Is it true that if your LLC makes less than $400 in a year, you don't have to pay self-employment tax? I heard that somewhere but not sure if it's accurate.

Yes, that's correct. If your net earnings from self-employment are less than $400 for the year, you don't have to pay self-employment tax. However, you still need to report the income on your tax return regardless of the amount. Be aware that even if you don't owe self-employment tax, you might still need to file other forms related to your business activities depending on your situation. And some states do have minimum tax requirements for LLCs regardless of income, so always check your specific state rules.

Is there an app you recommend for tracking business miles? I always forget to log them and probably missing out on deductions.

Thanks for sharing your experience! Do you separate out different types of expenses (like initial purchase vs. ongoing care) or just lump everything together under educational supplies?

We actually do separate the expenses into different categories. The initial purchase of the animal goes under "Equipment" since it's like acquiring a new business asset. Ongoing expenses like food, bedding, and regular checkups go under "Educational Supplies" since they're consumable items related to our curriculum. For larger vet expenses like that emergency surgery, we categorize it under "Repairs and Maintenance" - similar to how you'd categorize fixing a broken piece of classroom equipment. Our accountant said this approach gives us cleaner books and is easier to defend in case of an audit.

That's actually a really good point. The IRS considers animals to be property, so more expensive animals might need to be capitalized. What threshold did your accountant use for deciding to depreciate vs. expense?

Thank you so much for mentioning this! I am pretty sure I'll be getting a refund based on my withholding, but I didn't realize there was actually a 3-year window. That takes some pressure off, though I still want to get this done soon. Do you know if the refund amount stays the same over those 3 years, or does it increase with interest or anything?

Unfortunately, the IRS doesn't pay interest on refunds if you file late. The refund amount stays exactly the same whether you file on time or 2 years late. That's actually why it's always best to file on time even if you're getting a refund - you're essentially giving the IRS an interest-free loan of your money for however long you delay.

I used freetaxusa for a late 2022 return last year. The process is exactly the same as filing on time. The software doesn't change at all - you just select the correct tax year (2023 in your case) and proceed normally. They keep the previous year's software available specifically for late filers.

That's actually really helpful - I had no idea you could split it up like that! How do you decide what portion to take as Section 179 vs regular depreciation? Is there a formula or rule of thumb?

I basically look at my projected income for the year and figure out how much deduction I need to keep myself in a favorable tax bracket. If taking the full Section 179 would push me too far down or waste the deduction, I'll split it up. For most small businesses, it makes sense to take enough Section 179 to get your income to a target level, then save the rest for future years when you might need the deductions more. Your accountant should be able to model this with your specific numbers. It gives you more flexibility than the all-or-nothing approach most people think is required.

Oof, that's rough. How did the IRS find out about the usage change? Did you get audited or was there some kind of reporting requirement I should know about?

Thanks for the advice. Yeah, I'm definitely trying to tackle this now before it gets even worse.

Preach! 🙌 It's like they make it complicated on purpose.

Careful with that talk, you'll summon the "taxation is theft" crowd 😂