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If you didn't specifically choose a fiscal year when setting up your LLC, you most likely defaulted to a calendar tax year (Jan 1 - Dec 31). That's what happens for most single-member LLCs if you don't elect otherwise. But if your LLC is taxed as a corporation or partnership, it might be different. Did you file any additional forms to elect how your LLC would be taxed?
No I didn't file anything else yet. I'm a single-member LLC and plan to just have it as a disregarded entity. Based on what everyone's saying, sounds like I probably defaulted to the calendar year?
Yes, if you're a single-member LLC being treated as a disregarded entity, you're almost certainly on a calendar year tax basis. In this case, your business income and expenses will be reported on Schedule C with your personal tax return, which uses the calendar year. The only way you would be on something other than a calendar year would be if you specifically elected a different tax year, which requires filing additional forms. Since you didn't do that, you can safely assume you're on a calendar year basis.
Just a heads up - the tax year matters more than you might think! I made a mistake with my LLC's tax year and filed some quarterly reports on the wrong schedule. Ended up with penalties that took months to sort out.
This happened to me too. I recommend setting calendar reminders for all the quarterly due dates once you confirm your tax year. Saved me a lot of headaches in my second year of business.
Thanks for the warning! Definitely don't want to mess up and get hit with penalties. Once I verify my tax year I'll make sure to set up a proper calendar for all the filing deadlines.
Anyone else having issues with tax software not correctly identifying long-term vs short-term capital gains when you enter 12/31/23? My software keeps defaulting some of these to short-term even though the purchase dates are clearly from 2021. I have to manually override each transaction!
Which software are you using? I had the same issue with H&R Block last year but this year it seems fixed. Try entering the acquisition date as 01/01/2021 instead of 1/1/21 - sometimes the date format inconsistency causes problems.
I'm using TaxAct. The weird thing is that it's only happening on some transactions, not all of them. I'll try your suggestion about the acquisition date format! I've been using month/day/year but maybe it needs the leading zeros. It's just so tedious to fix each one when I have about 40 transactions from 12/31/23.
Is anyone else's brain just automatically typing 123123 for everything now? I accidentally put it as the date on a check yesterday š Tax season is officially melting my brain!
HAHAHA I did the same thing on an email to a client! I typed "As of 123123" instead of today's date. And I keep reading the number on receipts as dates now. Tax season madness is real!
3 One additional consideration - if your business buys the vehicle instead of you personally, there are different rules. My S-Corp actually purchased my vehicle, and we were able to take advantage of bonus depreciation. Talk to your CPA about Section 179 deductions too if vehicle weight is over 6,000 lbs. Just be aware that if the company owns the vehicle, any personal use needs to be tracked as a taxable fringe benefit to you. We track this using a mileage log and then calculate the personal use value using IRS tables. This gets added to my W-2 at year end. For many S-Corps, this can actually be more advantageous than personal ownership with reimbursement, but it really depends on your specific situation and driving patterns.
10 How difficult is the paperwork for having your S-Corp own the vehicle? I'm considering this approach for my next car purchase.
3 The paperwork isn't particularly difficult. The vehicle is purchased and registered in the company name, and you'll need commercial auto insurance rather than personal insurance. Your S-Corp makes the payments directly. The main ongoing requirement is diligent record-keeping. You must maintain a mileage log distinguishing between business and personal use. At year-end, your accountant will calculate the value of your personal use based on IRS rules (there are a few different methods), and this amount gets added to your W-2 as taxable compensation. The company can still deduct all vehicle expenses and take depreciation (potentially including Section 179 if applicable). The biggest considerations are making sure this approach makes financial sense based on your business use percentage and having the discipline to maintain proper documentation. Many business owners find it worthwhile, but it's definitely something to discuss with your tax advisor based on your specific circumstances.
22 Whatever you do, make sure you keep DETAILED mileage logs. I got audited last year and that was the first thing they asked for. I had been lazy with tracking and just estimated. Ended up losing about $4,300 in deductions that I had claimed but couldn't substantiate with proper records. Lesson learned the hard way!
22 Just a pro tip from someone who's been doing this a while - take screenshots of all your Fiverr receipts and keep them in a dedicated folder. The IRS has been increasingly interested in gig economy stuff, and having those records easily accessible has saved me during an audit. Also, you might want to look into if your state has different requirements than federal. Some states have lower thresholds for 1099 reporting than the $600 federal one. I got caught by this in Washington a couple years back.
1 Thanks for the tip about the screenshots! Does it matter if I save them digitally or should I print them out? And I hadn't even thought about state requirements being different. I'm in California - anyone know if they have different rules?
22 Digital records are fine as long as they're organized and accessible if you ever need them. I keep mine in a cloud folder organized by year and vendor just to be safe. California generally follows the federal $600 threshold for 1099-NEC reporting. However, if you're registered with the CA Employment Development Department, they have some specific reporting requirements. The main thing in California is making sure you're properly distinguishing between contractors and employees - they're pretty strict about worker classification with their AB5 law.
3 Has anyone used the built-in expense tracking in QuickBooks Self-Employed for managing Fiverr purchases? I'm trying to decide if it's worth switching from my current spreadsheet method.
10 I use QuickBooks Self-Employed and it's been pretty good for tracking all my freelancer expenses. It connects to your bank/credit card and automatically categorizes most transactions. The nice thing is you can tag Fiverr expenses as "contractor payments via platform" so it's clear they don't need 1099s at tax time.
Giovanni Colombo
My dad went through something similar with a CP2000 payment earlier this year. His check didn't get cashed for almost 8 weeks! What we did was take pictures of the check before sending it, along with the envelope and the CP2000 response letter. We also went to the post office and got a Certificate of Mailing (costs like $1.50) which proves the date it was sent. When the IRS finally did process everything, they tried to add interest for the "late" payment, but we were able to fax them the Certificate of Mailing showing it was sent on time. They ended up removing the additional interest charges. The important thing is to document EVERYTHING. Don't stop payment unless absolutely necessary because that just complicates things further.
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Carmen Vega
ā¢Thanks for mentioning the Certificate of Mailing option! I didn't know that was a thing. Did you have to request the interest removal specifically or did they do it automatically once they saw your documentation?
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Giovanni Colombo
ā¢We definitely had to request the interest removal specifically - nothing happens automatically with the IRS! We had to call (took forever to get through) and explain the situation, then fax the Certificate of Mailing to the number they provided. It took about 3 weeks after sending the fax for them to process the adjustment and remove the interest charges. The key was getting a specific reference number for our request when we called, so we could follow up if needed.
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Fatima Al-Qasimi
Just wondering - did your relatives send the check to the correct IRS address? Different types of payments go to different processing centers. I made the mistake of sending a CP2000 payment to the regular tax payment address once, and it took MONTHS to get sorted out because it went to the wrong department.
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Dylan Cooper
ā¢This is such an important point. The IRS has like a dozen different addresses, and they change sometimes too! I always double-check the address on the actual notice rather than using a general IRS address.
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