Wait, are you saying if I was owed a refund for 2013, I can't get it anymore? But if I owe THEM money, I still have to pay? That doesn't seem fair at all. How do I even know which situation I'm in before I file?

Yes, unfortunately that's exactly how it works. The IRS gives you 3 years to claim refunds, and after that window closes, you generally can't get that money. But they can still collect from you virtually forever (there's a 10-year statute of limitations on collection, but with many exceptions that can extend it). You won't know for certain which situation you're in until you prepare the return. That's why it might be worth working through the forms or using a service to calculate it first, before officially filing. If it turns out you owe a substantial amount with penalties, you might want to consult with a tax professional about your options.

I used FreeTaxUSA for a 2014 return last year and it worked well. It was around $15 for the federal (they keep all the old tax year versions available) and another $15 for state if I remember right. Much cheaper than TurboTax. The interface isn't as fancy but it gets the job done and had all the forms I needed.

Oh no, I didn't even think about this! So I need to make sure the 1099s are actually filed with the IRS too? My new preparer didn't mention anything about that specifically, just that we were amending my returns. Now I'm worried again...

Yes, you absolutely need to make sure the 1099-NECs are filed with the IRS! There are two parts to this process: sending copies to your contractors (which they need for their own tax filing) AND submitting them to the IRS. The deadline for filing 1099-NECs with the IRS is January 31st of the year following payment, so your 2022 forms were technically due January 31, 2023. There are penalties for late filing, but they're relatively small for small businesses if you file within 30 days of the deadline. The penalties increase the longer you wait, but filing late is still much better than not filing at all.

The penalties can actually be much higher depending on how many contractors and how late the filing is. I got hit with a $250 per contractor penalty for missing 1099s for my wedding video business. Definitely ask your preparer about this!

Does your employer know you do this? I'm worried mine would think I'm violating some non-compete if I tell them I need extra withholding for my side business.

Your employer doesn't need to know why you're adjusting your withholding. When you fill out a new W-4, you can either claim fewer allowances or simply specify an additional dollar amount to withhold from each paycheck. There's no requirement to explain why you want more taxes withheld. Many people adjust their withholding for various reasons - maybe they have investment income, rental property, or just want a bigger refund. The payroll department processes the change without needing an explanation.

Where do you find the estimator? I've been all over the IRS site and can't find anything helpful.

Does that mean I'm in trouble if I sometimes move some of my inventory boxes around when I need to vacuum or clean? The space is definitely dedicated to my business but occasionally I need to shift things for maintenance.

No, you're not in trouble for basic maintenance activities like cleaning. That's considered a normal part of maintaining your business space. What the IRS looks for is whether the space serves a dual purpose. For example, if you're storing inventory in your bedroom where you also sleep, or using your living room couch for both business and personal activities, those spaces wouldn't qualify. But if you have boxes of inventory in a dedicated area and just move them temporarily to clean, that's perfectly fine.

I used TurboTax last year and it walks you through both methods and shows you which one gives you the bigger deduction. It asks for your total home square footage, the business-use square footage, and your expenses. Pretty straightforward. But honestly, I still got confused with some of the questions about "exclusive use" and partial room usage. Had to google a bunch of stuff that wasn't clear in the software.

That's a really good point! My sister definitely treats it like a business - she has separate bank accounts, business cards, advertising, and she's been working on adjusting her pricing to be more profitable. She's only been doing it for about 18 months, so this is her first year with a full 12 months of operation. Does that help her case for it being a legitimate business vs a hobby?

Yes, that definitely helps her case! Separate business accounts, marketing materials, and actively working on pricing strategies all demonstrate business-like behavior. The fact that it's only been running for 18 months is also helpful - the IRS generally expects businesses might have losses in their early years. For additional protection, I'd suggest she document her efforts to make the business profitable - like market research, business plan updates, or courses she's taken to improve her skills or efficiency. The IRS uses a nine-factor test for determining hobby vs. business, and documentation showing profit motive is crucial. With her full-time job providing income, she's not dependent on the grooming business for livelihood, which could be one mark against her, but the other factors you mentioned strongly support treating it as a legitimate business.

I used it last year for my photography side gig that showed a small loss. It was pretty straightforward for getting the Schedule C done correctly, and it asked all the right questions to make sure I got all possible deductions. I think it was worth it for the peace of mind.