How do I claim QBI Deduction with my 1099-NEC for online tutoring?

Thank you so much for confirming! I was totally confused about whether tutoring would count as a "qualified business." Does it matter that I don't have a formal business setup? I literally just log onto the platform and teach students virtually. Also, do you know which form we should use - the 8995 or 8995-A? Is one simpler than the other?

You don't need a formal business structure to qualify for QBI. As long as you're performing services as an independent contractor (which it sounds like you are), your tutoring activity counts as a business for tax purposes, even if it's just you logging onto a platform to teach. For most taxpayers with income below the thresholds (which for 2024 are $364,200 for joint filers), the regular Form 8995 is all you need. It's much simpler than Form 8995-A. Form 8995-A is generally only required if your taxable income exceeds those thresholds or if you're in certain specified service businesses and your income falls within the phase-out range.

Does it work with TurboTax? I'm using that to file and don't want to have to switch everything to a different system this late in the game.

I'm a bit skeptical about AI tax tools. How accurate is it really? The last thing I want is to get audited because some algorithm gave bad advice.

It's not a replacement for your tax filing software - it's more like a smart assistant that reviews your documents and gives you personalized guidance. You can still use TurboTax to file, but taxr.ai helps you identify what to enter and where. I still used TurboTax but followed the recommendations from taxr.ai to make sure I was claiming everything correctly. The accuracy has been great in my experience. It's not making things up - it's applying established tax rules to your specific situation. I was concerned about that too, but everything it recommended was backed up by specific IRS publications and rules. It's kind of like having a tax pro look over your shoulder, but at a fraction of the cost.

Wait, how does this even work? The IRS phone system is notoriously impossible - what magic are they using to get through?

This sounds too good to be true. The IRS is basically unreachable by phone. You're telling me this service somehow jumps the queue? I'll believe it when I see it.

They use technology that can navigate through the phone system and hold for hours so you don't have to. It's not jumping the queue or anything shady - they're just doing the waiting for you. When an agent finally picks up, they connect you directly to that agent. It's actually pretty straightforward - they have systems that can stay on hold indefinitely and recognize when a human finally answers. Nothing magical about it, just smart use of technology to solve a real problem. The IRS wait times are still the same, you just don't have to be the one sitting there listening to the hold music for hours.

The home office thing confuses me. I teach from my guest bedroom which has a desk and my computer, but I also sometimes use it when family visits. Does that disqualify me from claiming it as a home office? And how do I calculate the internet percentage for business vs personal?

For the home office deduction, the space does need to be used regularly and exclusively for business. So if you're occasionally using it as a guest bedroom, that could be an issue. However, if you have a portion of that room that's used exclusively for your business (like a dedicated desk area), you might be able to claim that specific portion. For internet, you'd calculate a reasonable business percentage based on your usage. For example, if you spend 30 hours a week tutoring online out of a total of maybe 50 hours of household internet usage, you could reasonably claim 60% as a business expense. Just be prepared to explain your calculation method if asked.

Actually, tutoring generally doesn't fall under the specified service business category unless you're operating a school or formal educational institution. Individual tutoring services usually aren't subject to those stricter limitations.

This! I got hit with the same penalty. If you're withholding enough from your husband's job though, you might be covered. The IRS looks at your total tax payments throughout the year.

Wait, I didn't know this was a thing! My husband has extra withholding from his paycheck, but I haven't been paying anything quarterly. How do I know if we're covered or not?

You can check by looking at your total tax liability from last year and comparing it to what's being withheld from your husband's paycheck plus any estimated payments you've made. Generally, you need to pay at least 90% of this year's tax liability OR 100% of last year's tax liability (110% if your prior year AGI was over $150k) to avoid penalties. Since you file jointly, the IRS treats all your payments as one pool - so if your husband's withholding is high enough to cover both your incomes, you should be fine. You can use Form 1040ES to calculate what you should be paying quarterly, or many tax software programs will tell you if you need to make estimated payments when you're preparing your return. If you're unsure, it might be worth having a tax professional look at your situation, especially since you mentioned the filing deadline is approaching.