Do you know if we can switch methods? I tracked actual expenses in 2021 but want to use standard mileage rate for 2022 onward since it's easier. Is that allowed or do you have to be consistent?

If you used actual expenses in the first year you used your car for business, you're generally locked into that method for the life of that vehicle. However, if you used the standard mileage rate in the first year, you can switch between methods in subsequent years. So in your case, if you tracked actual expenses in 2021 (the first year you used the car for business), you would need to continue using that method for that particular vehicle. If you get a new vehicle, you could start fresh with either method. It's one of those IRS rules that catches people by surprise, so definitely something to keep in mind when planning your deductions.

Totally agree! I drive for multiple apps and keep a separate mileage tracking app running the whole time I'm working. The in-app trackers miss TONS of deductible miles. Also don't forget you can deduct miles when you're driving between deliveries looking for your next gig - those count as business miles too!

How would you know if they made this election? Is there specific paperwork they would have?

They should have filed Form 8832 (Entity Classification Election) and/or Form 2553 (Election by a Small Business Corporation) with the IRS if they made that choice. Ask your client if they ever filed these forms or received confirmation of S-Corp status from the IRS. Most small business owners remember making this election because it's a significant tax decision that usually involves discussing it with a tax professional first. They'd also have been filing very different tax forms in previous years - Form 1120-S instead of just including a Schedule C with their personal return. Plus, if they were an S-Corp, they should have been paying themselves a reasonable salary with payroll taxes.

Omg yes this! I had a client put all their rental property repairs on the same credit card as their other business expenses and sorting it out took FOREVER.

Yes, we did call the police first! They came out and documented it, put one of those orange stickers on it, and told us we needed to wait 72 hours before having it towed. We followed all the proper channels. The police report actually said the car was reported stolen in another county, but for some reason the towing company still charged us because they said the owner didn't come claim it and they had storage fees.

That's good to hear! Since you followed the proper legal procedures, the expense would definitely qualify as an ordinary and necessary business expense for your rental activity. When you list it on your Schedule E, I recommend noting that proper procedures were followed and that it was necessary to maintain access to the property. While you probably won't need to provide that detail unless audited, it's good documentation to have.

The de minimis safe harbor election does simplify recordkeeping, but you still need to keep receipts! What it really does is allow you to immediately deduct small-cost items (generally under $2,500 per item or invoice) rather than having to capitalize and depreciate them. For example, if you buy a $200 microwave for your rental unit, you can deduct it immediately rather than depreciating it over several years. But you absolutely should keep those receipts - they're your proof if audited. The safe harbor is about how you treat the expenses, not whether you need documentation.

If my profit is only about $7k like I mentioned, would I still need to worry about estimated payments? My regular job already withholds taxes, if that makes a difference.

With only a $7k profit, you probably don't need to worry about estimated payments, especially if you have regular withholding from a job. The key question is whether adding this $7k to your income would cause you to owe an additional $1,000 in taxes when you file. If you're in the 22% tax bracket, a $7k short-term capital gain would generate roughly $1,540 in additional tax. But if your current withholding is already covering your normal tax liability with some cushion, you likely won't need to make an estimated payment. You can also increase your withholding at your job for the remainder of the year to cover the additional expected tax if you're concerned.

I used TurboTax Deluxe last year for my home sale and it worked fine. It asks you for the purchase price, sale price, and improvements, then calculates everything. Pretty straightforward if your situation isn't too complex. Just make sure you have all your numbers ready before you start.

Thanks for the advice! I didn't even think about documenting the physical location. I'll definitely take pictures next time my parents go there. Do you know if there's a way to check if someone has a valid PTIN? I looked at the paperwork again and don't see any ID number for the preparer.

There's no public database where you can verify PTINs unfortunately. If the preparer didn't include their PTIN on the return where it asks for "Paid Preparer's Information," that's a violation of IRS requirements right there. Take photos of the office exterior, interior if possible, and any signage showing the business name. If they have a website or social media presence, screenshot those too - these operations sometimes disappear overnight when they get reported. Also, if your parents paid by anything other than cash, that bank or credit card statement is valuable evidence of them using this service.

Did your sister end up reporting the preparer too? Just curious if anything actually happens to these people when they get reported or if they just keep scamming others.