillment" that could apply here. The estate administrator would be the one handling these claims once appointed by the court. I'd recommend documenting everything meticulously - your original contract, what was completed, what you paid to the second contractor, etc. This will be important not just for the tax credit but also for any future discussions with the estate. In my situation, the insurance company actually contacted us directly once a claim was filed, but that might take time given the circumstances.

100% this. I got audited specifically on my EEHIC claim last year. They wanted the AHRI certificate showing the exact efficiency ratings, proof the contractor was certified, and itemized invoices showing what portion was for equipment vs labor. The equipment manufacturer specs were super important - they rejected my first submission because it didn't clearly show the SEER2 rating.

Would this still apply for 2022 taxes? I was unemployed for most of 2021 but also for part of 2022, so wondering if I can use this for next year's filing too.

Unfortunately, the lookback provision was only available for tax years 2020 and 2021 as a temporary COVID relief measure. For your 2022 taxes (which you'll file in 2023), you'll need to use your actual 2022 earned income to calculate your EITC. If you're concerned about a lower EITC for 2022, focus on documenting all eligible earned income you did have during the year, and look into other credits you might qualify for like the Child Tax Credit if you have dependents.

In TurboTax, you need to go to the Deductions & Credits section, then look for "Income that qualifies for certain credits." There should be a question about whether you want to use your 2019 earned income. It's easy to miss if you're clicking through quickly!

What's considered "reasonable" tho? Is there like a percentage of business income that's the standard? I've heard everything from 30% to 60% of profits should be salary.

There's no fixed percentage that's automatically considered "reasonable" - it depends on your industry, role, qualifications, and what similar positions would pay in your area. A good starting point is to research what someone would earn doing your job in your location if they weren't the owner. Sites like Bureau of Labor Statistics or industry salary surveys can help establish this baseline. Some tax professionals suggest that anything less than 40-50% of your business profits as salary might raise eyebrows, but it really depends on your specific situation.

I switched from TurboTax to H&R Block last yr for my s-corp and it was WAY better. TurboTax kept giving me errors about my 941 payments but H&R Block had a specific section for SMLLC S-corps. The questions were clearer and it properly showed how the salary and distributions flow between the 1120S and 1040.

What about insurance? The rental companies always try to sell that additional coverage. Is that deductible as part of the rental expense if I use the actual expense method?

Yes, the additional insurance or coverage options you purchase from rental companies would be considered part of your actual rental expenses, so they would be deductible based on your business-use percentage for that specific rental period. Some business owners overlook this, but if you consistently purchase the additional coverage, it can add up to a significant deduction over the course of a year with weekly rentals. Just make sure the insurance expense is clearly itemized on your rental receipts so it's properly documented.

The luxury auto limits still apply to rentals but in a different way. Since you're deducting actual expenses rather than depreciation, you don't run into the same depreciation caps. However, the IRS can still question whether extravagant or luxury vehicle rentals are "ordinary and necessary" business expenses. In your case, since you mentioned you're renting basic economy cars, this shouldn't be an issue. The IRS is mainly concerned with preventing businesses from fully deducting high-end luxury vehicles. Using standard economy rentals for legitimate business purposes shouldn't trigger any special limitations beyond the normal business-use percentage rules.