We used TurboTax Self-Employed last year when my wife started her etsy shop and I still had my regular job. It worked pretty well - walks you through all the Schedule C stuff and helps identify deductions. Definitely worth the upgrade from the regular version if you have any business income to report. It also helps with those quarterly estimated payments.

This is really helpful! One thing I'm still confused about - if my spouse's business loses money in the first year (which seems likely with startup costs), does that actually reduce our overall tax bill? Like if I make $78k and her business loses $5k, do we only pay taxes on $73k? That seems almost too good to be true. Also, what counts as legitimate startup costs that we can deduct right away?

Yes, you're absolutely right! If your spouse's business has a legitimate loss of $5k in the first year, it does reduce your taxable income from $78k to $73k on your joint return. This can result in real tax savings - potentially $1,100-1,200 less in taxes depending on your tax bracket. For startup costs, you can typically deduct up to $5,000 in business startup expenses in the first year (with the remainder amortized over 15 years). This includes things like: - Business registration fees and permits - Market research and advertising to launch the business - Professional services (attorney, accountant consultations) - Equipment and supplies needed to start operations - Initial inventory purchases - Website development and branding costs Just remember the IRS has "hobby loss" rules - they want to see that you're genuinely trying to make a profit. Keep detailed records showing business intent, like a business plan, marketing efforts, and professional development. As long as you can demonstrate it's a real business venture and not just a tax writeoff, those losses are completely legitimate! The key is treating it like a real business from day one with proper record-keeping and business practices.

I've been preparing taxes professionally for 15 years and have never seen an audit triggered by this. It's completely legitimate and very common. The IRS and state tax authorities understand they have different rules and don't expect them to match.

Thanks for confirming this approach! I'm actually new to dealing with itemized deductions and was worried I was overthinking it. Can you clarify what you mean by checking state-specific rules about which deductions they allow? Are there common deductions that federal allows but states typically don't, besides the obvious SALT limitation? I want to make sure I'm not accidentally claiming something on my state return that I shouldn't be. My main itemized deductions are mortgage interest, property taxes, charitable contributions, and a small amount of medical expenses. Should I be concerned about any of these at the state level?

You'll need more than just saying you weren't aware. The IRS wants to see that you took reasonable steps to understand your obligations and that you're making efforts to be compliant going forward. In your statement, include: 1. Specific reasons why you weren't aware (perhaps you consulted with someone who gave incorrect advice, or your business model changed) 2. The timing of when you discovered the requirement 3. Steps you took once you realized you needed to file 4. What procedures you're putting in place to ensure timely filing in the future Be honest but thorough. The IRS is more lenient with foreign entities that make honest efforts to comply once they discover their filing obligations.

This is incredibly helpful! I hadn't heard of the First Time Penalty Abatement program - that sounds like it might be simpler than going through the reasonable cause process. Do you know if FTA can be applied retroactively to penalties that haven't been assessed yet, or do you need to wait until the IRS actually sends you a penalty notice before requesting it? Also, when you mention the "simplified approach," does that mean filing a shorter version of the 1120F or is it a completely different form?

I heard some companies are still filing for those COVID credits retroactively? Is that true or am I too late for that now?

Yes, eligible employers can still claim the Employee Retention Credit retroactively by filing amended payroll tax returns (Form 941-X) for applicable quarters from 2020 and 2021. The statute of limitations gives you three years from the original filing date. However, be extremely careful with this. The IRS has flagged ERC claims as a high-audit area because of widespread abuse. Only claim it if you truly meet all the eligibility requirements about business disruption or revenue decline during the pandemic. Many businesses that started after the pandemic (like OP's) wouldn't qualify at all.

Great point! I'm using QuickBooks Online and I assumed it was categorizing everything correctly, but now I'll definitely check. Is there a specific expense category name I should look for to make sure my employer portions of FICA are being recorded properly?

In QuickBooks Online, you should look for "Payroll Tax Expenses" or "Employer Payroll Taxes" in your chart of accounts. The employer portions of Social Security and Medicare should typically be categorized under something like "Payroll Tax Expense - Social Security" and "Payroll Tax Expense - Medicare" if you have it broken down by type. If you're running payroll through QuickBooks, it should automatically create these entries when you process payroll. But if you're doing payroll manually or through another service, make sure these employer contributions aren't getting lumped in with regular wages or other categories. You want them clearly identified as employer payroll tax expenses so they properly flow to the right line on your Schedule C (or whatever business return you're filing).

Yes, you're right - it's just the Social Security portion (6.2%) for employees. Employers still pay their matching portion, and Medicare taxes continue as normal for everyone. I tried modeling it in TaxAct, but since it's just a deferral and not forgiveness, it didn't show any actual tax savings - just a timing difference of when the tax is paid.

You raise really good points about the timing. I'm new to understanding these tax policies, but it does seem like starting a deferral program in April when the period runs through May is pretty short notice for employers to implement. My company's payroll department told us they're still waiting for official Treasury guidance before making any decisions, which makes sense given the administrative complexity you mentioned. It seems like by the time employers figure out the logistics and update their payroll systems, we might be halfway through May already. As someone who's still learning about tax policy, I'm curious - is this kind of short-term deferral actually helpful for most people, or does it just create more paperwork headaches? The repayment aspect seems particularly concerning if people aren't prepared for it.