Does this apply to online tax courses too? I took a short course specifically to learn about self-employment taxes for my Etsy shop.

Yes, courses specifically focused on business taxes for your self-employment activities would generally be deductible as a business expense. A tax course that teaches you how to handle Etsy shop taxes would be considered an ordinary and necessary business expense since it directly relates to your business operations. Just make sure to keep good documentation of the course, including the syllabus or description showing it was focused on business tax topics relevant to your specific situation. Also save your receipt or proof of payment.

Your accountant gives you a specific percentage? Mine just tells me "some of it is deductible" without any clear guidance. Maybe I need a new accountant lol.

Thanks for this guidance. Do you happen to know which tax software handles ITIN applications most efficiently? And approximately how long should we expect for the ITIN processing?

All the major tax software programs (TurboTax, H&R Block, TaxSlayer) can handle ITIN applications equally well. They each have guided interviews that walk you through the W-7 form and explain what supporting documents you need. As for processing time, unfortunately, it's quite lengthy right now. Initial ITIN applications are taking about 7-11 weeks according to the IRS, but in practice, it can sometimes take 3-4 months, especially during peak tax season. The good news is that you can still file your return while the ITIN application is processing - you just won't receive certain credits until the ITIN is issued.

This is so true! I used TaxAct last year on an L1 visa and it asked the right questions to determine I was a resident alien for tax purposes based on the substantial presence test. Made a huge difference in available deductions.

Those business activity codes are super helpful! Do you know if there's a specific one for social media management? That's mainly what I do and I wasn't sure which category fits best.

This is really helpful! I definitely haven't had any penalties before. Is First Time Penalty Abatement something I should specifically mention in my letter? Or should I try to call and request this directly?

You should definitely mention First Time Penalty Abatement specifically in your letter or phone call. Use those exact words. Many IRS agents are trained to check for FTA eligibility, but some might not think to offer it unless you ask directly. It's usually faster to call and request it, as they can often approve it immediately over the phone if you qualify. Just have your notice information ready when you call. In your case, since you've never had penalties before, there's a very good chance you'll qualify!

This is such good advice! I made the mistake of waiting to pay anything while I disputed the penalty, and the interest just kept growing. Ended up owing way more in the end.

That's really interesting, I hadn't come across Section 195 in my research. How would I "demonstrate" that I was still in startup phase? Would the fact that I only had one short-term guest who was a friend be evidence of that? And how does this interact with the depreciation requirements that seem to start once I had that first paying guest?

To demonstrate you were in startup phase, you would need to show that you were preparing to enter the rental business but not yet actively operating. Documentation is key here - keeping records of renovation work, marketing efforts in progress, business plan development, etc. The fact that you only had one friend stay for a fee that was likely below market rate could potentially support your position that this wasn't the start of regular operations. Regarding depreciation, there's an important distinction here. Section 195 applies to business startup costs (like market research, analysis, business formation costs, etc.), while depreciable assets like furniture and appliances follow different rules. Those depreciable assets would generally start being depreciated when placed in service, which would arguably be when your property was ready and available for rent - potentially when your friend stayed there. It's a complex area with some gray zones. The most conservative approach would be to start depreciation in 2024 for your assets while potentially treating certain qualifying expenses as Section 195 startup costs. This is definitely a situation where professional guidance specific to your circumstances would be valuable.

I went through an audit 3 years ago specifically about first-year rental losses. In my experience, the IRS was mainly looking at whether I had the "intent to profit" from the rental activity. They wanted documentation showing I was genuinely trying to rent it out at market rates and not just using it primarily as a personal residence with occasional rentals. They also scrutinized my depreciation start dates and whether I had properly segregated personal use vs. rental use time. As long as you have good documentation and weren't trying to claim personal expenses as rental expenses, you should be fine even with legitimate losses in the first year. Those startup costs and initial losses are normal in the rental business.

That's really helpful, thanks. I do have good documentation of all my expenses and definitely was trying to rent it out (have all my marketplace listings saved). I'm just nervous because the loss ratio is so high compared to income in that first year. Sounds like that might be normal and expected though if I can document everything properly.