Whatever approach you take, make sure you keep ALL documentation! Keep copies of: 1) Your original SSA-1099 2) Bank statements showing the lump sum coming in 3) The payment to the disability insurance company 4) The contract with the disability company requiring repayment 5) Any correspondence with SSA or the insurance company I learned this the hard way when I had a similar situation in 2021 and got a letter from the IRS. Having all my documentation ready made resolving the issue much easier.

I'm dealing with almost the exact same situation right now! My husband just got approved for SSDI after 3 years on private LTD, and we're facing that massive lump sum with most of it going back to the insurance company. One thing I wanted to add that hasn't been mentioned yet - make sure you understand the timing of when you need to report this. Since SSDI backpay can cover multiple tax years, you might be able to use the "lump sum election" under Section 86(e) to calculate the tax as if you had received the payments in the years they were actually for, rather than all in the year you received them. This could potentially lower your overall tax burden, especially if it pushes you into higher tax brackets. You'd use Form SSA-1099 along with Form 1040 and possibly need to file amended returns for prior years. It's complex, but could save you significant money if the backpay covers multiple years and would have been taxed at lower rates if received when originally due. Definitely recommend getting professional help for this - the interaction between SSDI taxation, subrogation payments, and lump sum elections is not something most general tax preparers are familiar with.

Has anyone used cost segregation for a newly constructed single-family rental? I'm building a rental property and wondering if I should track construction costs by category from the beginning instead of doing a study later.

Yes, absolutely document with photos during construction! Take detailed pictures of electrical runs, plumbing rough-ins, HVAC ductwork, and specialty systems before drywall goes up. This visual documentation becomes invaluable for supporting your depreciation categories later. I'd also recommend keeping a detailed construction log noting dates and costs for each phase. When you install items like built-in appliances, custom lighting, or specialty flooring, photograph the installation process and keep all receipts with model numbers and specifications. One thing I learned the hard way - make sure your contractor understands you need separate line items for things like cabinet hardware, countertop installation, electrical fixtures, and flooring materials versus labor. The IRS likes to see clear distinctions between what qualifies for accelerated depreciation versus what's considered part of the building structure. Your future self (and your tax preparer) will thank you for this level of documentation. It's so much easier than trying to reconstruct everything after the fact!

Kinda silly question but does the price of the tote matter? Like if I spent $800 on a designer work bag, can I still deduct the whole thing or will the IRS be like "you could've bought a cheaper bag"?

Great question! I'm also relatively new to 1099 work and had similar concerns about what I could deduct. One thing that helped me was keeping a simple business expense log where I write down the date, amount, and business purpose for each purchase. For your tote bag situation, I'd suggest writing something like "Professional tote bag - exclusively used for transporting laptop, client documents, and business materials to meetings and co-working space." This creates a clear paper trail showing business intent. Also, don't worry about it being from Mercari - the IRS cares about the business purpose, not the retailer. Just make sure you have that receipt/purchase confirmation saved somewhere safe. Since you're under the $2,500 threshold, you can deduct it all in one year instead of depreciating it, which makes your taxes simpler too.

Great thread! I've been dealing with this exact issue for my home inspection business. What helped me was creating a clear business policy document that outlines when and why branded clothing is required. For driving instructors like Miguel, I'd suggest documenting that branded clothing serves multiple business purposes: 1) Professional identification for parents dropping off students, 2) Safety - helps police/emergency responders identify you as the instructor if there's an incident, 3) Marketing exposure while driving around town with students. I keep a simple log showing dates I wore branded items for business purposes, and I take occasional photos of myself in the field wearing them. My CPA said this documentation makes it very defensible as a marketing expense rather than personal clothing. One tip: consider ordering a few extra shirts specifically to give away as promotional items to completed students (as FireflyDreams mentioned). This creates a clear paper trail showing these are promotional materials, not just work clothes. The fact that some go to customers while others are worn by you for business purposes actually strengthens the marketing classification for all of them.

As a tax professional, I want to emphasize that the documentation suggestions here are excellent. The key distinction Miguel should understand is that as a business owner, you have more flexibility than employees when it comes to branded clothing deductions. For driving instructors specifically, I'd add another important point: your branded clothing serves a legitimate safety function that strengthens your deduction case. When you're in a vehicle with a student driver, being clearly identifiable as the instructor to law enforcement, emergency responders, and parents isn't just marketing - it's a business necessity. I recommend categorizing these expenses as "Advertising/Marketing" on Schedule C rather than "Uniforms" to avoid the stricter employee uniform rules. Keep receipts, document business use, and consider having your business policy state that instructors must wear branded clothing while teaching for safety and professional identification purposes. One more tip: if you're ever questioned about these deductions, the fact that you're required to maintain professional liability insurance and follow state regulations for driving instruction helps establish that your clothing requirements are legitimate business expenses, not personal choices.

Does anyone have experience using the 2023 Pub 560 worksheet but with 2024 numbers? Did the IRS give you any trouble if you got audited? I'm worried about using outdated forms even with updated numbers.

I ran into this exact same issue last month! What helped me was checking the IRS's "What's New" section on their website - they sometimes post interim guidance or notices with updated figures before the full publication is released. Also, if you're working with a tax professional or have access to professional tax software, they often have the updated worksheets available earlier than the general public since they get advance copies. In the meantime, the 2023 version with updated 2024 limits (as others mentioned) should definitely work fine - the calculation methodology rarely changes, just the dollar amounts.