Wait, so there could be ANOTHER limitation beyond the basis issue? So even if I figure out the basis part and have enough basis to take the loss, I might still not be able to deduct it because of these passive activity rules? Does that mean the loss just disappears completely?

The loss doesn't disappear completely - it gets suspended and carried forward to future tax years. You can use these suspended passive losses when you either generate passive income from other sources or when you completely dispose of your interest in the partnership. The passive activity rules are separate from basis limitations, so you need to clear both hurdles to claim the losses in the current year. First, you need sufficient basis, and second, you need to have either passive income or qualify for the special allowance. If you don't meet these conditions, the losses get carried forward until you do.

TurboTax can handle the data entry part fine, but in my experience, it doesn't help much with calculating your adjusted basis or determining loss limitations. I ended up having to do those calculations separately and then just entering the final numbers. The software doesn't track your basis from year to year either, which becomes a real problem if you hold these investments long-term.

What thresholds should we watch for? Is it the same for all states or does it vary? I'm selling on Etsy and about to expand to Amazon.

The thresholds vary significantly by state. Most common is $100,000 in sales or 200 transactions in a calendar year, but some states have lower thresholds, especially for marketplace sellers. When you expand to Amazon, your nexus footprint will likely increase because of their fulfillment centers. If Amazon stores your inventory in a state, many states consider that physical nexus regardless of sales volume. The good news is Amazon handles sales tax collection in all states, but you may still need business registrations.

I switched from spreadsheets to QuickBooks Online last year and it's been a game changer. Has specific settings for marketplace sales and can track which platform collected tax vs. which sales you need to handle yourself. Bit expensive but worth it for the time saved at tax time.

Thank you for pointing this out! I was actually confused about which tax year to report the missed distribution in. So to clarify - we take the missed 2022 RMD amount now, report it on our 2023 taxes, but file the Form 5329 with our 2022 taxes (or separately if we already filed)? And we still need to take the full 2023 RMD by the end of this year? That means double distributions this year, right?

That's correct. The missed 2022 RMD that you take now will be reported on your 2023 tax return because that's when you actually received the money. The Form 5329 reporting the missed RMD goes with your 2022 return because that's the year you were supposed to take it. Yes, you'll need to take both distributions this year - the missed 2022 one and your regular 2023 RMD. This sometimes creates a slightly higher tax situation since you're bunching two distributions in one tax year. If the combined amount might push you into a higher tax bracket, you might want to talk to a tax professional about timing the distributions to minimize the impact.

Good point about the spousal vs non-spousal differences. My understanding is that spouse beneficiaries have more flexibility. Can you explain what documentation we should keep if we're trying to get a waiver? Did your father use a tax professional for the appeal?

Does your CPA think it's better to lease these vehicles instead of buying them outright? I've heard leasing changes the tax treatment somehow.

He actually said it depends on your specific situation. Leasing has different tax treatment - you can deduct the actual lease payments rather than using Section 179 or depreciation. This can sometimes be advantageous if you don't have enough income to utilize the full Section 179 deduction in one year. The luxury auto lease rules can make things more complicated though. For expensive vehicles, the IRS requires an "inclusion amount" that effectively reduces your deduction for leased vehicles above certain thresholds. Definitely something to discuss with your own tax professional based on your specific business needs and financial situation.

You're exactly right. Those videos almost always exaggerate the savings. It's a deduction, not a credit. And they never mention self-employment taxes in the calculation either, which can add significant savings for sole proprietors.

That's a really good point about starting mid-year! So should I have more or less withheld since I'm starting in March rather than January? And I like the idea of quarterly check-ins - do you use any particular method to estimate where you stand?

Since you're starting mid-year, you'll have less annual income than your salary rate would suggest for a full year, which could actually result in overwithholding if you don't account for it. However, this might balance out with your husband's income putting your combined total in a higher bracket. For our quarterly check-ins, we use a simple method. We take our year-to-date income from paystubs, multiply our most recent month by however many months are left in the year, add in expected bonuses/commissions, then use a tax calculator to estimate our total tax. Then we compare that to how much tax has been withheld so far plus what will likely be withheld for the remainder of the year. If there's a gap of more than $1,000 in either direction, we adjust our W4s.

The IRS Withholding Estimator is good but I found it super confusing to use. It asks for so much detailed information that I wasn't sure where to find on my paystubs. Does anyone know a simpler alternative?