Watch out with amended returns and negative AGI situations! I tried to DIY this myself last year and ended up getting a notice from the IRS because I incorrectly tried to carry forward my entire negative AGI (which included FEIE). The IRS ended up disallowing my claimed carryforward and assessing additional tax plus interest. Make sure you're only carrying forward components that actually qualify - like business losses, not just the negative AGI that resulted from exclusions like FEIE.

Just to add another perspective here - I went through something very similar with my 2021 and 2022 returns. Had a negative AGI in 2021 due to a combination of FEIE and some business losses from freelance work that dried up during COVID. The key thing I learned (after initially getting it wrong) is that you really need to break down what specifically created that negative AGI. In my case, about $18k of the negative was from legitimate business losses that could be carried forward as an NOL, but the rest was from the FEIE which doesn't create a carryover opportunity. I ended up having to file Form 1045 to properly calculate the NOL portion and then amended my following year's return to claim it correctly. The business loss carryforward definitely helped offset some of my 2022 income, but it was way less than I initially thought I could carry forward. If you're dealing with multiple components creating the negative AGI like I was, I'd strongly recommend getting professional help or at least double-checking your work before filing the amendments. The IRS doesn't mess around with incorrectly claimed carryforwards.

Just wanted to add one more consideration that might be relevant to your situation - check if your teacher retirement system has any vesting requirements that could affect your withdrawal options. Some state systems have rules where you forfeit employer contributions if you withdraw before being fully vested (usually 5-10 years of service). Since you mentioned teaching for just under 3 years, you might want to verify what portion of that $7,200 is actually yours to withdraw versus what might be forfeited employer contributions. This could impact whether withdrawal vs. rollover makes more financial sense, though in most cases the rollover is still going to be the better choice tax-wise. You can usually find this information in your annual benefit statement or by calling the retirement system directly (though as others mentioned, getting through can be challenging). Better to know the full picture before making your decision!

One thing that might help with your decision is to consider your current and projected future income levels. If you're expecting to be in a higher tax bracket in the coming years, the rollover becomes even more attractive since you'd be avoiding taxes on that $7,200 at today's rates and potentially withdrawing it later when you're in retirement at lower rates. Also, don't forget to factor in the growth potential difference. Even if your teacher retirement system offers decent returns while inactive, most 401k plans give you access to low-cost index funds that could significantly outperform over the long term. With potentially 30+ years until retirement, that growth difference could be substantial on your $7,200. One last tip - if you do decide on the rollover, ask both administrators for written confirmation of the process and timeline. Government retirement systems can be notoriously slow, and having documentation helps if anything gets delayed or goes wrong during the transfer.

This has been such an informative thread! I'm in a similar situation with my freelance graphic design LLC and was making the same mistake of thinking I could somehow bypass taxation by contributing directly from my business account. Just to summarize what I've learned here for anyone else reading: You MUST pay yourself from the LLC first, pay taxes on that income, and then use the after-tax dollars for Roth contributions. There's no way around this - the IRS requires Roth contributions to come from properly reported earned income. The Solo 401(k) with Roth option sounds like the best path forward for those of us with LLCs making decent income. Being able to contribute up to $23,500 in Roth money (plus potentially more in traditional contributions) versus just $7,000 with a regular Roth IRA is a huge difference for retirement planning. One question I still have - if I set up a Solo 401(k), can I still contribute to my existing Roth IRA in the same year, or do I have to choose one or the other? I've had my Roth IRA for about 8 years and would hate to lose that 5-year clock if possible.

This thread has been incredibly helpful! I'm a tax attorney who works with a lot of small business owners, and I wanted to add a couple of important points that might save people some headaches: First, regarding the S-Corp election discussion - there's a "reasonable salary" requirement that the IRS takes seriously. If you elect S-Corp status, you MUST pay yourself a reasonable W-2 salary for the work you perform, even if it means higher payroll taxes. You can't just pay yourself $20k salary and take $70k in distributions to avoid payroll taxes. The IRS has been cracking down on this, and penalties can be severe. Second, for those considering Solo 401(k)s, remember that if you ever hire employees (even part-time), you'll generally need to include them in the plan, which can get expensive and complicated. A SEP-IRA might be a better choice if you think you'll expand your team. Finally, I'd strongly recommend working with a qualified tax professional before making major changes to your business structure or retirement strategy. The tax code is complex, and what works for one person's situation might create problems for another. The services mentioned in this thread (like taxr.ai) might be helpful for analysis, but they shouldn't replace professional advice for significant decisions. Great discussion overall - it's refreshing to see people taking retirement planning seriously!

Just a heads up on timing - make sure you have all your documentation ready before you file. I made the mistake of claiming my business loss without properly organizing my receipts first, and when I got a notice from the IRS asking for documentation, it was a nightmare trying to reconstruct everything months later. For your computer build, I'd recommend creating a simple spreadsheet listing each component, the date purchased, amount, and retailer. Take photos of the receipts and store them digitally. Also document how much you use the computer for business vs personal use - even something as simple as a weekly log showing hours spent on business activities can be helpful if questioned. The key is being able to show the IRS that this was a legitimate business expense and not just a personal computer you're trying to write off. Good record keeping from the start will save you major headaches later!

Great question! Yes, you can absolutely use your business loss to offset your W-2 income. Since you're operating as a sole proprietorship, the $1,200 net loss from your print-on-demand business will flow through to your personal tax return and reduce your overall taxable income. For your computer situation, I'd recommend treating it as a single asset with a total basis of $5,300 (all components combined). You have two main options: Section 179 expensing to deduct the full amount this year (if it qualifies and you meet the requirements), or depreciate it over 5 years using MACRS. Since it sounds like this computer is primarily for business use, Section 179 might be your best bet to maximize your current year deduction. Just make sure you can demonstrate legitimate business intent - keep good records of your business activities, maintain separate business accounts if possible, and document how you're working to improve profitability. The IRS is generally reasonable about startup losses as long as you can show you're running it like a real business, not a hobby. One tip: keep a detailed log of business vs personal use of that computer. Even if it's 90% business use, you can only deduct the business portion of the cost.

I'm going through this exact situation with my twin sons right now! They both turned 22 this year, graduated in May, and started jobs in different months (one in June, one in August). I was completely overwhelmed trying to figure out if I could claim either or both of them as dependents. After reading through this entire thread, I'm feeling so much more confident about the whole situation. The key insight for me was learning that there's no income limit for qualifying child dependents under 24 - I had somehow convinced myself that once they started earning "real salaries" they'd be automatically disqualified. Both of my sons were full-time students for the first 5 months of the year, and even though they're now making around $35,000 and $32,000 respectively, we've definitely provided more than half their support when you look at the entire year. Housing, food, health insurance, car insurance, phone bills - it adds up to way more than 50% even with their new paychecks. What really sealed the deal for me was realizing we paid about $15,000 total for both their final semester expenses. Based on what others have shared about education credits, it sounds like claiming them as dependents and pursuing the American Opportunity Tax Credit could result in significant tax savings beyond just the dependent exemptions themselves. Thanks to everyone who shared their real experiences - this thread has been like a masterclass in navigating this transition period that I never knew I needed!

I just wanted to add my experience since I went through this exact situation with my daughter last year. She's 22, graduated in December, and started working in February making about $42,000. I was completely confused about the dependent rules and honestly terrified I'd mess up our taxes. The breakthrough for me was understanding that the IRS looks at the entire tax year, not just the working months. Since your son was a full-time student for 5 months (January through May) and you provided more than half his support for the FULL YEAR, you should definitely be able to claim him as a dependent. What really helped me calculate the support test was making a simple list: housing costs, food, health insurance, car insurance, phone bill, utilities, even things like toiletries and clothing we bought him. When you add it all up for 12 months, even though he's making good money now, you're probably still covering way more than 50% of his total expenses. One thing I wish I'd known earlier - we paid about $5,400 for her final semester and ended up qualifying for education tax credits that were worth more than the dependent exemption itself. Definitely look into the American Opportunity Tax Credit if you paid any tuition or fees for his last semester. The whole process was way less scary than I thought it would be. Your son will file his own return but just needs to check the box saying he can be claimed as someone else's dependent. No conflicts with the IRS systems at all!