This happened to my brother! His construction job gave him a weird W2 that was mostly empty and later claimed he was "1099" but never gave him an actual 1099. He had to pay all the taxes himself and it was a nightmare.

That's a good point! What specific things should I document to show I'm running this as a legitimate business? I definitely want to turn a profit, but it's taking time to build up my designs and customer base.

You should keep track of how many hours you spend working on the business each week, have a separate business bank account, maintain professional records of income and expenses, create a business plan with profit projections, and document your marketing efforts. Also consider getting business cards, a business website or professional social media presence, and perhaps even form an LLC if you're serious about it long-term. The key is demonstrating that you're approaching this in a businesslike manner with the intention to make profit, even if you haven't gotten there yet. The IRS typically looks for profitability in 3 out of 5 years, but showing these business practices helps even if you're still in the early stages.

One thing to note - computers are considered "listed property" by the IRS if they're not used 100% for business, so you'll need to track business vs personal use. If you use it more than 50% for business, you can still claim depreciation proportional to business use.

Thanks for this insight. Our pediatrician has actually written respite care into my daughter's care plan, but nothing specifically about who provides it. Would it help if we got the doctor to write a letter specifically mentioning that having a trusted family member like grandma is beneficial for our daughter's condition since she struggles with new people due to her autism?

Yes, that would definitely strengthen your case considerably. Having your pediatrician specifically document that a familiar caregiver like your daughter's grandmother is medically beneficial due to her autism-related difficulties with new people would create a direct medical necessity connection. The letter should explain why this specific arrangement (flying in grandmother) is medically necessary rather than just convenient or preferable. Make sure the letter mentions your daughter's diagnosis, why consistent caregivers are important for her condition specifically, and how this respite care benefits her medical condition beyond just giving you a break.

I used TaxSlayer last year for a similar situation with my son's therapy travel expenses. TurboTax was too limiting for our complex medical situation. TaxSlayer has a specific section for unusual medical expenses where you can add detailed notes explaining the medical necessity.

2 Wait, Section 179 works for software too? I thought it was just for physical equipment like computers and machinery. Does the software have to be installed on your computer or can it be cloud-based subscription stuff too?

11 Yes, Section 179 absolutely applies to software! Off-the-shelf computer software that's available to the general public, used in your business, and has a useful life of more than one year qualifies for Section 179 deduction. Both installed software and cloud-based subscription software can potentially qualify, but there are some differences. Installed software you purchase outright typically qualifies for immediate Section 179 expensing. For cloud-based subscription services, it depends on the specifics - sometimes these are simply treated as regular business expenses rather than Section 179 property. The key is whether you have rights to the software beyond just accessing it online (like downloading components or having perpetual access rights).

16 Good point! In California, I discovered they have completely different rules about business education expenses. Had to file an adjustment because I assumed the state would follow the same federal guidelines. Cost me an extra $200 in state taxes I wasn't expecting.

I honestly hadn't considered that angle! I was briefly part of a small partnership about 6 years ago that dissolved, but we remained on good terms. I never thought they might still be using my info for something, but I'll definitely reach out to my former partner to check. That said, I'd still expect the IRS to be able to tell me who's making these payments. It's bizarre that they claim they can't see the source when it's their own payment system.

Glad I could suggest something helpful! The IRS systems are surprisingly disconnected from each other. The department that processes payments often doesn't have access to the details of who submitted them, especially for third-party payments. When you talk to your former partner, ask specifically if their accountant might be making these payments. In my case, the accountant had set up an automated system years earlier and nobody thought to update it after our business relationship ended. Definitely check on that possibility before going through all the hassle with the IRS.

This is good advice. I work in tax preparation, and I've seen several cases where the IRS corrected errors years later and then demanded repayment with interest and penalties. Document everything and maybe consider putting those refund amounts into a separate savings account so you have the money available if they ever come asking for it.