Don't forget about the Qualified Business Income deduction (Section 199A)! As a self-employed rideshare driver, you can potentially deduct 20% of your net business income. This is ON TOP OF your regular business deductions like mileage or car expenses. Also, make sure you're setting aside money for self-employment taxes. The current rate is 15.3% of your net earnings (to cover Social Security and Medicare taxes that an employer would normally handle).

Something NOBODY mentioned yet - if you're making decent money with rideshare, you should be making QUARTERLY estimated tax payments! I learned this the hard way and got hit with underpayment penalties. Since you don't have an employer withholding taxes, you're supposed to send estimated payments to the IRS four times a year. The due dates are April 15, June 15, September 15, and January 15 (of the following year).

Quick question for anyone who knows - if I have capital loss carryover and also did a Roth conversion this year, can I use the capital losses to offset the income from the Roth conversion? Or does that count as ordinary income subject to the $3000 limit?

This is such a great question and the answers here are spot on! I went through something very similar last year. Had about $8,000 in carryover losses from some bad stock picks in 2021, then finally had a good year with $5,000 in capital gains. Just to add to what others have said - make sure you keep good records of your carryover losses year to year. I almost lost track of mine and had to dig through old tax returns to reconstruct the carryover worksheet. The IRS doesn't send you a reminder of what you're carrying forward, so it's on you to track it. Also, if you're using tax software, it should automatically calculate this for you once you enter your prior year carryover and current year gains/losses. But it's still good to understand how it works like you're doing. You'll use $7,000 of your carryover against your gains, then $3,000 against ordinary income, leaving you with $0 carryover going into next year. Pretty efficient way to finally clear out those old losses!

Adding to what others have said - I went through this exact decision last year for my jewelry business. Started with just the free EIN from IRS.gov as a sole proprietor and it worked perfectly for getting set up on Etsy, Amazon, and even my Square account. The IRS online application literally takes 10 minutes and you get your EIN instantly. No need to pay $425 for an LLC unless you specifically want the liability protection or plan to have employees soon. One tip: when you apply for the EIN, make sure you select "sole proprietorship" as your business type if you're not forming an LLC. The application will ask for your business name - you can just use your legal name or "Your Name DBA [Business Name]" if you want to use a different business name. You can always upgrade to an LLC later if your business grows and the liability protection becomes worth the cost. I'm actually considering it now that my revenue has grown substantially, but starting with just the EIN saved me money in those crucial first months when every dollar counted.

Just went through this exact process for my woodworking business! You definitely don't need an LLC to get an EIN - I got mine directly from the IRS website in about 15 minutes completely free. The key thing to understand is that platforms like Etsy and Amazon are asking for an EIN for tax reporting purposes, not because you need to be incorporated. As a sole proprietor, you can get an EIN and use it instead of giving out your SSN to every platform and vendor. I started with just the free EIN and have been operating successfully for 8 months now. The liability protection of an LLC is nice to have, but for most craft businesses just starting out, the $425+ cost isn't justified until you're making consistent profit. My recommendation: Get the free EIN from IRS.gov now so you can start selling on those platforms. Once your business is generating steady income (maybe $20K+ annually), then revisit whether the LLC makes financial sense for liability protection and potential tax benefits. You can always form an LLC later and transfer your EIN to it - the IRS allows you to change the business structure associated with your EIN if needed.

I've been dealing with ESPP tax issues for years and want to clarify a few things based on my experience. The key is understanding that when you purchase ESPP shares at a discount, that discount is typically treated as compensation income and should appear on your W-2 in the year you bought the shares (not when you sold them). If you can find your W-2 from the year you purchased the ESPP shares, look for the discount amount included in your wages. If it's there, then you should definitely use the adjusted cost basis to avoid being taxed twice on the same money. However, if for some reason the discount wasn't included in your W-2 when you purchased (which can happen with some plan structures), then you'd use the regular cost basis and pay tax on the discount as part of your capital gains. The most important thing is to use Form 8949 with the proper adjustment code when your basis differs from the 1099-B. Don't just enter a different number without explanation - that's what triggers those CP2000 notices people mentioned. I'd also recommend keeping detailed records of your ESPP purchases, including purchase dates, discount amounts, and whether those discounts were included in your W-2 income. This documentation will be invaluable if you ever need to justify your basis calculations to the IRS.

I went through this exact same situation last year and ended up having to amend my return because I initially used the wrong basis. Here's what I learned: The key is determining whether the ESPP discount was already taxed as ordinary income. Look at your W-2 from the year you PURCHASED the shares (not when you sold them). If the discount amount is included in your wages, then you should use the adjusted cost basis because you've already paid income tax on that discount. When you file, make sure to use Form 8949 and include adjustment code "B" with a description like "ESPP basis adjustment per broker supplement." This tells the IRS why your reported basis differs from the 1099-B. I also recommend downloading IRS Publication 525 which covers employee stock purchase plans specifically. It clearly explains that if the discount was included in your income when you bought the shares, you don't pay tax on it again when you sell. The good news is that most tax software (including FreeTaxUSA) will handle the Form 8949 adjustments properly if you know to look for that section. Don't just enter the adjusted basis in the regular capital gains section without documenting the adjustment - that's what causes the IRS matching issues people have mentioned.

Just wanted to share my recent experience since I was in almost exactly the same situation as OP - hadn't filed for 3 years and lost all my W-2s. I ended up going the Form 4506-T route after the online system wouldn't verify my identity (probably because of the missing filings). The key things that helped me: 1) Make sure to put your own name and address in line 5a to get the unmasked version (as Diego mentioned), 2) Be very specific about which tax years you need, and 3) Allow extra time - mine took about 2.5 weeks to arrive by mail. One thing I learned that wasn't mentioned yet - if you're requesting multiple years, you can list them all on one form rather than submitting separate requests. Just write something like "2021, 2022, 2023" in the tax year section. Saved me from having to send multiple forms. The unmasked transcript ended up being exactly what I needed to reconstruct my tax situation. All employer info was there with full EINs, and it even showed estimated quarterly payments I had forgotten about from some freelance work. Really grateful for all the detailed advice in this thread - it made the whole process much less intimidating!

I just want to echo what Dylan said about the transcript showing quarterly payments - this was a lifesaver for me too! I had completely forgotten about some estimated tax payments I made for 2022 and was panicking thinking I'd have to pay penalties on top of what I already owed. Turns out the IRS had record of everything and the transcript showed not only the payment amounts but also how they applied the credits. One additional tip that helped me: when you're filling out Form 4506-T, use black ink and print clearly. I had to resubmit mine the first time because my handwriting was apparently too messy and they couldn't process it. Also, if you're mailing it in, consider sending it certified mail so you have proof they received it. The whole process was actually much more straightforward than I expected once I got the hang of it. Really appreciate everyone sharing their experiences here - this thread has been incredibly helpful!