Am I the only one who finds it ridiculous that the IRS still uses all these paper forms? Every year I stress about whether I've filled them out correctly. And the instruction booklet is like 20 pages long for what should be a simple form. No wonder everyone's confused about this stuff.

I completely understand your confusion! I went through the exact same thing my first year filing 1099s. You're absolutely correct - you would put "2" in the box asking for the number of forms on your 1096. The 1096 is just the transmittal form that goes with your 1099-NECs, so it doesn't count toward that total. One tip that helped me: I always double-check that the total dollar amounts on all my 1099-NECs add up to what I'm reporting on the 1096. It's an easy way to catch any math errors before sending everything off. Also, make sure you're using the current year's 1096 form - I made that mistake once and had to refile everything! Don't worry about asking "stupid" questions - the IRS forms can be confusing even for people who've been doing them for years. Better to ask and get it right than to file incorrectly and deal with correspondence later.

Important point everyone is missing: If you use the standard mileage deduction rate for the first year, you can switch between standard mileage and actual expenses in future years. But if you use actual expenses the first year, you're LOCKED IN to using actual expenses for the life of that vehicle. THIS IS HUGE if you're buying a car specifically for gig work. Get professional advice before making this decision because it could cost you thousands over the life of the vehicle if you choose wrong in year one. Also, keep a mileage log no matter what method you choose. IRS requires it even if you go with actual expenses. There are good apps for this - I use Stride.

Something else to consider that might affect your decision - if you're consistently making $650/week between both of you from gig work, you're looking at around $33,800 annually in self-employment income. This means you'll owe self-employment tax (15.3%) on top of regular income tax. A dedicated business vehicle can help offset some of that tax burden, but make sure you're also setting aside money quarterly for estimated tax payments. The IRS expects you to pay as you go when you're self-employed, not just at year-end. Also, don't forget about business insurance. Your personal auto policy likely won't cover you during commercial activities. You'll need either rideshare coverage or commercial insurance, which will be another deductible business expense if you go the actual expenses route. One more tip: if you do buy a dedicated gig car, consider getting it inspected and any needed repairs done before you start using it for business. Those initial repair costs could potentially be deductible as startup expenses.

If all else fails and the deadline is getting too close, you can always file a paper return! It takes longer to get your refund, but at least you'll avoid penalties for filing late. The AGI verification is only required for e-filing.

Another quick tip that might help - if you're still stuck and need your AGI fast, you can also call the IRS automated phone line at 1-800-908-9946. It's available 24/7 and you can get your prior year AGI without waiting for a human agent. You'll need your SSN, filing status, and the exact refund amount from last year (or the amount you owed if you had to pay). The system will give you your AGI immediately if you can verify those details. Way faster than waiting for transcripts or trying to dig up old documents!

Theres another aspect nobody mentioned - if your LLC is treated as an S-Corp for tax purposes (which many are), then completely different rules apply for redemptions! In that case, you're looking at stock redemption rules under sections 302 and 301 instead of partnership rules.

This is a really complex area that trips up a lot of people! One thing I want to emphasize that hasn't been fully covered - the timing of when you make a Section 754 election is crucial for redemptions. If your LLC doesn't have a 754 election in place at the time of the redemption, you generally can't get the step-up in inside basis that would benefit the remaining partners. The election has to be made by the due date of the return for the year the redemption occurs (including extensions). Without the 754 election, you end up in a situation where the redeemed partner's share of inside basis essentially disappears along with their outside basis, which can create some weird economic distortions for the continuing partners. They might be stuck with lower depreciation deductions than they should have based on what they effectively "paid" for the redeemed partner's share of assets. Also, make sure you're considering whether any of the redemption payments might be characterized as payments for unrealized receivables or goodwill under 736(a) - those get treated as guaranteed payments or distributive shares rather than distributions, which completely changes the tax treatment for the departing partner.

I've been dealing with similar contractor payment situations for my small business, and I'd recommend being extra careful about the payment processor route mentioned above. While it's true that paying through PayPal Business or credit cards can eliminate your 1099-NEC requirement, you need to make sure you're using the right type of payment. PayPal Friends & Family payments won't qualify - it has to be through their business/goods & services option where fees are charged. Same with credit cards - personal credit card payments might not always trigger 1099-K reporting depending on the processor and payment volume. The threshold for 1099-K reporting has also changed recently, so double-check current requirements. In 2023, the threshold was supposed to drop to $600 total payments, but the IRS delayed implementation. Make sure you understand what the current rules are before relying on this strategy. Bottom line: if you're going to deduct the expense, the IRS expects some form of third-party reporting to match. Whether that's a 1099-NEC from you or a 1099-K from a payment processor, there needs to be a paper trail.

Based on the discussion here, it sounds like using a payment processor like PayPal Business could be your best legitimate option. Just make sure you understand the requirements - you'll need to pay through their "goods and services" option (not friends & family) so they charge the processing fees and properly report it via 1099-K. I'd also suggest documenting everything clearly. Keep records showing how you paid (screenshots, transaction IDs, etc.) so you can demonstrate to the IRS that the payments were properly reported through the payment processor rather than requiring a 1099-NEC from you. One thing to consider though - the processing fees (usually around 2.9% plus $0.30 per transaction) will add up. On $10,000 in payments, you're looking at about $320 in fees. That might be worth it for your situation, but factor that into your decision. Whatever you decide, just make sure there's a clear paper trail. The IRS wants to see that contractor income is being reported somewhere in the system, whether through your 1099-NEC or the payment processor's 1099-K.