How do you decide what percentage of things like internet and cell phone to deduct when you use them for both personal and business purposes? I've heard conflicting advice about this.

The general rule is to deduct the percentage that you use for business purposes. For example, if you use your cell phone about 60% of the time for business calls/emails/etc., then you can deduct 60% of your cell phone bill. It's important to have some reasonable basis for determining these percentages. Some people keep logs for a sample period (like tracking business vs. personal internet usage for a few weeks) to establish their percentage. Others base it on time spent working vs. personal time. Whatever method you choose, just be consistent and make sure you can explain your reasoning if asked.

I've used TurboSelf-Employed for the past two years and it's definitely worth it for me. It walks you through all the self-employment forms step by step and automatically calculates your quarterly estimated payments. It also helps identify deductions I would have missed on my own. The expense categorization feature saves me tons of time - it learns which categories to assign to recurring expenses. And it keeps a running estimate of what I'll owe so there are no surprises at tax time.

Thanks for mentioning Section 179! I do have some shelving units and a computer system I use exclusively for the business. Would those qualify? And what's the max I can deduct this way?

Those shelving units and computer

Exactly this! I made this same mistake my first two years in business. The IRS doesn't care what you do with your profits - reinvest them, pay debt, whatever. They care about revenue minus deductible expenses. Paying down loan principal isn't a deductible expense.

Thanks for the input! That's definitely something I've been considering. Do you think there's any benefit to at least harvesting some gains to "reset" my cost basis higher in case the crypto keeps appreciating? I'm torn between letting it ride versus locking in some gains tax-free while I can.

That's a good point about resetting your cost basis. If you're confident in the crypto's long-term prospects, selling and rebuying to establish a higher cost basis could definitely help you in the future if prices continue to climb. I'd probably take a middle approach - maybe harvest enough gains to use up a portion of your losses while keeping some losses in reserve for future years. That way you're getting some tax benefit now while also positioning yourself better for future growth. It really comes down to your outlook on where crypto prices are headed and your personal cash needs.

As of the 2025 filing season, wash sale rules still don't apply to cryptocurrency. There have been proposals to change this, but they haven't been implemented yet. This is one of the few tax advantages crypto still has - you can sell at a loss and immediately repurchase to harvest the tax loss without waiting 30 days (which would be required for stocks and securities). Just make sure you're keeping detailed records of all transactions since the IRS is paying more attention to crypto reporting these days.

15 Does the SIMPLE IRA allow for Roth contributions like his current solo 401k? I thought SIMPLE IRAs were all traditional pre-tax money. If he's been doing Roth contributions, wouldn't switching to a SIMPLE change his tax strategy pretty significantly?

22 You're absolutely right about the Roth consideration. SIMPLE IRAs don't have a Roth option currently - they're all traditional pre-tax money. This would be a significant change from the solo Roth 401k strategy. If maintaining Roth contribution capability is important, then a regular 401k plan with a Roth option would be needed despite the higher administrative costs. Some providers have started offering more affordable 401k options for small businesses that include Roth capabilities. The tax strategy difference is substantial - immediate tax deduction with traditional contributions versus tax-free growth and distributions with Roth.

11 I use Vanguard for my small construction business (7 employees). The transition from solo 401k was pretty straightforward - about $1200 setup fee and $800 annual administration fee. The bigger issue was the timeline - took about 2 months to get everything set up, so if you're planning to hire in March/April, start the process ASAP. The investment options are solid though, and their customer service has been helpful with the transition questions.

Hmm that's interesting! So how do I know if my situation counts as "regular business" vs just "other income"? I did babysit for them for about 3 weeks but it was just while their regular childcare was unavailable.

It comes down to whether you're in the "trade or business" of babysitting. If this was a one-off situation where you were helping out a family temporarily with no intention of continuing to offer babysitting services to the general public, you could make a case for "other income." But if you advertise your services, do this for multiple families, or plan to continue babysitting regularly, the IRS would likely consider it self-employment. Since you mentioned it was just for a few weeks during a specific situation, it sounds more like "other income" to me, but this is definitely a gray area where reasonable people disagree.

This is terrible advice. Venmo now reports transactions to the IRS if you receive more than $600 in payments for goods and services. Plus not reporting income is literally tax evasion.

Venmo only reports if you have a business account or mark the payments as goods and services. Regular personal payments aren't reported. And let's be real, the IRS isn't coming after babysitters making a few hundred bucks. They want the big fish.