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Just adding another perspective: we formed an LLC with 3 members and initially filed Form 8832 to elect C-corp taxation because we thought it would be better. BIG MISTAKE for our small business! We ended up paying corporate tax AND personal tax on distributions. Switched to partnership taxation the next year and it's much simpler and usually more tax-efficient unless you need to retain significant profits in the business.
If we go with partnership taxation, do my dad and I need to split everything 50/50 or can we have different percentages? Also, do we need to pay ourselves a salary or can we just take draws?
You can absolutely have different ownership percentages - it doesn't have to be 50/50. Your LLC operating agreement should specify the ownership percentages, and your K-1 forms will reflect those percentages for distributing profits and losses. For a partnership, you don't technically take "salaries" - you take draws, which aren't subject to withholding. However, you'll still pay self-employment taxes on your share of the profits regardless of whether you take draws or leave the money in the business. That's different from S-corps where you'd need to pay yourself a reasonable salary subject to payroll taxes.
Does anyone know if your first tax return for a new LLC has any special requirements? I just started mine in October and I'm already stressing about tax season.
For a new LLC filing as a partnership, you'll need to include Form 1065 Schedule B and check the box indicating it's an "initial return." You'll also need to select your tax year (usually calendar year for most small businesses). Make sure you've obtained an EIN before filing - you can't use your SSN for a partnership return.
Remember that if your main job already puts you in the higher tax bracket, that £2 over the allowance will be taxed at 40% not 20%! So that would be 80p instead of 40p in tax lol. But seriously, I'd declare it just to be safe. My friend got a scary letter from HMRC about undeclared income from just one Etsy sale they forgot about.
Would they really go after someone for less than a pound in unpaid tax though? Seems like it would cost them more to send the letter than they'd get back.
It's not about the amount, it's about the principle. HMRC systems are increasingly automated and can pick up discrepancies between what platforms report and what you declare. My friend didn't get in serious trouble, but did have to file an amended return and pay a small penalty that was way more than the actual tax due. The real issue isn't the £2 over - it's that once you're over the allowance threshold, technically the full amount becomes declarable (though you still get to claim the £1000 allowance against it). HMRC might not chase 80p, but they might question why £1002 of income wasn't declared at all.
I think everyone's overlooking something - if you're doing Uber, aren't you self-employed rather than this being a "side hustle"? If so, different rules might apply and you'd need to register as self-employed with HMRC regardless of the amount earned. The £1000 trading allowance might not apply the same way. Maybe check with a tax advisor?
My tax accountant told me I could just report the net gain/loss from the 1099 forms that exchanges provide (like Coinbase). But then I learned that doesn't capture everything - especially if you've moved crypto between wallets or done DeFi stuff. I think different tax preparers have different interpretations because the IRS guidelines aren't super clear on crypto reporting yet. But just looking at wallet deposits vs withdrawals definitely doesn't work if you've done any wallet transfers.
But my Coinbase 1099 is missing a bunch of transactions from before 2023. Does that mean I'm screwed?
You're not screwed, but you do need to account for those missing transactions. Exchanges are only required to report transactions from certain years forward, but that doesn't exempt you from reporting everything. For transactions not on your 1099, you'll need to go back through your exchange history and download those transaction records. Some exchanges let you export your complete history as a CSV file, which can be really helpful. Then you'd need to calculate your gains/losses for those transactions or use one of the crypto tax services people have mentioned to help with that.
Just to add some practical reality here... I've been trading crypto since 2017 and I've never listed out thousands of individual transactions. I keep detailed records of everything, but then summarize by exchange on my 8949 form. My tax guy says this is fine as long as my summary numbers are accurate and I can provide transaction details if ever requested. There's a big difference between "having complete records available" and "listing every single transaction on your tax forms" - the former is definitely required, the latter is impractical for active traders.
This matches what my CPA told me. He said the IRS doesn't expect Form 8949 to list thousands of trades, but rather to have reasonable summaries with backup documentation. He has clients who are day traders with stocks who do the same thing.
I'm gonna go against the grain here. I also have a cross-state tax situation (PA resident working in NY) and I did go to a tax pro last year after using software for years. They caught something software never did - I was eligible for a local tax credit related to my city taxes that the software never asked about. Got me an extra $600! Software is fine for most people but sometimes a human looking at your specific situation can spot things the automated questionnaires miss. Just don't go to one of those seasonal pop-up places with minimally trained staff. Find an enrolled agent or CPA who does taxes year-round.
Do you think the $600 was worth the fee you paid to the tax pro? I'm wondering about the cost-benefit analysis. Also, now that you know about that credit, couldn't you just claim it yourself using software in future years?
Totally worth it - I paid $220 for the service, so I came out $380 ahead. And yes, now that I know about the credit, I can claim it myself going forward. I actually went back to software this year and made sure to look for that specific credit. I think seeing a pro once every few years as a "check-up" is a good strategy. Then you can self-file in between knowing you're doing it right. Tax laws also change pretty frequently, so it's good to get a professional review periodically.
One thing nobody's mentioned - if your income is under $73,000 you can use the IRS Free File program to file federal taxes for free. And many of those services include free state filing too. No point paying for software or a tax pro if you qualify for free filing with a simple return!
Hunter Edmunds
For multiple W2 jobs, you should definitely check the "Multiple Jobs" box in Step 2 of your W4, or complete the worksheet to determine additional withholding. Checking "Exempt" means NO federal taxes are withheld! Also, file that 2022 return ASAP! The penalty for not filing (5% of unpaid taxes per month, up to 25% max) is much worse than just not paying (0.5% per month). You can set up a payment plan for what you owe if you can't pay it all at once.
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Carter Holmes
ā¢Thank you for the advice! I've already started working on my 2022 return and will file it this week. Is there any way to reduce the penalties since this is my first time making this mistake?
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Hunter Edmunds
ā¢You can request penalty abatement under the IRS First Time Penalty Abatement policy if you haven't had any significant penalties in the past 3 tax years and have filed (or filed extensions for) all required returns. Call the IRS after you file and pay or set up a payment plan. Tell them you want to request "first-time penalty abatement" for reasonable cause. Explain that you misunderstood the withholding requirements with multiple jobs and that you've taken steps to correct it for the future. Many people get approved, especially for first-time mistakes.
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Ella Lewis
I'm in almost the exact same situation! Work as a server nights/weekends and have an office job during weekdays. I owe $9200 this year because both jobs were withholding as if they were my only income. My tax guy said this happens all the time with people working multiple jobs. For the rest of 2025, I'm having an extra $500 taken out of each office paycheck. It hurts now but better than another shock next April.
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Andrew Pinnock
ā¢You might want to update your W4 instead of just asking for extra withholding. If you use the IRS Tax Withholding Estimator online it'll tell you exactly how to fill it out for multiple jobs.
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