Just to add another perspective - I've been running my LLC for about 3 years now and started exactly where you are. The transition from individual gig work to business income can feel overwhelming, but you're asking all the right questions. One thing that really helped me was opening a dedicated business checking account if you haven't already. Even though your LLC is a disregarded entity for tax purposes, having that separation makes tracking so much cleaner. I deposit all my DoorDash and contract payments there, then transfer a set amount to personal for living expenses. Also consider getting a business credit card for expenses like gas, phone bills, and car maintenance. It makes tracking deductions way easier at tax time, and you might get better rewards rates for business spending. The W-2 salary idea is smart for the future, but honestly, don't stress about it this first year. Focus on getting your bookkeeping systems solid and tracking all those deductible expenses. Once you're consistently profitable and the S-Corp election makes sense financially, you can always make that change later. Keep detailed records of everything - mileage, receipts, income sources. Your future self will thank you come tax season!

You're definitely on the right track with your thinking! Since you formed your LLC in August, you can absolutely include all your post-formation DoorDash and 1099 editing income as business income. The key is consistency - treat these as legitimate business activities and maintain proper documentation. A few practical tips from someone who made this transition: 1. **Mileage tracking is crucial** - Use an app like MileIQ or Everlance to automatically track your DoorDash miles. This will be one of your biggest deductions. 2. **Business expense deductions** - Don't forget about phone bills (business use portion), car maintenance, tolls, parking fees, insulated bags, phone mounts, etc. These add up quickly. 3. **Quarterly estimated taxes** - With variable gig income, I recommend the "pay as you go" approach. Set aside 25-30% of each payment immediately into a separate tax savings account. This prevents the shock of owing thousands at tax time. 4. **S-Corp election timing** - You're smart to wait on this. Generally, it only makes sense when your business profit exceeds $40-60k annually due to the added compliance costs and complexity. 5. **Record keeping** - Get a dedicated business bank account if you haven't already, and consider a business credit card for expenses. This separation will save you hours during tax prep. The LLC structure gives you flexibility to grow into more complex tax strategies as your income increases. For now, focus on maximizing your legitimate business deductions and maintaining clean books!

Has anyone dealt with clients who opted in to PTE tax mid-year? My client made the election in October 2024 for the 2024 tax year, but we had already been making quarterly distributions based on prior treatment. Trying to figure out how to retroactively adjust those distributions in the books vs. tax treatment.

This is exactly the type of complex book-tax difference that trips up even experienced practitioners! I've been dealing with similar PTE tax issues across multiple states this season. One thing I'd add to the excellent advice already given - make sure you're documenting the treatment clearly in your workpapers. I create a separate schedule that shows the flow: 1) Book treatment (distribution), 2) Tax treatment (deduction), 3) M-1 adjustment (add back), 4) M-2 offset (other addition to AAA). This helps during reviews and if you ever get questioned. Also, don't forget to consider the impact on each shareholder's basis calculations. The PTE tax deduction flows through and increases their basis, while the book distribution treatment doesn't affect basis at all. So you need to make sure the K-1 preparation reflects the tax treatment, not the book treatment, for basis purposes. For states like California and New York that have different timing rules for the PTE tax election, this gets even more complicated. Each state may require slightly different book-tax reconciliation approaches.

This has been a really helpful thread! I've learned so much about asset classifications that I never knew before. As someone who's been doing my own taxes for years, I always just focused on reporting income and deductions without thinking about how the IRS actually classifies the underlying assets. The explanation about bank accounts being intangible because they represent a claim against the bank rather than physical currency really clicked for me. And I appreciate everyone sharing their experiences with different tools and services - it's good to know there are resources out there when the IRS publications get too confusing or when you can't get through on the phone. One follow-up question though: does this classification affect anything for people who have joint bank accounts? Is the intangible asset considered to be owned 50/50 by each person, or does it depend on whose name is listed first or who deposited the money?

This discussion has been really enlightening! I work in financial planning and often get questions about asset classifications from clients. What I find helpful to explain is that the IRS classification system is designed around the legal nature of what you actually own, not just the practical experience. When you have cash in a bank account, you're not actually owning specific dollar bills sitting in a vault with your name on them. You own a contractual right - essentially an IOU from the bank. That's why it's intangible. The bank has commingled your deposit with everyone else's and invested it, lent it out, etc. Your "asset" is really just the bank's legal obligation to pay you back on demand. This is also why FDIC insurance exists - because if the bank fails, your claim is against the FDIC, not against any specific physical money. It's all about the legal structure of ownership rather than what it feels like day-to-day when you're using your debit card or writing checks. For most people filing standard tax returns, this distinction won't directly impact your filing, but understanding it helps explain why certain financial products and accounts are treated differently by the IRS.

I'm still confused about one thing - if I have wash sales throughout the year but close out ALL my positions by December 31st and don't rebuy for 30+ days, do I still get to claim all my net losses for the year?

As someone who went through this exact same confusion last year, I can tell you that you're likely overthinking it. With $54k in gains and $49k in losses, you're probably looking at paying taxes on roughly your $5k net profit, not the full $54k. The wash sale rule doesn't eliminate your losses - it just defers them by adding them to the cost basis of your replacement shares. Since you're day trading the same stock constantly, those adjusted cost bases are getting realized when you sell those shares throughout the year. The real trap is if you have significant wash sale losses at year-end that carry into January. That's when you could get stuck paying taxes on gains while having your losses deferred to next year. My advice: Track your actual realized gains/losses carefully (not just the gross numbers), and if you're worried, consider using one of the software tools mentioned above to get a clearer picture of your true tax situation. Don't panic - you're probably in better shape than you think!

I'm confused about something - doesn't the 2-year ownership and use test apply regardless of this non-qualified use issue? Like if you move back and live there for 2 years before selling, wouldn't you qualify for the exclusion anyway? I've been trying to understand this for my own situation.

This is a really complex situation, and I appreciate everyone sharing their experiences and insights. As someone who's dealt with similar Section 121 exclusion questions, I want to emphasize how important it is to get this right given the significant tax implications. From what I understand about your situation, the key issue is whether the 17 years your brother-in-law lived there would count as "non-qualified use." Based on the responses here, it sounds like since you weren't charging rent and this was a family arrangement, those years likely wouldn't count against you under the non-qualified use rules. However, given that you're looking at a $675k gain with only $500k in potential exclusion, I'd strongly recommend getting a second opinion from a tax professional who specializes in real estate transactions. The difference between 25% exclusion and full exclusion that's been discussed here could save you tens of thousands of dollars. Also, make sure to document everything about the arrangement with your brother-in-law - even informal family arrangements should be properly documented in case the IRS has questions later. The fact that he paid property taxes directly actually seems to support that this was a family care arrangement rather than a rental situation.