Thanks so much for this professional perspective. So for my situation, would it be better to take the total account growth percentage (including both cash and investments) and apply that to my excess contribution amount? That seems simpler than what I was trying to do.

Yes, that total account growth percentage method is actually preferable because it's simpler and still meets the "reasonable method" requirement. Just take the total account growth (or loss) for the year as a percentage, then multiply your excess contribution amount by that percentage. This approach is easy to explain if questioned and is commonly accepted by the IRS. The key timing factor is making sure you complete the distribution of both the excess amount and earnings before the tax filing deadline (including extensions) to avoid the 6% excise tax on excess contributions.

Is there also a penalty on the earnings portion? I thought I read somewhere that earnings are subject to an additional 10% tax if you're under 65.

Do you use a specific app to track all those expenses or just a spreadsheet? And I never thought about things like phone mounts being deductible! For the Qualified Business Income deduction - does that apply even if I'm only doing this part-time for a few months?

I actually use a simple spreadsheet combined with a dedicated credit card for all business purchases to keep things separate. Makes it much easier at tax time! And yes, even small things like phone mounts, portable chargers, and trunk organizers count as legitimate business expenses. For the QBI deduction, yes it absolutely applies to part-time gig work! There's no minimum time requirement. As long as you have net profit from self-employment, you can potentially claim this deduction. Even for just a few months of work. It's calculated as 20% of your net profit (after expenses), which can significantly reduce your taxable income on your joint return.

This is terrible advice for someone doing part-time Instacart for a few months. The costs and complexity of maintaining an S-Corp would far outweigh any potential tax benefits at that income level. S-Corps make sense when you're consistently earning substantial self-employment income (usually $60k+), not for temporary gig work.

Thanks for bringing this up! How would I know if I have profits interests vs capital interests? The agreement uses the term "restricted incentive units" throughout and mentions something about only being eligible for distributions after I've vested and after all capital contributions have received a return of some percentage. Does that sound like profits interests?

That definitely sounds like profits interests based on the language about distributions only happening after capital contributions receive their return. This is good news tax-wise! Profits interests are designed to give you a share of future growth without taxing you on existing value. The "after all capital contributions have received a return" language is classic profits interest structure - it means your units only have value after the existing investors get their money back plus some preferred return. Just make sure you understand the vesting schedule and any potential acceleration clauses. Also, check if your company will provide tax distribution provisions to cover any phantom income that might be allocated to you.

This is so true. My friend got hit with a massive surprise tax bill because of self-employment taxes on her LLC equity income. Her company didn't withhold anything, and she ended up owing like $15k unexpectedly. Definitely something to budget for!

Does that calculator thing work for people with multiple jobs or side gig income? I always struggle with getting my withholding right because I have my main job plus some freelance stuff.

Yes, it definitely works for multiple jobs and side gig income! The calculator has specific sections where you can enter income from different sources, including self-employment. The tool is actually really good at handling complex situations like yours. It will ask about all your income streams and help calculate the right withholding amount. For freelance income, it'll even help determine if you need to make estimated tax payments throughout the year to avoid penalties.

That's actually the opposite issue but still not ideal. Claiming 0 when you have 2 qualified dependents means you're having TOO MUCH withheld. It's legal but you're giving the government an interest-free loan of your money throughout the year. You'd be better off claiming your actual dependents and putting that extra money to work for you each month.

Thanks for this advice! I just contacted the company and you're exactly right - they have a policy of only issuing 1099-NECs for amounts over $600 per project, and I had several smaller projects that added up to the missing amount. They confirmed I should still report everything. How specifically do I add this to my tax return? Is there a specific line or form for "income not reported on 1099-NEC"?

You'll report all your self-employment income on Schedule C, regardless of whether it was on a 1099 or not. There's not actually a separate line for "income not reported on 1099-NEC" - I was simplifying a bit there. The total income you report on Schedule C should be everything you earned from your business, and the IRS doesn't actually require you to break out what was or wasn't on a 1099 on this form. If you're using tax software, there's usually a section where you enter 1099-NEC information, but there should also be a way to add additional self-employment income. Just make sure your total Schedule C gross receipts equals all the money you received from your business activities.

The basics haven't changed much but the standard deduction amount increases slightly each year. The bigger difference might be that you didn't claim as many business deductions? Also, your income from other sources could affect it. Self-employment taxes are pretty consistent at around 15.3% of net business profit.